UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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¨ Definitive Proxy Statement | |
¨ Definitive Additional Materials | |
x Soliciting Material Pursuant to §240.14a-12 |
NOVELL, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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This filing relates to a proposed merger between Novell, Inc. (“Novell”) and Attachmate Corporation (“Attachmate”) pursuant to the terms of an Agreement and Plan of Merger, dated as of November 21, 2010 (the “Merger Agreement”), by and among Novell, Attachmate and Longview Software Acquisition Corp. The Merger Agreement is on file with the U.S. Securities and Exchange Commission (“SEC”) as an exhibit to the Current Report on Form 8-K/A filed by Novell on November 22, 2010, and is incorporated by reference into this filing.
This filing consists of (1) a press release issued by Novell on December 2, 2010 to report Novell’s financial results for the fourth fiscal quarter and full fiscal year ended October 31, 2010; (2) information provided pursuant to Item 2.02 of a Current Report on Form 8-K filed by Novell with the SEC on December 2, 2010; and (3) a letter from Ronald W. Hovsepian, President and Chief Executive Officer of Novell, distributed to Novell employees on December 2, 2010.
FOR IMMEDIATE RELEASE
December 2, 2010
Novell Reports Financial Results for Fourth Fiscal Quarter and Full Fiscal Year 2010
WALTHAM, Mass. – December 2, 2010 - Novell, Inc. (NASDAQ: NOVL) today announced financial results for its fourth fiscal quarter and full fiscal year ended October 31, 2010. For the quarter, Novell reported net revenue of $207 million. This compares to net revenue of $216 million for the fourth fiscal quarter of 2009. GAAP income from operations for the fourth fiscal quarter of 2010 was $22 million. This compares to GAAP loss from operations of $259 million for the fourth fiscal quarter of 2009, which included a $279 million non-cash impairment charge to goodwill and intangible assets. GAAP net income in the fourth fiscal quarter o f 2010 was $322 million, or $0.91 per share, which included $308 million in non-cash tax provision benefits, principally to release a valuation allowance for certain net deferred tax assets. This compares to a GAAP net loss of $256 million, or a $0.74 loss per share, for the fourth fiscal quarter of 2009. Foreign currency exchange rates favorably impacted net revenue by $1 million, operating expenses by $1 million and income from operations by $2 million compared to the same period last year.
On a non-GAAP basis, income from operations for the fourth fiscal quarter of 2010 was $38 million. This compares to non-GAAP income from operations of $37 million in the same period last year. Non-GAAP net income for the fourth fiscal quarter of 2010 was $25 million, or $0.07 per share. This compares to non-GAAP net income of $38 million, or $0.11 per share, for the fourth fiscal quarter of 2009. A reconciliation of GAAP to non-GAAP results is provided in the financial schedules as part of this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”
For the full fiscal year 2010, Novell reported net revenue of $812 million and GAAP income from operations of $84 million. Comparatively, net revenue for the full fiscal year 2009 was $862 million and GAAP loss from operations was $206 million, which included a $279 million non-cash impairment charge to goodwill and intangible assets. GAAP net income for the full fiscal year 2010 was $378 million or $1.07 per share, which included $308 million in non-cash tax provision benefits, principally to release a valuation allowance for certain net deferred tax assets. This compares to a net loss of $213 million, or a $0.62 loss per share, for the full fiscal year 2009. Foreign currency exchange rates favorably impacted net revenue by $4 million and unfavorably impacted operating expenses by $10 million and income from operations by $6 million comp ared to the prior fiscal year.
Page 2 of 12 |
On a non-GAAP basis, income from operations for the full fiscal year 2010 was $131 million. This compares to non-GAAP income from operations of $139 million in the prior year. Non-GAAP net income for the full fiscal year 2010 was $97 million, or $0.27 per share. This compares to non-GAAP net income of $117 million, or $0.34 per share, for the full fiscal year 2009.
“I am pleased with our fourth quarter performance,” said Ron Hovsepian, President and CEO of Novell. “We continue to see strong performance from our Linux business with invoicing for Linux, excluding Microsoft certificates, up over 40% from the year ago period and the prior fiscal year. We also saw some stabilization in the Collaboration Solutions business with invoicing decreasing 3% over the year ago period. In addition, we continue to invest in the business while improving our GAAP and non-GAAP operating margins, which were 11% and 19%, respectively, for the quarter. Finally, we were profitable on a GAAP net income basis for the quarter and for the full year, even excluding discrete tax items.”
Cash, cash equivalents and short-term investments were $1.1 billion at October 31, 2010, up from $1.0 billion last quarter. Days sales outstanding in accounts receivable was 76 days at the end of the fourth fiscal quarter of 2010, up from 75 days at the end of the year-ago quarter. Total deferred revenue was $651 million at the end of the fourth fiscal quarter of 2010, down from $689 million at the end of the year-ago quarter. For the fourth fiscal quarter of 2010, cash flow from operations was $52 million. This compares to cash flow from operations of $51 million for the fourth fiscal quarter of 2009. For the full fiscal year 2010, cash flow from operations was $76 million. This compares to cash flow from operations of $69 million for the full fiscal year 2009.
Further details on Novell's reported results are included in the financial schedules that are a part of this release.
In addition, as previously publicly disclosed, Novell entered into an Agreement and Plan of Merger, dated as of November 21, 2010, with Attachmate Corporation, a Washington corporation, and Longview Software Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Attachmate, upon the terms and subject to the conditions of which, Longview will be merged with and into Novell, with Novell continuing as the surviving corporation and a wholly-owned subsidiary of Attachmate.
Page 3 of 12 |
Non-GAAP Financial Measures
We supplement our consolidated unaudited condensed financial statements presented in accordance with GAAP with certain non-GAAP financial measures. These non-GAAP measures include adjusted income from operations, adjusted operating margin, adjusted income from continuing operations, adjusted net income, adjusted income per share from continuing operations and adjusted net income per share. We provide non-GAAP financial measures to enhance an overall understanding of our current financial performance and prospects for the future and to enable investors to evaluate our performance in the same way that management does. Management uses these same non-GAAP financial measures to evaluate performance, allocate resources, and determine compensation. The non-GAAP financial measures do not replace the presentation of our GAAP financial results, but they eliminate expenses and gains that are excluded from most analysts' consensus estimates, that are unusual, and/or that arise outside of the ordinary course of business, such as, but not limited to, those related to stock-based compensation, acquisition-related intangible asset amortization, restructuring, asset impairments, litigation judgments and settlements, strategic alternatives review, the sale of business operations, long-term investments, property, plant and equipment, and unusual and discrete income tax effects.
Legal Notice Regarding Forward-Looking Statements
This press release may include statements that are not historical in nature and that may be characterized as “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including those related to future financial and operating results, targets, and prospects; future opportunities; market leadership and positioning; short-term and long-term trends; the macroeconomic environment; customer priorities; timing of realization of projections; functionality, characteristics, quality and performance capabilities of Novell's products and technology; and results achievable and benefits attainable through deployment of Novell's products and provision of services. Forward-looking statements forecasting growth in financial metrics are predicated on assumptions regarding improvements in the overal l economy and the markets served by the Company and in which the Company operates, the timing of which are impossible to accurately predict. Actual results may differ materially from the results discussed in or implied by such forward-looking statements, which are based upon information that is currently available to us and/or management’s current expectations and speak only as of the date hereof. We are subject to a number of risks, including, among others, the risk that the merger may be delayed or may not be consummated, the risk that the definitive merger agreement may be terminated in circumstances that require Novell to pay Attachmate a termination fee of $60 million; risks related to the diversion of management’s attention from Novell’s ongoing business operations; risks regarding the failure of Attachmate to obtain the necessary financing to complete the merger; the effect of the announcement of the merger on Novell’s business rel ationships (including, without limitation, partners and customers), operating results and business generally; and risks related to obtaining the requisite consents to the merger, including, without limitation, the timing (including possible delays) and receipt of regulatory approvals from various governmental entities (including any conditions, limitations or restrictions placed on these approvals) and the risk that one or more governmental entities may deny approval, as well as risks related to indirect sales, growth rates of our business units, renewal of SUSE® Linux Enterprise Server subscriptions with customers who have received certificates from Microsoft, decline rates of Open Enterprise Server and NetWare® revenue, development of products and services, the intelligent workload management market, software vulnerabilities, delays in product releases, reliance on open source software, adequacy of renewal rates, uncertain economic conditions, competition, rapid technological changes, fail ure to expand brand awareness, adequacy of technical support, pricing pressures, system failures, integration of acquisitions, industry consolidation, challenges resulting from a global business, foreign research and development operations, loss of key employees, intellectual property infringement, litigation matters, unpredictable financial results, impairments, the timing of revenue recognition, our investments and effective use of our cash.
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A detailed discussion of these and other factors that could affect our results is included in our SEC filings, including, but not limited to, our Quarterly Report on Form 10-Q for the period ended April 30, 2010 filed with the SEC on June 8, 2010 and our Current Report on Form 8-K filed with the SEC on November 22, 2010 (as amended), which may be obtained by calling (800) 317- 3195, or at our Investor Relations web page at: www.novell.com/company/ir.
We expressly disclaim any obligation, except as required by law, or undertaking to update or revise any forward-looking statements contained in this press release to reflect any change of expectations with regard thereto or to reflect any change in events, conditions, or circumstances on which any such forward-looking statement is based, in whole or in part.
Additional Information About the Merger and Where to Find It
In connection with the merger, Novell intends to file relevant materials with the SEC, including a proxy statement. Investors and security holders of Novell are urged to read these documents (if and when they become available) and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information about Novell, the merger and the other parties to the merger. Investors and security holders may obtain these documents (and any other documents filed by Novell and Attachmate with the SEC) free of charge at the SEC’s website at http://www.sec.gov. In addition, the documents filed with the SEC by Novell may be obtained free of charge by directing such request to: Novell Investor Relations at 1-800-317-3195 or from the investor relations portion of Novell’s website at http://www.novell.com/company/ir/. Investors and security holders are urged to read the definitive proxy statement and the other relevant materials when they become available before making any voting or investment decision with respect to the merger.
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Novell and its directors and executive officers may be deemed to be participants in the solicitation of proxies from Novell’s stockholders in respect of the merger. Information regarding Novell’s directors and executive officers is contained in Novell’s Annual Report on Form 10-K for the fiscal year ended October 31, 2009, its proxy statement for its 2010 Annual Meeting of Stockholders, dated February 26, 2010, and subsequent filings which Novell has made with the SEC. Stockholders may obtain additional information about the directors and executive officers of Novell and their respective interests with respect to the merger by security holdings or otherwise, which may be different than those of Novell’s stockholders generally, by reading the definitive proxy statement and other relevant documents regarding the merger, when filed with the SEC. Each of these documents is, or will be, available as described above.
About Novell
Novell, Inc. (NASDAQ: NOVL), a leader in intelligent workload management, through WorkloadIQTM, helps organizations securely deliver and manage computing services across physical, virtual and cloud computing environments. We help customers reduce the cost, complexity, and risk associated with their IT systems through our solutions for identity and security, systems management, collaboration and Linux-based operating platforms. With our infrastructure software and ecosystem of partnerships, Novell integrates mixed IT environments, allowing people and technology to work as one. For more information, visit www.novell.com.
NetWare, Novell, the Novell logo, the N Logo, and SUSE are registered trademarks and WorkloadIQ is a trademark of Novell, Inc. in the United States and other countries. All third party trademarks are the property of their respective owners.
Press Contact: | Investor Relations Contact: |
Ian Bruce | Robert Kain |
Novell, Inc. | Novell, Inc. |
Phone: 781-464-8034 | Phone: 800-317-3195 |
E-Mail: ibruce@novell.com | E-Mail: rkain@novell.com |
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Novell, Inc. | ||||||||||||||||
Consolidated Unaudited Condensed Statements of Operations | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Fiscal Quarter Ended | Fiscal Year Ended | |||||||||||||||
Oct 31, 2010 | Oct 31, 2009 | Oct 31, 2010 | Oct 31, 2009 | |||||||||||||
Net revenue: | ||||||||||||||||
Software licenses | $ | 31,256 | $ | 31,382 | $ | 105,108 | $ | 116,919 | ||||||||
Maintenance and subscriptions | 153,277 | 159,902 | 618,542 | 640,745 | ||||||||||||
Services (1) | 21,978 | 24,351 | 88,221 | 104,521 | ||||||||||||
Total net revenue | 206,511 | 215,635 | 811,871 | 862,185 | ||||||||||||
Cost of revenue: | ||||||||||||||||
Software licenses | 2,538 | 2,967 | 8,506 | 9,174 | ||||||||||||
Maintenance and subscriptions | 22,517 | 24,276 | 88,447 | 92,613 | ||||||||||||
Services | 20,013 | 20,426 | 76,652 | 85,044 | ||||||||||||
Total cost of revenue | 45,068 | 47,669 | 173,605 | 186,831 | ||||||||||||
Gross profit | 161,443 | 167,966 | 638,266 | 675,354 | ||||||||||||
Operating expenses: | ||||||||||||||||
Sales and marketing | 67,841 | 68,760 | 282,402 | 295,998 | ||||||||||||
Product development | 41,718 | 45,756 | 160,188 | 181,383 | ||||||||||||
General and administrative | 23,652 | 26,948 | 101,118 | 102,172 | ||||||||||||
Other operating expenses (2) | 6,225 | 285,636 | 10,121 | 302,293 | ||||||||||||
Total operating expenses | 139,436 | 427,100 | 553,829 | 881,846 | ||||||||||||
Income (loss) from operations | 22,007 | (259,134 | ) | 84,437 | (206,492 | ) | ||||||||||
Operating margin % | 10.7 | % | -120.2 | % | 10.4 | % | -23.9 | % | ||||||||
Other income, net: | ||||||||||||||||
Interest income, net | 2,588 | 3,208 | 10,790 | 15,275 | ||||||||||||
Other income (expense) | 353 | (2,392 | ) | 6,860 | (12,757 | ) | ||||||||||
Total other income, net | 2,941 | 816 | 17,650 | 2,518 | ||||||||||||
Income (loss) from continuing operations before taxes | 24,948 | (258,318 | ) | 102,087 | (203,974 | ) | ||||||||||
Income tax (benefit) expense | (296,640 | ) | (2,629 | ) | (275,279 | ) | 10,666 | |||||||||
Income (loss) from continuing operations | 321,588 | (255,689 | ) | 377,366 | (214,640 | ) | ||||||||||
Income from discontinued operations | 610 | - | 610 | 1,904 | ||||||||||||
Net income (loss) | $ | 322,198 | $ | (255,689 | ) | $ | 377,976 | $ | (212,736 | ) | ||||||
Diluted earnings (loss) per share: | ||||||||||||||||
Continuing operations | $ | 0.90 | $ | (0.74 | ) | $ | 1.07 | $ | (0.62 | ) | ||||||
Net income (loss) | $ | 0.91 | $ | (0.74 | ) | $ | 1.07 | $ | (0.62 | ) | ||||||
Weighted average shares | 356,010 | 347,043 | 353,447 | 345,493 | ||||||||||||
(1) Services includes professional services, technical support and training services. | ||||||||||||||||
(2) See Page 9 of 12 for a detail of other operating expenses. | ||||||||||||||||
Revisions were made to prior period amounts in order to conform to the current period's presentation. | ||||||||||||||||
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Novell, Inc. | ||||||||
Consolidated Unaudited Condensed Balance Sheets | ||||||||
(In thousands) | ||||||||
Oct 31, 2010 | Oct 31, 2009 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 685,594 | $ | 591,656 | ||||
Short-term investments | 441,096 | 391,809 | ||||||
Restricted cash | - | 53,033 | ||||||
Receivables, net | 171,607 | 177,898 | ||||||
Prepaid expenses | 16,233 | 17,708 | ||||||
Current deferred income taxes | 49,169 | 5,521 | ||||||
Other current assets | 33,725 | 26,747 | ||||||
Total current assets | 1,397,424 | 1,264,372 | ||||||
Property, plant and equipment, net | 156,033 | 170,459 | ||||||
Long-term investments | - | 10,303 | ||||||
Goodwill | 353,415 | 356,033 | ||||||
Intangible assets, net | 28,746 | 36,621 | ||||||
Deferred income taxes | 243,583 | 26,717 | ||||||
Other assets | 46,797 | 38,403 | ||||||
Total assets | $ | 2,225,998 | $ | 1,902,908 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 26,785 | $ | 37,628 | ||||
Accrued compensation | 83,181 | 87,928 | ||||||
Other accrued liabilities | 86,223 | 97,154 | ||||||
Deferred revenue | 487,590 | 495,245 | ||||||
Total current liabilities | 683,779 | 717,955 | ||||||
Deferred income taxes | 7,622 | 8,403 | ||||||
Other long-term liabilities | 35,655 | 48,502 | ||||||
Long-term deferred revenue | 163,394 | 193,526 | ||||||
Total liabilities | 890,450 | 968,386 | ||||||
Stockholders' equity | 1,335,548 | 934,522 | ||||||
Total liabilities and stockholders' equity | $ | 2,225,998 | $ | 1,902,908 | ||||
Revisions were made to prior period amounts in order to conform to the current period's presentation. | ||||||||
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Novell, Inc. | ||||||||||||||||
Consolidated Unaudited Condensed Statements of Cash Flows | ||||||||||||||||
(In thousands) | ||||||||||||||||
Fiscal Quarter Ended | Fiscal Year Ended | |||||||||||||||
Oct 31, 2010 | Oct 31, 2009 | Oct 31, 2010 | Oct 31, 2009 | |||||||||||||
Cash flows from operating activities | ||||||||||||||||
Net income (loss) | $ | 322,198 | $ | (255,689 | ) | $ | 377,976 | $ | (212,736 | ) | ||||||
Adjustments to reconcile net income (loss) to net cash provided | ||||||||||||||||
by operating activities: | ||||||||||||||||
Stock-based compensation expense | 8,232 | 5,683 | 29,057 | 25,881 | ||||||||||||
Depreciation and amortization | 7,896 | 9,657 | 30,298 | 40,675 | ||||||||||||
Change in accounts receivable allowances | (1,166 | ) | 827 | (1,833 | ) | 444 | ||||||||||
Utilization of previously reserved acquired net operating losses | - | 2,125 | - | 2,580 | ||||||||||||
Net gain on sale of property, plant and equipment | - | (2,199 | ) | - | (2,199 | ) | ||||||||||
Gain on debenture repurchases | - | - | - | (11 | ) | |||||||||||
Income from discontinued operations | (610 | ) | - | (610 | ) | (1,904 | ) | |||||||||
Impairment of long-term investments | - | - | - | 5,466 | ||||||||||||
Net gain on sale of previously impaired investments | (218 | ) | (300 | ) | (7,413 | ) | (300 | ) | ||||||||
Impairment of goodwill and intangible assets | - | 279,135 | - | 279,135 | ||||||||||||
Gain on sale of subsidiaries | - | - | - | (16 | ) | |||||||||||
Deferred income taxes | (272,654 | ) | (3,071 | ) | (261,878 | ) | 8,610 | |||||||||
Changes in assets and liabilities, excluding the | ||||||||||||||||
effect of acquisitions and dispositions | (12,085 | ) | 15,250 | (90,050 | ) | (76,855 | ) | |||||||||
Net cash provided by operating activities | 51,593 | 51,418 | 75,547 | 68,770 | ||||||||||||
Cash flows from investing activities | ||||||||||||||||
Purchases of property, plant and equipment | (2,410 | ) | (7,324 | ) | (17,648 | ) | (22,087 | ) | ||||||||
Net proceeds from the sale of property, plant and equipment | - | 10,748 | - | 10,748 | ||||||||||||
Short-term investment activity | (1,936 | ) | (5,199 | ) | (42,663 | ) | 5,100 | |||||||||
Long-term investment activity | 218 | 300 | 8,847 | 4,209 | ||||||||||||
Change in restricted cash | 17,723 | (25 | ) | 53,033 | (332 | ) | ||||||||||
Cash proceeds from sale of discontinued operations | 233 | - | 938 | 1,036 | ||||||||||||
Net cash paid for acquisitions | - | - | - | (48,472 | ) | |||||||||||
Other | 6,520 | 1,330 | 7,899 | 7,228 | ||||||||||||
Net cash provided by (used in) investing activities | 20,348 | (170 | ) | 10,406 | (42,570 | ) | ||||||||||
Cash flows from financing activities | ||||||||||||||||
Issuances of common stock | 1,292 | 641 | 8,940 | 3,566 | ||||||||||||
Excess tax effects from stock-based compensation | 2,226 | 13 | 2,226 | (2,775 | ) | |||||||||||
Debt repayment | - | (4,087 | ) | - | (4,658 | ) | ||||||||||
Debenture repurchases | - | - | - | (125,537 | ) | |||||||||||
Net cash provided by (used in) financing activities | 3,518 | (3,433 | ) | 11,166 | (129,404 | ) | ||||||||||
Effect of exchange rate changes on cash | 5,085 | 6,977 | (3,181 | ) | 14,826 | |||||||||||
Increase (decrease) in cash and cash equivalents | 80,544 | 54,792 | 93,938 | (88,378 | ) | |||||||||||
Cash and cash equivalents - beginning of period | 605,050 | 536,864 | 591,656 | 680,034 | ||||||||||||
Cash and cash equivalents - end of period | $ | 685,594 | $ | 591,656 | $ | 685,594 | $ | 591,656 | ||||||||
Page 9 of 12 | ||||||||||||||||
Novell, Inc. | ||||||||||||||||
Unaudited Non-GAAP Adjusted Income From Operations | ||||||||||||||||
(In thousands) | ||||||||||||||||
Fiscal Quarter Ended | Fiscal Year Ended | |||||||||||||||
Oct 31, 2010 | Oct 31, 2009 | Oct 31, 2010 | Oct 31, 2009 | |||||||||||||
GAAP income (loss) from operations | $ | 22,007 | $ | (259,134 | ) | $ | 84,437 | $ | (206,492 | ) | ||||||
Adjustments: | ||||||||||||||||
Stock-based compensation expense: | ||||||||||||||||
Cost of revenue | 876 | 512 | 3,053 | 2,649 | ||||||||||||
Sales and marketing | 2,385 | 1,659 | 8,038 | 7,015 | ||||||||||||
Product development | 2,151 | 1,721 | 8,227 | 9,332 | ||||||||||||
General and administrative | 2,820 | 1,791 | 9,739 | 6,885 | ||||||||||||
Sub-total | 8,232 | 5,683 | 29,057 | 25,881 | ||||||||||||
Acquisition-related intangible asset amortization: | ||||||||||||||||
Cost of revenue | 1,129 | 2,098 | 4,895 | 9,984 | ||||||||||||
Sales and marketing | 630 | 2,706 | 2,980 | 7,296 | ||||||||||||
Sub-total | 1,759 | 4,804 | 7,875 | 17,280 | ||||||||||||
Other operating expenses (income): | ||||||||||||||||
Restructuring expense | - | 8,700 | 2,774 | 25,200 | ||||||||||||
Strategic alternatives review expense | 6,225 | - | 9,222 | - | ||||||||||||
Litigation related activity | - | - | (1,875 | ) | - | |||||||||||
Gain on sale of subsidiaries | - | - | - | (16 | ) | |||||||||||
Net gain on sale of property, plant and equipment | - | (2,199 | ) | - | (2,199 | ) | ||||||||||
IT outsourcing transition costs | - | - | - | 173 | ||||||||||||
Impairment of goodwill and intangible assets | - | 279,135 | - | 279,135 | ||||||||||||
Sub-total | 6,225 | 285,636 | 10,121 | 302,293 | ||||||||||||
Total operating adjustments | 16,216 | 296,123 | 47,053 | 345,454 | ||||||||||||
Non-GAAP income from operations | $ | 38,223 | $ | 36,989 | $ | 131,490 | $ | 138,962 | ||||||||
Non-GAAP operating margin % | 18.5 | % | 17.2 | % | 16.2 | % | 16.1 | % |
Novell, Inc. | ||||||||||||||||
Unaudited Non-GAAP Adjusted Net Income | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Fiscal Quarter Ended | Fiscal Year Ended | |||||||||||||||
Oct 31, 2010 | Oct 31, 2009 | Oct 31, 2010 | Oct 31, 2009 | |||||||||||||
GAAP net income (loss) | $ | 322,198 | $ | (255,689 | ) | $ | 377,976 | $ | (212,736 | ) | ||||||
Operating adjustments (detailed above) | 16,216 | 296,123 | 47,053 | 345,454 | ||||||||||||
Non-operating expenses (income) adjustments: | ||||||||||||||||
Net gain on sale of previously impaired investments | (218 | ) | (300 | ) | (7,413 | ) | (300 | ) | ||||||||
Gain on debenture repurchases | - | - | - | (11 | ) | |||||||||||
Impairment of long-term investments | - | - | - | 5,466 | ||||||||||||
Sub-total | (218 | ) | (300 | ) | (7,413 | ) | 5,155 | |||||||||
Total pre-tax adjustments | 15,998 | 295,823 | 39,640 | 350,609 | ||||||||||||
Income tax adjustments | (312,118 | ) | (2,130 | ) | (320,153 | ) | (19,219 | ) | ||||||||
Income from discontinued operations | (610 | ) | - | (610 | ) | (1,904 | ) | |||||||||
Total net adjustments | (296,730 | ) | 293,693 | (281,123 | ) | 329,486 | ||||||||||
Non-GAAP net income and non-GAAP income | ||||||||||||||||
from continuing operations | $ | 25,468 | $ | 38,004 | $ | 96,853 | $ | 116,750 | ||||||||
GAAP net income (loss) per share | $ | 0.91 | $ | (0.74 | ) | $ | 1.07 | $ | (0.62 | ) | ||||||
Total adjustments detailed above | (0.84 | ) | 0.85 | (0.80 | ) | 0.96 | ||||||||||
Non-GAAP net income per share and non-GAAP | ||||||||||||||||
income from continuing operations per share | $ | 0.07 | $ | 0.11 | $ | 0.27 | $ | 0.34 | ||||||||
GAAP weighted average shares | 356,010 | 347,043 | 353,447 | 345,493 | ||||||||||||
Change from basic to diluted weighted average shares | - | 1,707 | - | 2,328 | ||||||||||||
Non-GAAP weighted average shares | 356,010 | 348,750 | 353,447 | 347,821 | ||||||||||||
Page 10 of 12 | ||||||||||||||||||||||||||||
Novell, Inc. | ||||||||||||||||||||||||||||
Consolidated Unaudited Condensed Segment Results | ||||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Fiscal Quarter Ended October 31, 2010 | ||||||||||||||||||||||||||||
Security, | ||||||||||||||||||||||||||||
Management and | Collaboration | Common | ||||||||||||||||||||||||||
Operating Platforms | % | Solutions | % | Unallocated | Total | % | ||||||||||||||||||||||
Net revenue: | ||||||||||||||||||||||||||||
Software licenses | $ | 18,915 | 14.7 | $ | 12,341 | 15.8 | $ | - | $ | 31,256 | 15.1 | |||||||||||||||||
Maintenance and subscriptions | 93,360 | 72.8 | 59,917 | 76.6 | - | 153,277 | 74.2 | |||||||||||||||||||||
Services | 16,044 | 12.5 | 5,934 | 7.6 | - | 21,978 | 10.6 | |||||||||||||||||||||
Total net revenue | 128,319 | 100.0 | 78,192 | 100.0 | - | 206,511 | 100.0 | |||||||||||||||||||||
Cost of revenue: | ||||||||||||||||||||||||||||
Software licenses | 1,938 | 1.5 | 408 | 0.5 | 192 | 2,538 | 1.2 | |||||||||||||||||||||
Maintenance and subscriptions | 14,546 | 11.3 | 6,822 | 8.7 | 1,149 | 22,517 | 10.9 | |||||||||||||||||||||
Services | 14,627 | 11.4 | 4,722 | 6.0 | 664 | 20,013 | 9.7 | |||||||||||||||||||||
Total cost of revenue | 31,111 | 24.2 | 11,952 | 15.3 | 2,005 | 45,068 | 21.8 | |||||||||||||||||||||
Gross profit | 97,208 | 75.8 | 66,240 | 84.7 | (2,005 | ) | 161,443 | 78.2 | ||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||
Sales and marketing | 52,139 | 40.6 | 12,687 | 16.2 | 3,015 | 67,841 | 32.9 | |||||||||||||||||||||
Product development | 31,239 | 24.3 | 8,328 | 10.7 | 2,151 | 41,718 | 20.2 | |||||||||||||||||||||
General and administrative | 13,419 | 10.5 | 7,413 | 9.5 | 2,820 | 23,652 | 11.5 | |||||||||||||||||||||
Other operating expenses | - | - | - | - | 6,225 | 6,225 | 3.0 | |||||||||||||||||||||
Total operating expenses | 96,797 | 75.4 | 28,428 | 36.4 | 14,211 | 139,436 | 67.5 | |||||||||||||||||||||
Income (loss) from operations | $ | 411 | 0.3 | $ | 37,812 | 48.4 | $ | (16,216 | ) | $ | 22,007 | 10.7 | ||||||||||||||||
Fiscal Quarter Ended July 31, 2010 | ||||||||||||||||||||||||||||
Security, | ||||||||||||||||||||||||||||
Management and | Collaboration | Common | ||||||||||||||||||||||||||
Operating Platforms | % | Solutions | % | Unallocated | Total | % | ||||||||||||||||||||||
Net revenue: | ||||||||||||||||||||||||||||
Software licenses | $ | 15,819 | 12.8 | $ | 9,149 | 12.1 | $ | - | $ | 24,968 | 12.5 | |||||||||||||||||
Maintenance and subscriptions | 92,333 | 74.8 | 60,126 | 79.7 | - | 152,459 | 76.6 | |||||||||||||||||||||
Services | 15,354 | 12.4 | 6,199 | 8.2 | - | 21,553 | 10.8 | |||||||||||||||||||||
Total net revenue | 123,506 | 100.0 | 75,474 | 100.0 | - | 198,980 | 100.0 | |||||||||||||||||||||
Cost of revenue: | ||||||||||||||||||||||||||||
Software licenses | 1,842 | 1.5 | 325 | 0.4 | 188 | 2,355 | 1.2 | |||||||||||||||||||||
Maintenance and subscriptions | 14,428 | 11.7 | 6,755 | 9.0 | 1,350 | 22,533 | 11.3 | |||||||||||||||||||||
Services | 13,165 | 10.7 | 4,834 | 6.4 | 620 | 18,619 | 9.4 | |||||||||||||||||||||
Total cost of revenue | 29,435 | 23.8 | 11,914 | 15.8 | 2,158 | 43,507 | 21.9 | |||||||||||||||||||||
Gross profit | 94,071 | 76.2 | 63,560 | 84.2 | (2,158 | ) | 155,473 | 78.1 | ||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||
Sales and marketing | 54,949 | 44.5 | 13,708 | 18.2 | 2,135 | 70,792 | 35.6 | |||||||||||||||||||||
Product development | 29,720 | 24.1 | 7,743 | 10.3 | 1,937 | 39,400 | 19.8 | |||||||||||||||||||||
General and administrative | 13,854 | 11.2 | 7,615 | 10.1 | 1,836 | 23,305 | 11.7 | |||||||||||||||||||||
Other operating expenses | - | - | - | - | 878 | 878 | 0.4 | |||||||||||||||||||||
Total operating expenses | 98,523 | 79.8 | 29,066 | 38.5 | 6,786 | 134,375 | 67.5 | |||||||||||||||||||||
Income (loss) from operations | $ | (4,452 | ) | (3.6 | ) | $ | 34,494 | 45.7 | $ | (8,944 | ) | $ | 21,098 | 10.6 | ||||||||||||||
Fiscal Quarter Ended October 31, 2009 | ||||||||||||||||||||||||||||
Security, | ||||||||||||||||||||||||||||
Management and | Collaboration | Common | ||||||||||||||||||||||||||
Operating Platforms | % | Solutions | % | Unallocated | Total | % | ||||||||||||||||||||||
Net revenue: | ||||||||||||||||||||||||||||
Software licenses | $ | 19,430 | 14.8 | $ | 11,952 | 14.2 | $ | - | $ | 31,382 | 14.6 | |||||||||||||||||
Maintenance and subscriptions | 94,189 | 71.6 | 65,713 | 78.1 | - | 159,902 | 74.2 | |||||||||||||||||||||
Services | 17,859 | 13.6 | 6,492 | 7.7 | - | 24,351 | 11.3 | |||||||||||||||||||||
Total net revenue | 131,478 | 100.0 | 84,157 | 100.0 | - | 215,635 | 100.0 | |||||||||||||||||||||
Cost of revenue: | ||||||||||||||||||||||||||||
Software licenses | 2,247 | 1.7 | 384 | 0.5 | 336 | 2,967 | 1.4 | |||||||||||||||||||||
Maintenance and subscriptions | 14,816 | 11.3 | 7,603 | 9.0 | 1,857 | 24,276 | 11.3 | |||||||||||||||||||||
Services | 14,908 | 11.3 | 5,101 | 6.1 | 417 | 20,426 | 9.5 | |||||||||||||||||||||
Total cost of revenue | 31,971 | 24.3 | 13,088 | 15.6 | 2,610 | 47,669 | 22.1 | |||||||||||||||||||||
Gross profit | 99,507 | 75.7 | 71,069 | 84.4 | (2,610 | ) | 167,966 | 77.9 | ||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||
Sales and marketing | 51,305 | 39.0 | 13,090 | 15.6 | 4,365 | 68,760 | 31.9 | |||||||||||||||||||||
Product development | 35,077 | 26.7 | 8,958 | 10.6 | 1,721 | 45,756 | 21.2 | |||||||||||||||||||||
General and administrative | 16,294 | 12.4 | 8,863 | 10.5 | 1,791 | 26,948 | 12.5 | |||||||||||||||||||||
Other operating expenses | - | - | - | - | 285,636 | 285,636 | 132.5 | |||||||||||||||||||||
Total operating expenses | 102,676 | 78.1 | 30,911 | 36.7 | 293,513 | 427,100 | 198.1 | |||||||||||||||||||||
Income (loss) from operations | $ | (3,169 | ) | (2.4 | ) | $ | 40,158 | 47.7 | $ | (296,123 | ) | $ | (259,134 | ) | (120.2 | ) | ||||||||||||
Revisions were made to prior period amounts in order to conform to the current period's presentation. |
Page 11 of 12 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Novell, Inc. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unaudited Trended Segment Revenue by Software Licenses and Maintenance and Services | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Change from | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Q4 2009 | % | Fiscal Year 2009 | % | Q3 2010 | % | Q4 2010 | % | Fiscal Year 2010 | % | Q4 2009 to Q4 2010 | FY 2009 to FY 2010 | |||||||||||||||||||||||||||||||||||||||||||||
Security, management and operating platforms | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Open platform solutions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Linux platform products | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Software licenses | $ | - | - | $ | - | - | $ | - | - | $ | - | - | $ | - | - | $ | - | - | $ | - | - | |||||||||||||||||||||||||||||||||||
Maintenance and subscriptions | 39,011 | 18.1 | 149,162 | 17.3 | 35,506 | 17.8 | 36,256 | 17.6 | 144,411 | 17.8 | (2,755 | ) | (7.1 | ) | (4,751 | ) | (3.2 | ) | ||||||||||||||||||||||||||||||||||||||
39,011 | 18.1 | 149,162 | 17.3 | 35,506 | 17.8 | 36,256 | 17.6 | 144,411 | 17.8 | (2,755 | ) | (7.1 | ) | (4,751 | ) | (3.2 | ) | |||||||||||||||||||||||||||||||||||||||
Other open platform products | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Software licenses | 21 | 0.0 | 125 | 0.0 | 1 | 0.0 | 70 | 0.0 | 109 | 0.0 | 49 | 233.3 | (16 | ) | (12.8 | ) | ||||||||||||||||||||||||||||||||||||||||
Maintenance and subscriptions | 1,979 | 0.9 | 7,592 | 0.9 | 2,108 | 1.1 | 2,505 | 1.2 | 8,088 | 1.0 | 526 | 26.6 | 496 | 6.5 | ||||||||||||||||||||||||||||||||||||||||||
2,000 | 0.9 | 7,717 | 0.9 | 2,109 | 1.1 | 2,575 | 1.2 | 8,197 | 1.0 | 575 | 28.8 | 480 | 6.2 | |||||||||||||||||||||||||||||||||||||||||||
Total open platform solutions | 41,011 | 19.0 | 156,879 | 18.2 | 37,615 | 18.9 | 38,831 | 18.8 | 152,608 | 18.8 | (2,180 | ) | (5.3 | ) | (4,271 | ) | (2.7 | ) | ||||||||||||||||||||||||||||||||||||||
Identity and security management | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Identity, access and compliance management | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Software licenses | 10,360 | 4.8 | 31,908 | 3.7 | 7,991 | 4.0 | 10,912 | 5.3 | 34,508 | 4.3 | 552 | 5.3 | 2,600 | 8.1 | ||||||||||||||||||||||||||||||||||||||||||
Maintenance and subscriptions | 19,606 | 9.1 | 80,340 | 9.3 | 22,502 | 11.3 | 21,856 | 10.6 | 88,637 | 10.9 | 2,250 | 11.5 | 8,297 | 10.3 | ||||||||||||||||||||||||||||||||||||||||||
29,966 | 13.9 | 112,248 | 13.0 | 30,493 | 15.3 | 32,768 | 15.9 | 123,145 | 15.2 | 2,802 | 9.4 | 10,897 | 9.7 | |||||||||||||||||||||||||||||||||||||||||||
Other identity and security management | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Software licenses | 426 | 0.2 | 1,965 | 0.2 | 260 | 0.1 | 393 | 0.2 | 1,416 | 0.2 | (33 | ) | (7.7 | ) | (549 | ) | (27.9 | ) | ||||||||||||||||||||||||||||||||||||||
Maintenance and subscriptions | 1,781 | 0.8 | 6,837 | 0.8 | 1,303 | 0.7 | 1,072 | 0.5 | 4,926 | 0.6 | (709 | ) | (39.8 | ) | (1,911 | ) | (28.0 | ) | ||||||||||||||||||||||||||||||||||||||
2,207 | 1.0 | 8,802 | 1.0 | 1,563 | 0.8 | 1,465 | 0.7 | 6,342 | 0.8 | (742 | ) | (33.6 | ) | (2,460 | ) | (27.9 | ) | |||||||||||||||||||||||||||||||||||||||
Total identity and security management | 32,173 | 14.9 | 121,050 | 14.0 | 32,056 | 16.1 | 34,233 | 16.6 | 129,487 | 15.9 | 2,060 | 6.4 | 8,437 | 7.0 | ||||||||||||||||||||||||||||||||||||||||||
Systems and resource management | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Software licenses | 8,623 | 4.0 | 33,806 | 3.9 | 7,567 | 3.8 | 7,540 | 3.7 | 29,549 | 3.6 | (1,083 | ) | (12.6 | ) | (4,257 | ) | (12.6 | ) | ||||||||||||||||||||||||||||||||||||||
Maintenance and subscriptions | 31,812 | 14.8 | 126,963 | 14.7 | 30,914 | 15.5 | 31,671 | 15.3 | 126,502 | 15.6 | (141 | ) | (0.4 | ) | (461 | ) | (0.4 | ) | ||||||||||||||||||||||||||||||||||||||
Total systems and resource management | 40,435 | 18.8 | 160,769 | 18.6 | 38,481 | 19.3 | 39,211 | 19.0 | 156,051 | 19.2 | (1,224 | ) | (3.0 | ) | (4,718 | ) | (2.9 | ) | ||||||||||||||||||||||||||||||||||||||
Total security, management and operating platforms | 113,619 | 52.7 | 438,698 | 50.9 | 108,152 | 54.4 | 112,275 | 54.4 | 438,146 | 54.0 | (1,344 | ) | (1.2 | ) | (552 | ) | (0.1 | ) | ||||||||||||||||||||||||||||||||||||||
Collaboration solutions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OES and NetWare-related | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Software licenses | 5,504 | 2.6 | 20,232 | 2.3 | 5,225 | 2.6 | 6,128 | 3.0 | 20,831 | 2.6 | 624 | 11.3 | 599 | 3.0 | ||||||||||||||||||||||||||||||||||||||||||
Maintenance and subscriptions | 38,080 | 17.7 | 157,524 | 18.3 | 35,161 | 17.7 | 35,478 | 17.2 | 144,794 | 17.8 | (2,602 | ) | (6.8 | ) | (12,730 | ) | (8.1 | ) | ||||||||||||||||||||||||||||||||||||||
43,584 | 20.2 | 177,756 | 20.6 | 40,386 | 20.3 | 41,606 | 20.1 | 165,625 | 20.4 | (1,978 | ) | (4.5 | ) | (12,131 | ) | (6.8 | ) | |||||||||||||||||||||||||||||||||||||||
Collaboration | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Software licenses | 3,827 | 1.8 | 14,822 | 1.7 | 1,980 | 1.0 | 3,271 | 1.6 | 9,555 | 1.2 | (556 | ) | (14.5 | ) | (5,267 | ) | (35.5 | ) | ||||||||||||||||||||||||||||||||||||||
Maintenance and subscriptions | 20,477 | 9.5 | 85,123 | 9.9 | 18,978 | 9.5 | 18,867 | 9.1 | 77,282 | 9.5 | (1,610 | ) | (7.9 | ) | (7,841 | ) | (9.2 | ) | ||||||||||||||||||||||||||||||||||||||
24,304 | 11.3 | 99,945 | 11.6 | 20,958 | 10.5 | 22,138 | 10.7 | 86,837 | 10.7 | (2,166 | ) | (8.9 | ) | (13,108 | ) | (13.1 | ) | |||||||||||||||||||||||||||||||||||||||
Other collaboration solutions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Software licenses | 2,621 | 1.2 | 14,061 | 1.6 | 1,944 | 1.0 | 2,942 | 1.4 | 9,140 | 1.1 | 321 | 12.2 | (4,921 | ) | (35.0 | ) | ||||||||||||||||||||||||||||||||||||||||
Maintenance and subscriptions | 7,156 | 3.3 | 27,204 | 3.2 | 5,987 | 3.0 | 5,572 | 2.7 | 23,902 | 2.9 | (1,584 | ) | (22.1 | ) | (3,302 | ) | (12.1 | ) | ||||||||||||||||||||||||||||||||||||||
9,777 | 4.5 | 41,265 | 4.8 | 7,931 | 4.0 | 8,514 | 4.1 | 33,042 | 4.1 | (1,263 | ) | (12.9 | ) | (8,223 | ) | (19.9 | ) | |||||||||||||||||||||||||||||||||||||||
Total collaboration solutions | 77,665 | 36.0 | 318,966 | 37.0 | 69,275 | 34.8 | 72,258 | 35.0 | 285,504 | 35.2 | (5,407 | ) | (7.0 | ) | (33,462 | ) | (10.5 | ) | ||||||||||||||||||||||||||||||||||||||
Total software licenses, maintenance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
and subscriptions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Software licenses | 31,382 | 14.6 | 116,919 | 13.6 | 24,968 | 12.5 | 31,256 | 15.1 | 105,108 | 12.9 | (126 | ) | (0.4 | ) | (11,811 | ) | (10.1 | ) | ||||||||||||||||||||||||||||||||||||||
Maintenance and subscriptions | 159,902 | 74.2 | 640,745 | 74.3 | 152,459 | 76.6 | 153,277 | 74.2 | 618,542 | 76.2 | (6,625 | ) | (4.1 | ) | (22,203 | ) | (3.5 | ) | ||||||||||||||||||||||||||||||||||||||
Total product revenue | 191,284 | 88.7 | 757,664 | 87.9 | 177,427 | 89.2 | 184,533 | 89.4 | 723,650 | 89.1 | (6,751 | ) | (3.5 | ) | (34,014 | ) | (4.5 | ) | ||||||||||||||||||||||||||||||||||||||
Services | 24,351 | 11.3 | 104,521 | 12.1 | 21,553 | 10.8 | 21,978 | 10.6 | 88,221 | 10.9 | (2,373 | ) | (9.7 | ) | (16,300 | ) | (15.6 | ) | ||||||||||||||||||||||||||||||||||||||
Total net revenue | $ | 215,635 | 100.0 | $ | 862,185 | 100.0 | $ | 198,980 | 100.0 | $ | 206,511 | 100.0 | $ | 811,871 | 100.0 | $ | (9,124 | ) | (4.2 | ) | $ | (50,314 | ) | (5.8 | ) | |||||||||||||||||||||||||||||||
Page 12 of 12 | ||||||||||
Novell, Inc. | ||||||||||
Major IT Software and Solutions Included Within Reported Line Items | ||||||||||
Security, Management and Operating Platforms | ||||||||||
Open Platform Solutions | ||||||||||
Linux Platform Products | ||||||||||
> SUSE LINUX Enterprise Server | ||||||||||
> SUSE LINUX Enterprise Desktop | ||||||||||
Other Open Platform Products | ||||||||||
> SUSE Engineering | ||||||||||
Identity and Security Management | ||||||||||
Identity, Access and Compliance Management | ||||||||||
> Identity Manager | ||||||||||
> SecureLogin | ||||||||||
> Access Manager | ||||||||||
> Sentinel | ||||||||||
Other Identity and Security Management | ||||||||||
> eDirectory | ||||||||||
Systems and Resource Management | ||||||||||
> ZENworks Suite | ||||||||||
> ZENworks Patch Management | ||||||||||
> ZENworks Asset Management | ||||||||||
> ZENworks Linux Management | ||||||||||
> ZENworks Configuration Management | ||||||||||
> PlateSpin | ||||||||||
> Business Service Management | ||||||||||
Collaboration Solutions | ||||||||||
Open Enterprise Server and NetWare-Related | ||||||||||
> Open Enterprise Server (OES) | ||||||||||
> NetWare | ||||||||||
> Cluster Services | ||||||||||
Collaboration | ||||||||||
> GroupWise | ||||||||||
> Teaming + Conferencing | ||||||||||
Other Collaboration Solutions | ||||||||||
> BorderManager | ||||||||||
Services | ||||||||||
> Professional Services | ||||||||||
> Technical Support Services | ||||||||||
> Training Services | ||||||||||
On December 2, 2010, Novell, Inc. (“Novell”) issued a press release to report Novell’s financial results for the fourth fiscal quarter and full fiscal year ended October 31, 2010. A copy of the press release is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.
The information disclosed in this Current Report on Form 8-K and Exhibit 99.1 is being furnished pursuant to Item 2.02 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
We disclosed non-GAAP financial measures in the press release for the fiscal quarters and fiscal years ended October 31, 2010 and October 31, 2009. These non-GAAP measures include adjusted income from operations, adjusted operating margin, adjusted income from continuing operations, adjusted net income, adjusted income per share from continuing operations and adjusted net income per share. We provide non-GAAP financial measures to enhance an overall understanding of our current financial performance and prospects for the future and to enable investors to evaluate our performance in the same way that management does. Management uses these same non-GAAP financial measures to evaluate performance, allocate resources, and determine compensation.
The non-GAAP financial measures do not replace the presentation of our GAAP financial results, but they eliminate expenses and gains that are excluded from most analysts’ consensus estimates, that are unusual, and/or that arise outside of the ordinary course of business.
In the noted fiscal periods, we excluded the following items from our GAAP income from operations to arrive at our non-GAAP income from operations and non-GAAP operating margin:
· | Stock-based compensation expense – We excluded stock-based compensation expense incurred in the fiscal quarters and fiscal years ended October 31, 2010 and October 31, 2009 to be consistent with the way the financial community evaluates our performance and the methods used by analysts to calculate consensus estimates. |
· | Acquisition-related intangible asset amortization – We excluded acquisition-related intangible asset amortization incurred in the fiscal quarters and fiscal years ended October 31, 2010 and October 31, 2009 because such charges are unrelated to our core operating performance and the intangible assets acquired vary significantly based on the timing and magnitude of our acquisition transactions and the maturities of the businesses acquired. |
· | Restructuring expense – We excluded restructuring expenses incurred in the fiscal years ended October 31, 2010 and October 31, 2009 and in the fiscal quarter ended October 31, 2009 because such expenses distort trends and are not part of our ongoing, ordinary business. |
· | Strategic alternatives review expense – We excluded expenses incurred in the fiscal quarter and fiscal year ended October 31, 2010 associated with (i) our Board of Director’s review with our independent financial and legal advisors of the unsolicited, conditional proposal from Elliott Associates, L.P. to acquire the company, and (ii) matters associated with and resulting from our Board of Directors’ review of various alternatives to enhance stockholder value including, without limitation, a return of capital to stockholders through a stock repurchase or cash dividend, strategic partnerships and alliances, joint ventures, a recapitalization and a sale of the company. |
· | Litigation related activity – We excluded amounts recognized in the fiscal year ended October 31, 2010 for activity associated with the resolution of certain legal actions because such activities distort trends and are not part of our ongoing, ordinary business. |
· | Gain on sale of subsidiaries – We excluded net gains associated with the finalization of the sale of our wholly-owned subsidiaries in Mexico, Argentina and Chile recorded in the fiscal year ended October 31, 2009 because sales of subsidiaries occur infrequently and are not considered part of our ongoing, ordinary business. |
· | Net gain on sale of property, plant and equipment – We excluded a net gain incurred in the fiscal quarter and fiscal year ended October 31, 2009 resulting from the sale of material corporate assets because (i) sales of material corporate assets occur infrequently; and (ii) net gains related to the sale of material corporate assets distort trends and are not considered part of our ongoing, ordinary business. |
· | IT outsourcing transition costs - We excluded expenses incurred in the fiscal year ended October 31, 2009 associated with transition activities related to outsourcing the majority of our IT support functions because expenses related to the transition activities distort trends and are not considered part of our ongoing, ordinary business. |
· | Impairment of goodwill and intangible assets – We excluded expenses incurred in the fiscal quarter and fiscal year ended October 31, 2009 related to the impairment of goodwill and intangible assets because (i) the impairment of goodwill and intangible assets occurs infrequently; and (ii) the impairment of goodwill and intangible assets distorts trends and is not considered part of our ongoing, ordinary business. |
In the noted fiscal periods, we excluded the items described above and the following additional items from our GAAP net income to arrive at our non-GAAP income from continuing operations, non-GAAP net income, non-GAAP income per share from continuing operations and non-GAAP net income per share:
· | Net gain on sale of previously impaired investments – We excluded net gains from the sale of previously impaired investments recorded in the fiscal quarters and fiscal years ended October 31, 2010 and October 31, 2009 because the sale of previously impaired investments is not considered part of our ongoing business. |
· | Gain on debenture repurchases – We excluded net gains from the repurchase of our 0.5% senior convertible debentures incurred in the fiscal year ended October 31, 2009 because the repurchase of long-term debt securities occurs infrequently and is not considered part of our ongoing, ordinary business. |
· | Impairment of long-term investments – We excluded impairments of investments in the fiscal year ended October 31, 2009 because impairments of investments occur infrequently and are not considered part of our ongoing, ordinary business. |
· | Income tax adjustments – We adjusted our income taxes related to the excluded items indicated above. We apply a blended worldwide income tax rate to non-GAAP adjusted income before tax to calculate non-GAAP adjusted income tax expense. Accordingly, the non-GAAP adjusted income tax expense excludes $308 million in non-cash tax provision benefits recorded in the fiscal quarter and fiscal year ended October 31, 2010, principally to release a valuation allowance for certain net deferred tax assets. |
· | Income from discontinued operations – We excluded income from discontinued operations recorded in the fiscal quarter and fiscal year ended October 31, 2010 related to an accrual release from the resolution of outstanding pension plan agreements associated with Celerant consulting, which we sold in fiscal 2006, and contingent payments earned in the fiscal year ended October 31, 2009 for the sale of our U.K.-based business consulting unit in fiscal 2007 because (i) we exited the business consulting segment in fiscal 2008, and (ii) this income is not considered part of our ongoing, ordinary business. |
As previously publicly disclosed, we entered into an Agreement and Plan of Merger, dated as of November 21, 2010 (the “Merger Agreement”), with Attachmate Corporation, a Washington corporation (“Attachmate”), and Longview Software Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Attachmate (“Longview”), upon the terms and subject to the conditions of which, Longview will be merged with and into Novell, with Novell continuing as the surviving corporation and a wholly owned subsidiary of Attachmate (the “Merger”).
We are subject to a number of risks, including, among others, the risk that the Merger may be delayed or may not be consummated; the risk that the Merger Agreement may be terminated in circumstances that require us to pay Attachmate a termination fee of $60 million; risks related to the diversion of management’s attention from our ongoing business operations; risks regarding the failure of Attachmate to obtain the necessary financing to complete the Merger; the effect of the announcement of the Merger on our business relationships (including, without limitation, partners and customers), operating results and business generally; and risks related to obtaining the requisite consents to the Merger, including, without limitation, the timing (including possible delays) and receipt of regulatory approvals from various governmental entitie s (including any conditions, limitations or restrictions placed on these approvals) and the risk that one or more governmental entities may deny approval.
ADDITIONAL INFORMATION ABOUT THE MERGER
AND WHERE TO FIND IT
In connection with the Merger, Novell intends to file relevant materials with the SEC, including a proxy statement. Investors and security holders of Novell are urged to read these documents (if and when they become available) and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information about Novell, the Merger and the other parties to the Merger. Investors and security holders may obtain these documents (and any other documents filed by Novell and Attachmate with the SEC) free of charge at the SEC’s website at http://www.sec.gov. In addition, the documents filed with the SEC by Novell may be obtained free of charge by directing such request to:& #160; Novell Investor Relations at 1-800-317-3195 or from the investor relations portion of Novell’s website at http://www.novell.com/company/ir/. Investors and security holders are urged to read the definitive proxy statement and the other relevant materials when they become available before making any voting or investment decision with respect to the Merger.
Novell and its directors and executive officers may be deemed to be participants in the solicitation of proxies from Novell’s stockholders in respect of the Merger. Information regarding Novell’s directors and executive officers is contained in Novell’s Annual Report on Form 10-K for the fiscal year ended October 31, 2009, its proxy statement for its 2010 Annual Meeting of Stockholders, dated February 26, 2010, and subsequent filings which Novell has made with the SEC. Stockholders may obtain additional information about the directors and executive officers of Novell and their respective interests with respect to the Merger by security holdings or otherwise, which may be different than those of Novell’s stockholders generally, by reading the definitive proxy statement and other relevant docume nts regarding the Merger, when filed with the SEC. Each of these documents is, or will be, available as described above.
Ron Hovsepian Q4 and Full Year FY2010, Financial Results- Letter to All-Employees
Team,
Today we announced Novell's Q4 and full year fiscal year 2010 results. We reported revenue of $207 million, compared to $216 million for the fourth quarter of 2009. On a non-GAAP basis, net income for Q4 was $25 million, or $0.07 per share. Year-ago Q4 net income was $38 million, or $0.11 per share.
For the full fiscal year 2010, Novell reported non-GAAP net income of $97 million, or $0.27 per share. This compares to fiscal year 2009 net income of $117 million, or $0.34 per share.
I am pleased with our progress during the fourth quarter as well as for the full fiscal year 2010.
Early in the year, last December, we introduced our strategy to become the leader in the emerging category of Intelligent Workload Management. We followed that up with our branded approach to intelligent workload management, WorkloadIQ, last August. During the year we've introduced 11 new or significant upgrades to our product portfolio that support our WorkloadIQ road map. These include Novell Identity Manager 4, Novell Sentinel Log Manager, Novell Cloud Security Service, SUSE Linux Enterprise 11 SP1, SUSE Appliance Toolkit, SUSE Gallery, SUSE Cloud Program, Novell Cloud Manager, PlateSpin Migrate, PlateSpin Protect, and PlateSpin Forge. On the col laboration front, we also made substantial progress on the product front in FY2010 with the launch of Novell File Management Suite, Novell Data Synchronizer, Novell Teaming 2.1, Novell Conferencing, Novell Groupwise 8 SP2 and most recently the beta launch of Novell Vibe.
Our progress with our key strategic partners continues to gain momentum. During the past year we announced a key strategic partnership with VMware, deepened our partnership with IBM as we jointly celebrated and promoted the 10th anniversary of SUSE Linux Enterprise Server on IBM system Z, announced a new solution for SAP to fully optimize SAP applications on SUSE Linux Enterprise Server, continued our interoperability work with Microsoft, as well as furthered our relationship with HP and Dell. In addition, we are forging new relationships with XaaS pr oviders (such as infrastructure as a service) which will provide additional traction for our intelligent workload management strategy and WorkloadIQ branded approach to gain leadership there. On the broader partner front, we made progress with critical programs such as Partner Deal Registration, which showed a 66% growth in partner participation, 62% growth in pipeline and 32% growth in average deal size.
Our Novell brand reputation, while faced with some uncertainty during the year, nevertheless gained momentum. As we measure our success against the intelligent workload management strategy, 57% of IT executives in a global survey, rate Novell as either an above average or leading provider of intelligent workload management solutions.
Our most important asset, our 3,400 Novell employees, also was as you might expect, a bright spot this year. Career mobility increased 50% in FY2010, more manager roles were filled internally in FY2010 than in the previous year, FACE of Excellence nominations increased by 40%, and in spite of some uncertain times, 98% of you completed the annual performance management process and had the important conversations with your manager.
Let me close by reminding you, we need to stick to our key three Novell corporate objectives as we're now one full month into the quarter. These are;
-Become the leader in intelligent workload management
-Meet our invoicing and margin requirements
-Retain and acquire customers through and with partners
We all need to stay focused on these goals and I know you will. I realize all of this is against a backdrop of the November 22 announcement that we entered into a definitive merger agreement with Attachmate Corporation. Since the announcement I and members of our Executive Leadership Team have held town hall meetings at virtually all key Novell sites around the globe to take your questions and have an open discussion. Many of you have mentioned that you have on-going questions and/or comments from partners, customers, fellow Novell employees or outside acquaintances. Let me remind you that we've published a detailed set of communications (include link) for key stakeholders and a set of FAQ’s for inter nal use by Novell employees. While I realize there remain many questions, the key points that are appropriate for discussion both internally and externally, are the ones provided in these key documents.
We plan to have more information for you about the integration of Novell and Attachmate Corporation throughout the upcoming weeks and months, and will communicate with employees as appropriate throughout the planning process.
Let's keep focused on Novell's business and on our three key corporate objectives. I am very proud of your leadership and dedication during Q4 and for the full FY2010. The events and discussions of the past couple of weeks have only strengthened my belief that we have a terrific team at Novell. I truly appreciate your dedication, passion for the business, and professionalism. Let's work to make this quarter a success on behalf of our customers, partners, and one another. Thank you.
Ron
ADDITIONAL INFORMATION ABOUT THE MERGER AND WHERE TO FIND IT
In connection with the merger, Novell intends to file relevant materials with the SEC, including a proxy statement. Investors and security holders of Novell are urged to read these documents (if and when they become available) and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information about Novell, the merger and the other parties to the merger. Investors and security holders may obtain these documents (and other documents filed by Novell and Attachmate with the SEC) free of charge a t the SEC's website at http://www.sec.gov. In addition, the documents filed with the SEC by Novell may be obtained free of charge by directing such request to: Novell Investor Relations at 1-800-317-3195 or from the investor relations portion of Novell's website at http://www.novell.com/company/ir/. Investors and security holders are urged to read the definitive proxy statement and the other relevant materials when they become available before making any voting or investment decision with respect to the merger.
Novell and its directors and executive officers may be deemed to be participants in the solicitation of proxies from Novell's stockholders in respect of the merger. Information regarding Novell's directors and executive officers is contained in Novell's Annual Report on Form 10-K for the fiscal year ended October 31, 2009, its proxy statement for its 2010 Annual Meeting of Stockholders, dated February 26, 2010, and subsequent filings which Novell has made with the SEC. Stockholders may obtain additional information about the directors and executive officers of Novell and their respective interests with respect to the merger by security holdings or otherwise, which may be different than those of Novell's stockholders generally, by reading the definitive proxy statement and other rele vant documents regarding the merger, when filed with the SEC. Each of these documents is, or will be, available as described above.