UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended January 31, 2001
or
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from
-------
to
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Commission File Number: 0-13351
NOVELL, INC.
(Exact name of registrant as specified in its charter)
Delaware 87-0393339
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1800 South Novell Place
Provo, Utah 84606
(Address of principal executive offices and zip code)
(801) 861-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
As of February 28, 2001 there were 317,576,897 shares of the Registrant's Common
Stock outstanding.
PART I. FINANCIAL INFORMATION, ITEM 1. FINANCIAL STATEMENTS
NOVELL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
JANUARY 31, 2001 OCTOBER 31, 2000
---------------- ----------------
Amounts in thousands, except share and per share data (Unaudited)
ASSETS
CURRENT ASSETS:
Cash and short-term investments $ 655,449 $ 698,193
Receivables, less allowances ($42,461 - January; $33,469
- - October) 161,095 196,672
Inventories 1,898 2,621
Prepaid expenses 25,458 26,120
Deferred and refundable income taxes 56,996 60,109
Other current assets 25,179 23,644
------------ ------------
Total current assets 926,075 1,007,359
Property, plant and equipment, net 282,937 290,104
Long-term investments 397,876 383,583
Other assets 38,566 31,300
------------ ------------
Total assets $ 1,645,454 $ 1,712,346
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 94,286 $ 85,050
Accrued compensation 56,849 54,546
Accrued marketing liabilities 12,500 13,632
Other accrued liabilities 58,786 59,644
Income taxes payable 26,145 39,043
Deferred revenue 220,154 203,163
------------ ------------
Total current liabilities 468,720 455,078
Minority interests 11,457 12,183
SHAREHOLDERS' EQUITY:
Common stock, par value $.10 per share
Authorized - 600,000,000 shares
Issued - 317,653,609 shares-January
327,618,192 shares-October 31,766 32,762
Retained earnings 1,250,626 1,319,853
Accumulated other comprehensive income (loss) (101,797) (84,427)
Other (15,318) (23,103)
------------- -------------
Total shareholders' equity 1,165,277 1,245,085
------------ ------------
Total liabilities and shareholders' equity $ 1,645,454 $ 1,712,346
============ ============
See notes to consolidated unaudited condensed financial statements.
NOVELL, INC.
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
FISCAL QUARTER ENDED
-------------------------------------------
JAN. 31, 2001 JAN. 31, 2000
Amounts in thousands, except per share data
NET SALES $ 245,035 $ 316,043
Cost of sales 65,862 78,727
----------- -----------
GROSS PROFIT 179,173 237,316
OPERATING EXPENSES:
Sales and marketing 121,747 113,656
Product development 49,488 57,937
General and administrative 21,222 19,193
----------- -----------
Total operating expenses 192,457 190,786
Income (loss) from operations (13,284) 46,530
OTHER INCOME (EXPENSE)
Investment income 17,287 17,551
Other, net 544 (1,810)
----------- ------------
Other income, net 17,831 15,741
Income before taxes 4,547 62,271
Income taxes 1,273 17,436
----------- -----------
Net income before cumulative effect of change in accounting
principle 3,274 44,835
Cumulative effect of change in accounting principle (Note K) (11,048) --
------------ -----------
NET INCOME (LOSS) $ (7,774) $ 44,835
============ ==========
NET INCOME (LOSS) PER SHARE
BASIC:
Before cumulative effect of change in accounting principle $ 0.01 $ 0.14
Cumulative effect of change in accounting principle (Note K) (0.03) --
----------- ----------
$ (0.02) $ 0.14
=========== ==========
DILUTED:
Before cumulative effect of change in accounting principle $ 0.01 $ 0.13
Cumulative effect of change in accounting principle (Note K) (0.03) --
----------- ----------
$ (0.02) $ 0.13
=========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 322,183 326,906
Diluted 322,183 342,105
PRO FORMA AMOUNTS ASSUMING THE ACCOUNTING CHANGE IS APPLIED RETROACTIVELY
Net Income $ 3,274 $ 37,419
=========== ===========
Net income per share (diluted) $ 0.01 $ 0.11
====+====== ===========
See notes to consolidated unaudited condensed financial statements.
NOVELL, INC.
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
JAN. 31, 2001 JAN. 31, 2000
Dollars in thousands
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (7,774) $ 44,835
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Depreciation and amortization 19,421 18,505
Stock plans' income tax benefits -- 29,677
Decrease in receivables 35,577 47,653
Decrease (increase) in inventories 723 (275)
Decrease in prepaid expenses 662 3,784
Decrease in deferred and refundable income taxes 4,439 19,442
(Increase) decrease in other current assets (1,535) 10,480
Increase (decrease) in current liabilities, net 13,642 (33,264)
---------- -----------
Net cash provided from operating activities 65,155 140,837
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock, net 4,314 37,164
Repurchase of common stock (64,910) (88,781)
----------- -----------
Net cash used by financing activities (60,596) (51,617)
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment (7,252) (10,674)
Purchases of short-term investments (285,812) (294,999)
Maturities of short-term investments 213,259 280,750
Sales of short-term investments 58,336 163,507
Expenditures for other long-term investments (13,712) (130,009)
Increase in restricted cash -- (16,629)
Other (15,505) 15,594
----------- ----------
Net cash provided (used) by investing activities (50,686) 7,540
TOTAL INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (46,127) 96,760
Cash and cash equivalents - beginning of period 289,537 274,269
---------- ----------
CASH AND CASH EQUIVALENTS - END OF PERIOD 243,410 371,029
Short-term investments - end of period 412,039 576,486
---------- ----------
CASH AND SHORT-TERM INVESTMENTS - END OF PERIOD $ 655,449 $ 947,515
========== ==========
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING AND INVESTING ACTIVITIES:
Issuance of restricted stock for acquisitions $ -- $ 10,656
See notes to consolidated unaudited condensed financial statements.
NOVELL, INC.
NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS
A. QUARTERLY FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
The accompanying consolidated unaudited condensed financial statements have
been prepared in accordance with the instructions to Form 10-Q but do not
include all of the information and footnotes required by generally accepted
accounting principles and should, therefore, be read in conjunction with
the Company's fiscal 2000 Annual Report on Form 10-K. These financial
statements do include all normal recurring adjustments that the Company
believes necessary for a fair presentation of the statements. The interim
operating results are not necessarily indicative of the results for a full
year. Certain reclassifications, none of which affected net income, have
been made to the prior years' amounts in order to conform to the current
year's presentation.
B. CASH AND SHORT-TERM INVESTMENTS
The Company considers all highly liquid debt instruments purchased with a
term to maturity of three months or less to be cash equivalents. Short-term
investments are widely diversified, consisting primarily of short-term
investment grade securities, substantially all of which either mature
within the next 12 months or have characteristics of short-term
investments. Municipal securities included in short-term investments have
contractual maturities ranging from one to seven years. Money market
preferreds have contractual maturities of less than 180 days. No other
short-term investments have contractual maturities. All marketable debt and
equity securities that are included in cash and short-term investments are
considered available-for-sale and are carried at fair market value. The
unrealized gains and losses related to these securities are included in
shareholders' equity, net of tax and after applicable valuation allowances.
Fair market values are based on quoted market prices where available; if
quoted market prices are not available, then fair market values are based
on quoted market prices of comparable instruments. The cost of securities
sold is based on the specific identification method. Such securities are
anticipated to be used for current operations and are therefore classified
as current assets, even though some maturities may extend beyond one year.
The following is a summary of cash and short-term investments, all of which
are considered available-for-sale.
GROSS GROSS FAIR MARKET
COST AT UNREALIZED UNREALIZED VALUE AT
JAN. 31, 2001 GAINS LOSSES JAN. 31, 2001
------------- ----- ------ -------------
(Amounts in thousands) Cash and cash equivalents:
Cash.............................................. $ 126,095 $ -- $ -- $ 126,095
Corporate debt.................................... 70,165 7 -- 70,172
Money market funds................................ 90,512 -- -- 90,512
---------- -------- --------- ----------
Total cash and cash equivalents........... 286,772 7 -- 286,779
Short-term investments:
State and local government debt................... 158,452 2,153 -- 160,605
Corporate debt.................................... 34,575 912 -- 35,487
Money market preferreds........................... 98,600 -- -- 98,600
Mutual funds...................................... 55,491 -- (8,541) 46,950
Equity securities................................. 29,861 6,746 (9,579) 27,028
---------- -------- ---------- ----------
Total short-term investments.............. 376,979 9,811 (18,120) 368,670
Total cash and short-term investments..... $ 663,751 $ 9,818 $ (18,120) $ 655,449
========== ======== ========== ==========
GROSS GROSS FAIR MARKET
COST AT UNREALIZED UNREALIZED VALUE AT
OCT. 31, 2000 GAINS LOSSES OCT. 31, 2000
------------- ----- ------ -------------
(Amounts in thousands) Cash and cash equivalents:
Cash..............................................$ 137,968 $ -- $ -- $ 137,968
Corporate debt.................................... 54,514 1 -- 54,515
Money market funds................................ 97,054 -- -- 97,054
---------- --------- ---------- ----------
Total cash and cash equivalents........... 289,536 1 -- 289,537
Short-term investments:
State and local government debt................... 221,565 -- (1,274) 220,291
Corporate debt.................................... 48,257 238 -- 48,495
Money market preferreds........................... 57,000 -- -- 57,000
Mutual funds...................................... 54,082 -- (8,543) 45,539
Equity securities................................. 25,221 20,267 (8,157) 37,331
---------- --------- ---------- ----------
Total short-term investments.............. 406,125 20,505 (17,974) 408,656
Total cash and short-term investments.....$ 695,661 $ 20,506 $ (17,974) $ 698,193
========== ========= ========== ==========
During the first three months of fiscal 2001, the Company realized gains of
$6.4 million and realized losses of $2.8 million on the sale of securities
compared to realized gains of $6.7 million and realized losses of $0.9
million in the first three months of fiscal 2000. In addition, during the
first quarter of fiscal 2001, the Company wrote off $2.6 million related to
investments that had become impaired. The Company reviews all of its
short-term investments for impairment and recognizes impairment losses as
necessary.
C. OTHER ASSETS
The primary components of other assets as of January 31, 2001 and October
31, 2000 were long-term investments related to restricted cash for the
Company's off-balance-sheet financing of its buildings in San Jose,
California and Provo, Utah, investments made through the Novell Venture
Fund, and strategic long-term equity investments, including the Company's
investment in marchFIRST.
The Company marks its public equity securities to market each month and
records the related unrealized gain or loss as a component of comprehensive
income. The Company also reviews its investments in long-term public and
private equity securities and venture funds for impairment and recognizes
losses as necessary. As of January 31, 2001, unrealized losses on public
long-term equity securities totaled $91 million, all of which related to
the investment in marchFIRST.
D. INCOME TAXES
The Company's estimated effective tax rate, before the effect of the
cumulative change in accounting principle, for the first three months of
fiscal 2001 was 28.0%, the same as in the first three months of fiscal
2000. The Company paid cash amounts for income taxes of $1.0 million in the
first three months of fiscal 2001 and $2.0 million during the same period
of fiscal 2000.
E. LINE OF CREDIT
The Company currently has a $10 million unsecured revolving bank line of
credit, with interest at the prime rate. The line of credit expires on
February 28, 2002 and can be renewed at the option of the Company. The line
can be used for either letter of credit or working capital purposes. The
line is subject to the terms of a loan agreement containing financial
covenants and restrictions, none of which are expected to significantly
affect the Company's operations. At January 31, 2001, there were standby
letters of credit of $1.5 million outstanding under this agreement. The
Company also has an additional $10 million credit facility with another
bank, which is not subject to a loan agreement. At January 31, 2001, there
was $0.4 million of standby letters of credit outstanding under this
arrangement.
F. RESTRUCTURING
During the fourth quarter of fiscal 2000, the Company recorded a
restructuring charge of approximately $48.0 million as a result of the
Company's plan to change its business strategy to address changes in the
market due to technology changes, customer demands, and methods of
distribution. Specific actions taken included reducing the Company's
workforce worldwide by approximately 700 employees (approximately 13%),
consolidating facilities and disposing of excess fixed assets, abandoning
and writing off technologies that no longer fit within the Company's new
strategy, discontinuing unprofitable products and closing offices in
unprofitable locations. The following table summarizes the activity related
to restructuring costs and activities in the first quarter of fiscal 2001.
BALANCE AT BALANCE AT
OCTOBER 31, CASH NON-CASH JANUARY 31,
2000 PAYMENTS CHARGES 2001
---------- -------- ------- ----------
(AMOUNTS IN THOUSANDS)
Severance and benefits $ 6,139 $ (3,505) -- $ 2,634
Abandoned technology 286 -- -- 286
Redundant facilities and fixed assets 4,726 (261) (474) 3,991
Other restructuring related costs 2,616 (671) -- 1,945
--------- ---------- --------- ---------
$ 13,767 $ (4,437) $ (474) $ 8,856
========= ========== ========== =========
As of January 31, 2001, the remaining portion of the restructuring charge
included in accrued liabilities related to severance and benefits,
abandoned technology, and other restructuring related costs will be paid
during fiscal 2001. Amounts related to redundant facilities will be paid
over the respective remaining lease terms.
G. COMMITMENTS AND CONTINGENCIES
The Board of Directors has established the Novell Venture Fund within
Novell's investment portfolio for the purpose of making investments in
private companies, mainly small capitalization stocks in the
high-technology industry sector, and funds managed by venture capitalists.
These investments are intended to promote the Company's business and
strategic objectives. As of January 31, 2001, the Company had investments
of $53.9 million in various venture capital funds and had commitments to
contribute an additional $108.7 million to these funds over the next two to
three years, as requested by the fund managers.
In fiscal 1997, the Company entered into agreements to lease buildings
being constructed on land owned by the Company in San Jose, California and
in Provo, Utah. The lessor has funded $223 million for construction of the
buildings. The leases are for a period of seven years and can be renewed
for two additional five-year periods, by either the lender or the Company,
subject to the approval of the other party. Rent obligations commenced
during the second quarter of fiscal 1999 for the San Jose buildings and
during the second quarter of fiscal 2000 for the Provo buildings. Annual
rent under each agreement is determined by taking the funded amount
multiplied by the secured interest rate. If the Company does not purchase
the buildings, or arrange for the sale of the buildings, at the end of the
lease, the Company will guarantee the lessor no more than 85% of the
residual value of the buildings. The guaranteed residual value at January
31, 2001, was approximately $190 million. In addition, the agreement calls
for the Company to maintain a specific level of restricted cash to serve as
collateral for the leases and maintain compliance with certain financial
covenants. The value of restricted cash held as collateral at January 31,
2001 was approximately $223 million, and is included in long-term
investments.
In February 1998, a suit was filed in the U.S. District Court, District of
Utah, against Novell and certain of its officers and directors, alleging
violation of federal securities laws by concealing the true nature of
Novell's financial condition. The lawsuit was brought as a purported class
action on behalf of purchasers of Novell common stock from November 1,
1996, through April 22, 1997. The Federal District Court dismissed the
original complaint November 2, 2000; however, the plaintiffs filed an
amended complaint November 22, 2000 in an effort to remedy inadequacies in
the original complaint. Novell intends to seek dismissal of the amended
complaint and believes that the case is without merit. If the case
continues, Novell intends to vigorously defend against the allegations.
While there can be no assurance as to the ultimate disposition of the
lawsuit, Novell does not believe that the resolution of this litigation
will have a material adverse effect on its financial position, results of
operations, or cash flows.
In January 2001, Novell began a jury trial in a suit filed against Novell
by Lantec, Inc. in the U.S. District Court, District of Utah, for alleged
anti-trust violations arising from Novell's acquisition of the GroupWise
technology. The judge ruled in favor of Novell and dismissed the original
complaint; however, the plaintiffs have the opportunity to appeal the
decision. Novell does not believe that the resolution of this litigation
will have a material adverse effect on its financial position, results of
operations, or cash flows.
The Company is a party to a number of legal claims arising in the ordinary
course of business. The Company believes the ultimate resolution of the
claims will not have a material adverse effect on its financial position,
results of operations, or cash flows.
H. SEGMENT INFORMATION
The Company operates in one business segment, directory-enabled networking
software and services. Company's products are sold throughout the world; in
the U.S. via direct, OEM, reseller, and distributor channels, and
internationally through distributors who sell to dealers and end users. The
Company is organized into four business units, based on product or service
type. Novell's business units are as follows:
o Net Management Services, which includes Directory-Enabled OS, management
and collaboration products, and UNIX royalties o Net Directory Services,
which includes NDS Directory Services and other directory products o Net
Content Services, which includes Internet Caching services o Novell
Customer Services
Performance of the Company is evaluated by the Company's chief decision
makers, the Chief Executive Officer and Executive Council, based on
evaluation of revenue results by business unit and geographic region, and
expense results on a total company level. Separate financial information is
not available by business unit in regards to asset allocation, expense
allocation, or profitability.
REVENUE BY PRODUCT CATEGORY FISCAL QUARTER ENDED
--------------------------- -------------------------------------------
JANUARY 31, 2001 JANUARY 31, 2000
---------------- ----------------
DOLLARS IN THOUSANDS
Net Management Services $ 186,860 $ 259,528
Net Directory Services 7,632 6,099
Net Content Services 1,858 1,265
Novell Customer Services 48,685 49,151
------------ -----------
Total net sales $ 245,035 $ 316,043
=========== ===========
Sales outside the U.S. are comprised of sales to international customers in
Europe, the Middle East, Canada, South America, and Asia Pacific. Other
than sales in Ireland, international sales were not material individually
in any other international location.
For the first three months of fiscal 2001 and fiscal 2000, sales to
international customers were approximately $106.4 million and $150.3
million, respectively. In the first three months of fiscal 2001 and fiscal
2000, 29% and 31%, respectively, of international sales were to European
countries. No one foreign country accounted for 10% or more of total net
sales in either period.
There were no customers accounting for more than 10% of total revenue
during the first three months of fiscal 2001. During the first quarter of
fiscal 2000, one multi-national distributor accounted for 10% of total net
revenue.
I. NET INCOME (LOSS) PER SHARE
FISCAL QUARTER ENDED
----------------------------------------
AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA JAN. 31, 2001 JAN. 31, 2000
------------------------------------------- ------------- -------------
BASIC NET INCOME PER SHARE COMPUTATION
Net income (loss) $ (7,774) $ 44,835
------------ -----------
Weighted average shares outstanding 322,183 326,906
----------- -----------
Basic net income (loss) per share $ (0.02) $ 0.14
============ ===========
DILUTED NET INCOME PER SHARE COMPUTATION
Net income (loss) $ (7,774) $ 44,835
------------ -----------
Weighted average shares outstanding 322,183 326,906
Incremental shares attributable to exercise of
outstanding options (treasury stock method) -- 15,199
----------- -----------
Total 322,183 342,105
----------- -----------
Diluted net income (loss) per share $ (0.02) $ 0.13
============ ===========
J. COMPREHENSIVE INCOME
The components of comprehensive income (loss), net of tax, for the quarter
ended January 31, 2001 and 2000 were as follows:
FISCAL QUARTER ENDED
----------------------------------------
DOLLARS IN THOUSANDS JAN. 31, 2001 JAN. 31, 2000
-------------------- ------------- -------------
Net income (loss) $ (7,774) $ 44,835
Change in net unrealized gain on investments (18,084) 74,646
Change in cumulative translation adjustment 714 (550)
----------- ------------
Comprehensive income (loss) $ (25,144) $ 118,931
============ ===========
The components of accumulated other comprehensive income, net of related
tax, at January 31, 2001 and October 31, 2000, are as follows:
JAN. 31, 2001 OCT. 31, 2000
------------- -------------
DOLLARS IN THOUSANDS
Net unrealized gain (loss) on investment: $ (99,278) $ (81,194)
Cumulative translation adjustment (2,519) (3,233)
------------ ------------
Accumulated other comprehensive income (loss) $ (101,797) $ (84,427)
============ ============
K. RECENT ACCOUNTING PRONOUNCEMENTS
REVENUE RECOGNITION
The Company previously recognized revenue related to product sales to
distribution channel partners upon shipment to the partner and provided a
reserve for contractual return obligations and other estimated product
returns. Effective November 1, 2000, the Company changed its method of
accounting for revenue related to these product sales to recognize such
revenues upon the sell-through of the respective product from the
distribution channel partner to the end user. The Company believes the
change in accounting principle is preferable based on guidance provided in
SEC Staff Accounting Bulletin No. 101, Revenue Recognition in Financial
Statements. The $11.0 million ($.03 per share) cumulative effect of the
change (after reduction for income taxes of $6.1 million) is included in
income of the first quarter of fiscal 2001.
For the three months ended January 31, 2001, the Company recognized $6.8
million in revenue that was included in the cumulative effect adjustment at
November 1, 2000. The effect of that revenue on the first quarter was to
increase income by $4.9 million ($0.01 per share). Had the Company reported
under its previous method of accounting for revenue recognition, the effect
on earnings without consideration of the cumulative effect of the change
would be a decrease in earnings of approximately $1.8 million or $.01 per
share. The pro forma amounts presented in the unaudited consolidated
statements of income were calculated assuming the accounting change was
made retroactively to prior periods.
DERIVATIVE INSTRUMENTS
During the first quarter of fiscal 2001, the Company adopted Statements of
Financial Accounting Standards No. 133 and 138, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133 and SFAS 138). SFAS 133
established accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and
for hedging activities requiring all companies to recognize derivatives as
either assets or liabilities in the statement of financial position and
measure those instruments at fair value. SFAS 138 is an amendment to SFAS
133, which amended or modified certain issues discussed in SFAS 133.
Implementation of SFAS 133 and SFAS 138 did not have a material impact on
the Company's statement of financial position, results of operations or
cash flows.
L. SUBSEQUENT EVENTS
On March 12, 2001, the Company announced that they had entered into a
definitive agreement to acquire Cambridge Technology Partners, Inc., a
global information technology services and eSolutions provider. Novell will
exchange .668 shares of its common stock for every outstanding share of
Cambridge. The transaction is valued at approximately $266 million, based
on the March 9,2001 closing price of $6.06 per share. The acquisition will
be accounted for as a purchase and is expected to be complete during the
third quarter of fiscal 2001.
Upon closing, Novell Board member Jack Messman, who is also the president
and chief executive officer of Cambridge, will assume the role of chief
executive officer at Novell. Eric Schmidt will continue as chairman of the
board of directors of Novell and will assume the role of chief strategist
of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results
of Operations ("MD&A") and other parts of this Form 10-Q contain forward-looking
statements that involve risks and uncertainties. All forward-looking statements
are based on information available to the Company on the date hereof, and the
Company assumes no obligation to update any such forward-looking statements. The
Company's actual results may differ materially from the results discussed in
such forward-looking statements as a result of a number of factors, which
include, but are certainly not limited to, those set forth below in the section
titled "Risk Factors Affecting Future Results of Operations."
INTRODUCTION
Novell, Inc., is a leading provider of Net services software that delivers
services to secure and power all types of networks--the Internet, intranets, and
extranets; wired to wireless; corporate and public--across leading operating
systems. Novell's Net services software provides the foundation for one Net--a
single global network that supports new applications and forms of business.
Worldwide channel, consulting, education and technical support programs, along
with strategic alliances, combine Novell Net services software with third-party
products and services to form complete Net solutions.
RESULTS OF OPERATIONS
NET SALES
Q1 2001 Change Q1 2000
---------------- --------------- ----------------
Net sales (thousands) $ 245,035 (22.5)% $ 316,043
Novell's products are organized around the following four business units, all
within the directory-enabled networking software services segment.
o Net Management Services, which includes Directory-Enabled OS, management
and collaboration products, and UNIX royalties o Net Directory Services,
which includes NDS Directory Services and other directory products o Net
Content Services, which includes Internet Caching services o Novell
Customer Services
Revenue from Net Management Services products decreased $72.7 million or 28% in
the first quarter of fiscal 2001 compared to the first quarter of fiscal 2000.
Sales in the first quarter of fiscal 2001 were lower than the first quarter of
fiscal 2000 primarily due to "Year 2000" related sales that occurred in the
prior year as companies purchased additional software to become Year 2000
compliant. In addition, sales were also lower in first quarter fiscal 2001
compared to fiscal 2000 due to the continued decline in the Company's packaged
software business, which saw a decline in sales of 67% from the prior year first
quarter, lower UNIX royalties, and continued weak sales performance in Europe.
Revenue from Net Directory Services products was $7.6 million in the first
quarter of fiscal 2001 compared to $6.1 million in the first quarter of fiscal
2000. The 25% increase was mainly due to increased unit sales of products
introduced during fiscal 2000, such as Single Sign-on, DirXML, and iChain,
slightly offset by a decrease in NDS Directory Services sales.
Revenue from Net Content Services products was $1.9 million in the first quarter
of fiscal 2001 compared to $1.3 million in the first quarter of fiscal 2000. The
47% increase was mainly due to growth in the Internet caching market, which
resulted in higher unit sales.
Revenue from Novell Customer Services revenues were $48.7 million and $49.2
million in the first quarter of fiscal 2001 and fiscal 2000, respectively. The
slight decrease was a result of decreased education revenues, offset by higher
consulting and service revenue.
The Company previously recognized revenue related to product sales to
distribution channel partners upon shipment to the partner and provided a
reserve for contractual return obligations and other estimated product returns.
Effective November 1, 2000, the Company changed its method of accounting for
revenue related to these product sales to recognize such revenues upon the
sell-through of the respective product from the distribution channel partner to
the end user. The Company believes the change in accounting principle is
preferable based on guidance provided in SEC Staff Accounting Bulletin No. 101,
Revenue Recognition in Financial Statements. The $11.0 million ($.03 per share)
cumulative effect of the change (after reduction for income taxes of $6.5
million) is included in income of the first quarter of fiscal 2001.
For the three months ended January 31, 2001, the Company recognized $6.8 million
in revenue that was included in the cumulative effect adjustment at November 1,
2000. The effect of that revenue on the first quarter was to increase income by
$4.9 million ($0.01 per share). Had the Company reported under its previous
method of accounting for revenue recognition, the effect on earnings without
consideration of the cumulative effect of the change would be a decrease in
earnings of approximately $1.8 million or $.01 per share. The pro forma amounts
presented in the unaudited consolidated statements of income were calculated
assuming the accounting change was made retroactively to prior periods.
International sales represented 43% of total sales in the first three months of
fiscal 2001 compared to 48% in the first three months of fiscal 2000. During the
first three months of fiscal 2001, international revenue decreased 29% while
domestic revenue decreased 16% compared to the same period of fiscal 2000.
Internationally, the Company experienced weakened sales in Europe, Japan, Latin
America and Canada in fiscal 2001.
The Company is currently addressing the decline in sales, particularly the
decrease in channel sales, in an effort to improve results in future periods.
During fiscal 2000, the Company reorganized its sales force and product groups
to better service its customers and to focus its resources on taking advantage
of new opportunities. The Company has continued these efforts in fiscal 2001,
and anticipates that it will take a couple of quarters to fully implement these
changes and realize the benefits from them.
GROSS PROFIT
Q1 2001 Change Q1 2000
---------------- --------------- ----------------
Gross profit (thousands) $179,173 (24.5)% $237,316
Percentage of net sales 73.1% 75.1%
Gross profit as a percentage of sales decreased in the first quarter 2001
compared to the same period of fiscal 2000 due primarily to the effects of
decreased product sales levels and higher costs for services related to the
Company's consulting business. The mix between software sales and services,
education and consulting revenue continues to shift with software sales becoming
a smaller percentage of total sales.
OPERATING EXPENSES
Q1 2001 Change Q1 2000
---------------- --------------- ----------------
Sales and marketing (thousands) $ 121,747 7.1% $ 113,656
Percentage of net sales 49.7% 36.0%
Product development (thousands) $ 49,488 (14.6)% $ 57,937
Percentage of net sales 20.2% 18.3%
General and administrative (thousands) $ 21,222 10.6% $ 19,193
Percentage of net sales 8.7% 6.1%
Total operating expenses (thousands) $ 192,457 0.9% $ 190,786
Percentage of net sales 78.5% 60.4%
Sales and marketing expenses increased by $8.1 million in the first quarter of
fiscal 2001 compared to the same period of fiscal 2000. Sales and marketing
expenses fluctuate in any given period due to timing of product promotions,
advertising or other discretionary expenses. Also, beginning in the second half
of fiscal 2000 and continuing in fiscal 2001, the Company increased its sales
and marketing expenditures, where appropriate, in an effort to focus on
improving future sales growth. The increased expenditures included costs for
advertising and promotion, as well as sales force training. Increased
expenditures and lower sales during fiscal 2001 caused sales and marketing
expenses as a percentage of sales to increase.
Product development expenses decreased $8.4 million in the first quarter of
fiscal 2001 compared to the same period of fiscal 2000 due primarily to
decreased headcount as a result of the restructuring in the fourth quarter of
fiscal 2000. Product development expenses increased as a percentage of net sales
in the first quarter of 2001 due to lower sales levels.
General and administrative expenses increased $2.0 million during the first
quarter of fiscal 2001 compared to the first quarter of fiscal 2000. The
increase was primarily due to costs incurred for the formation of Volera, the
Company's new internet content subsidiary, offset somewhat by lower operating
costs from decreased headcount as a result of the restructuring in the fourth
quarter of fiscal 2000. Decreased sales levels in fiscal 2001 caused general and
administrative expenses as a percentage of sales to increase in the first
quarter of fiscal 2001 compared to the same period of fiscal 2000.
RESTRUCTURING
During the fourth quarter of fiscal 2000, the Company recorded a restructuring
charge of approximately $48 million as a result of the Company's plan to change
its business strategy to address changes in the market due to technology
changes, customer demands, and methods of distribution. Specific actions taken
included reducing the Company's workforce worldwide by approximately 700
employees (approximately 13%), consolidating facilities and disposing of excess
fixed assets, abandoning and writing off technologies that no longer fit within
the Company's new strategy, discontinuing unprofitable products and closing
offices in unprofitable locations. The following table summarizes the
restructuring costs and activities as of the first quarter of fiscal 2001.
BALANCE AT BALANCE AT
OCTOBER 31, CASH NON-CASH JANUARY 31,
2000 PAYMENTS CHARGES 2001
----------- -------- ------- -----------
(AMOUNTS IN THOUSANDS)
Severance and benefits $ 6,139 $ (3,505) -- $ 2,634
Abandoned technology 286 -- -- 286
Redundant facilities and fixed assets 4,726 (261) (474) 3,991
Other restructuring related costs 2,616 (671) -- 1,945
--------- ---------- --------- ---------
$ 13,767 $ (4,437) $ (474) $ 8,856
========= ========== ========== =========
As of January 31, 2001, the remaining portion of the restructuring charge
included in accrued liabilities related to severance and benefits, abandoned
technology, and other restructuring related costs will be paid during fiscal
2001. Amounts related to redundant facilities will be paid over the respective
remaining lease terms.
Q1 2001 Change Q1 2000
---------------- ---------------- ----------------
Employees at end of period 4,794 (10.2)% 5,338
Annualized revenue per average employee
(thousands) $ 202 (14.0)% $ 235
Annualized net income per average employee,
before accounting change (thousands) $ 2.7 (91.9)% $ 33.3
Headcount decreased from the first quarter of 2000 to the first quarter of 2001,
primarily due to the reduction in force that occurred during the fourth quarter
of fiscal 2000 as a part of the restructuring.
OTHER INCOME, NET
Q1 2001 Change Q1 2000
---------------- ---------------- ----------------
Other income, net (thousands) $17,831 13.3% $15,741
Percentage of net sales 7.3% 5.0%
The primary component of other income, net is investment income, which was $17.3
million in the first quarter of fiscal 2001 compared to $17.6 million in the
first quarter of fiscal 2000. The Company realized capital losses of $2.8
million and realized capital gains of $6.4 million during the first three months
of fiscal 2001, compared to realized capital losses of $0.9 million and realized
capital gains were $6.7 million during the same period of fiscal 2000. First
quarter 2001 realized losses included a $2.6 million impairment loss on one of
the Company's short-term investments.
INCOME TAXES
Q1 2001 Change Q1 2000
---------------- ---------------- ----------------
Income taxes (thousands) $1,273 (92.7)% $ 17,436
Percentage of net sales 0.5% 5.5%
Effective tax rate 28.0% 28.0%
The effective tax rate for fiscal 2001, before cumulative effect of accounting
change, is estimated to be 28%, the same as fiscal 2000.
NET INCOME (LOSS) AND NET INCOME (LOSS) PER SHARE
(dollars in thousands, except per share data) Q1 2001 Change Q1 2000
---------------- ---------------- ----------------
Income before accounting change $ 3,274 (92.7)% $ 44,835
Percentage of net sales 1.3% 14.2%
Net income (loss) $ (7,774) (117.3)% $ 44,835
Percentage of net sales (3.2)% 14.2%
Income per share, before accounting change - basic
$ 0.01 $ 0.14
Net income (loss) per share - basic $ (0.02) $ 0.14
Income per share, before accounting change -
diluted $ 0.01 $ 0.13
Net income (loss) per share - diluted $ (0.02) $ 0.13
LIQUIDITY AND CAPITAL RESOURCES
Q1 2001 Change Q4 2000
---------------- ---------------- ----------------
Cash and short-term investments (thousands) $655,449 (6.1)% $698,193
Percentage of total assets 39.8% 40.8%
Cash and short-term investments decreased by $42.7 million to $655.4 million at
January 31, 2001, down from $698.2 million at October 31, 2000. During the first
three months of fiscal 2001, cash and short-term investments decreased primarily
due to cash outflows of $64.9 million for the repurchase of common stock, $40.0
million for net purchases of long-term investments and other long-term investing
activities and $7.3 million to purchase property, plant and equipment. These
cash outflows were offset by $65.2 million provided from operating activities
and $4.3 million from the issuance of common stock.
The Company's investment portfolio is diversified among security types, industry
groups, and individual issuers. To achieve potentially higher returns, a portion
of the Company's investment portfolio is invested in equity securities and
mutual funds, which incur market risk. The Company's investment portfolio
includes equity securities with gross unrealized gains of $9.7 million and gross
unrealized losses of $109.0 million as of January 31, 2001. Included in the
Company's unrealized losses at January 31, 2001 were the Company's investments
in marchFIRST, Inc., which had unrealized losses of $91.0 million, Entrust,
which had unrealized losses of $7.6 million, and Caldera, which had unrealized
losses of $1.8 million. Because of the decline in the stock price of these
investments, the Company is monitoring their status and will record a loss if
their decline is other than temporary. No other individual security had material
unrealized losses as of the end of the first quarter 2001.
The Company's principal source of liquidity has been from operations. At January
31, 2001, the Company's principal unused sources of liquidity consisted of cash
and short-term investments and available borrowing capacity of approximately $18
million under its credit facilities. The Company's liquidity needs are
principally for the Company's financing of accounts receivable, capital assets,
strategic investments, product development and flexibility in a dynamic and
competitive operating environment.
During the first three months of fiscal 2001, the Company continued to generate
cash from operations. The Company anticipates being able to fund its current
operations and planned capital expenditures for the foreseeable future with
existing cash and short-term investments together with internally generated
funds. The Company believes that borrowings under the Company's credit
facilities or public offerings of equity or debt securities are available if the
need arises. Investments will continue in product development and in new and
existing areas of technology. Cash may also be used to acquire technology
through purchases and strategic acquisitions. Capital expenditures in fiscal
2001 are anticipated to be approximately $65 million, but could be reduced if
the growth of the Company is less than presently anticipated. The Company also
intends to commit an additional $60 million during fiscal 2001 to venture
capital funds.
During the fourth quarter of fiscal 2000, the Board of Directors authorized the
use of up to $500 million for the repurchase of additional outstanding shares of
the Company's common stock through October 31, 2001. As of January 31, 2001,
$82.4 million had been spent to repurchase 12.4 million shares under this plan
at an average price of $6.67 per share.
SUBSEQUENT EVENTS
On March 12, 2001, the Company announced that they had entered into a definitive
agreement to acquire Cambridge Technology Partners, Inc., a global information
technology services and eSolutions provider. Novell will exchange .668 shares of
its common stock for every outstanding share of Cambridge. The transaction is
valued at approximately $266 million, based on the March 9,2001 closing price of
$6.06 per share. The acquisition will be accounted for as a purchase and is
expected to be complete during the third quarter of fiscal 2001.
Upon closing, Novell Board member Jack Messman, who is also the president and
chief executive officer of Cambridge, will assume the role of chief executive
officer at Novell. Eric Schmidt will continue as chairman of the board of
directors of Novell and will assume the role of chief strategist of the Company.
RISK FACTORS AFFECTING FUTURE RESULTS OF OPERATIONS
The Company's future results of operations involve a number of risks and
uncertainties. Among the factors that could cause actual results to differ
materially from historical results are the following: business conditions and
the general economy; competitive factors, such as rival operating systems,
directories and applications; acceptance of new products and price pressures;
availability of third-party compatible products at below market prices; risk of
nonpayment of accounts or notes receivable; risks associated with foreign
operations; risk of product line or inventory obsolescence due to shifts in
technologies or market demand; timing of software product introductions; market
fluctuations of investment securities; and litigation.
Other factors may also adversely affect the Company's earnings and stock price,
including but not limited to: o competition for qualified employees o
competition from competitors o delays in the introduction of new products o
success of new products or technologies o stock market fluctuations unrelated to
Company performance
Our Financial Results May Vary
The Company often experiences a higher volume of sales at the end of the quarter
and during the fourth quarter. Because of this, fixed costs that are out of line
with sales levels may not be detected until late in any given quarter. As a
result, results of operations could be adversely affected, and even produce a
loss.
Operating results have been and may also be affected by other factors including,
but not limited to:
o timing of orders from customers and shipments to customers
o product mix, a shift from higher margin products, such as licensing, to lower
margin products or services, such as boxed products
o delays or problems with our fulfillment agents
o impact of foreign currency exchange rates on the price of our products in
international locations
o our inability to respond to the decline in sales through the distribution
channel
o our inability to derive benefits from the restructuring and new corporate
strategy
We Face Intense Competition for Attracting and Retaining Qualified Personnel in
the Computer Industry
The ability of the Company to maintain its competitive technological position
will depend, in large part, on its ability to attract and retain highly
qualified development and managerial personnel. Competition for such personnel
is intense and there is a risk of departure due to the competitive environment
in the software industry. The loss of a significant group of key personnel would
adversely affect the Company's performance. Over the past year, the Company has
lost several of its vice presidents. The failure to successfully promote and
hire suitable replacements in a timely manner could have a material adverse
effect on the Company's business.
We compete in the highly competitive market for computer software
Novell believes that the principal competitive factors are technical innovation
to meet dynamic market needs, marketing strength, system/performance, customer
service and support, reliability, ease of use, security, and price/performance.
The market for computer software remains competitive due to such factors as
Microsoft's presence in all sectors of the software business. The Company does
not have the product breadth and market power of Microsoft. Microsoft's ability
to ship networking products with features and functionality that are competitive
with Novell, together with its ability to offer incentives to customers to
purchase certain products in order to obtain favorable sales terms or necessary
compatibility or information with respect to other products, may significantly
inhibit the Company's ability to grow its business. In addition, as Microsoft
creates new operating systems and applications, there can be no assurance that
Novell will be able to ensure that its products will be compatible with those of
Microsoft.
Additionally, the Company may face competition from other industry companies,
which could introduce competitive products. If any of these competing products
achieves market acceptance, Novell's business and results of operations could be
materially adversely affected.
We Have Experienced Delays in the Introduction of New Products Due to Various
Factors
As is common in the computer software industry, Novell has experienced delays in
the introduction of new products due to: the complexity of software products,
the need for extensive testing of software to ensure compatibility of new
releases with a wide variety of application software and hardware devices, and
the need to "debug" products prior to extensive distribution. Significant delays
in developing, completing or shipping new or enhanced products would adversely
affect the Company.
Moreover, the Company may experience delays in market acceptance of new releases
of its products as the Company engages in marketing and education of the user
base regarding the advantages and system requirements for the new products and
as customers evaluate the advantages and disadvantages of upgrading. The Company
has encountered these issues on each major new release of its products, and
expects that it will encounter such issues in the future. Novell's ability to
achieve desired levels of sales growth depends at least in part on the
successful completion, introduction and sale of new versions of its products.
There can be no assurance that the Company will be able to respond effectively
to technological changes or new product announcements by others, or that the
Company's research and development efforts will be successful. Should Novell
experience material delays or sales shortfalls with respect to new product
releases, the Company's sales and net income could be adversely affected.
We May Not Be Successful at Introducing New Technologies
Another goal of the Company is to achieve widespread acceptance and adoption of
Novell's Net Services and e-solutions products, Directory Services (NDS), and
the products and applications that take advantage of directory services. The
Company's ability to achieve success with its Net Services and NDS solutions is
dependent on a number of factors including but not limited to the following:
development of key Net Services and directory products and upgrades, the
acceptance of those products by large industry partners, the marketing of those
products through appropriate channels of distribution, and the acceptance of
those products in major accounts. The Company has only had limited success in
introducing new technologies and there can be no assurance of success with Net
Services or NDS solutions.
Our Existing Product Sales May Deteriorate More Rapidly than Sales of Our New
Products Increase
The Company has several existing products, which it has been selling and
upgrading for many years. Technology shifts or competition could occur causing
sales of these products to decline at a faster rate than the Company is able to
increase sales of new products or technologies.
We Face Productivity and Financial Risks Due To The Power Crisis In California
The Company conducts operations in San Jose, California, which is currently
experiencing an energy crisis. If the state of California is not able to remedy
this problem, the Company could suffer work stoppages, loss of data, and/or
higher operating costs due to significantly higher utility costs.
We Face Risks from Our International Operations
The Company has sales offices in countries worldwide. It also has significant
operations in Ireland and Japan, and conducts product development in India.
International operations are subject to inherent risks including, but not
limited to: fluctuating currency exchange rates, longer payment cycles,
difficulties in managing multiple offshore operations, increased tariffs and
duties, price controls, restrictions on foreign currencies, trade barriers, and
political unrest. These factors could have a material impact on our financial
condition in the future.
Our Long-term and Venture Capital Fund Investments Could Become Impaired
Included in the Company's investment portfolio are investments made for
strategic business purposes, such as marchFIRST, and investments through the
Novell Venture Fund. Novell Venture Fund investments are in private companies,
generally small capitalization stocks in the high-technology industry sector,
and funds managed by venture capitalists. The value of these investments is
dependent on the performance, successful acquisition, and/or initial public
offering of the investees. Some or all of these investments could become
permanently impaired in the future requiring the Company to record investment
losses.
Our Stock Price Will Fluctuate
The Company's future earnings and stock price could be subject to significant
volatility, particularly on a quarterly basis. Due to analysts' expectations of
continued growth, any such shortfall in earnings can be expected to have an
immediate and significant adverse effect on the trading price of Novell's Common
Stock in any given period. Revenue fluctuations may also contribute to the
volatility of the trading price of Novell Common Stock in any given period.
In addition, the market prices for securities of software companies have been
very volatile recently and historically they have also shown to be volatile as
well. The market price of Novell Common Stock, in particular, has been subject
to wide fluctuations in the past. As a result of the foregoing factors and other
factors that may arise in the future, the market price of Novell's Common Stock
may be subject to significant fluctuations within a short period of time. These
fluctuations may be due to factors specific to the Company, to changes in
analysts' earnings estimates, or to factors affecting the computer industry or
the securities markets in general.
Novell believes that it has the product offerings, facilities, personnel, and
competitive and financial resources for continued business success, but future
revenues, costs, margins, product mix, and profits are all influenced by a
number of factors, such as those discussed above.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to financial market risks, including changes in interest
rates, foreign currency exchange rates and marketable equity security prices. To
mitigate some of these risks, the Company utilizes currency forward contracts
and currency options. The Company does not use derivative financial instruments
for speculative or trading purposes, and no derivative financial instruments
were outstanding at January 31, 2001.
INTEREST RATE RISK
The primary objective of the Company's investment activities is to preserve
principal while maximizing yields without significantly increasing risk. This is
accomplished by investing in widely diversified short-term investments,
consisting primarily of investment grade securities, substantially all of which
either mature within the next 12 months or have characteristics of short-term
investments. A hypothetical 50 basis point increase in interest rates would
result in an approximate $5.1 million decrease (approximately 1%) in the fair
value of the Company's available-for-sale securities.
MARKET RISK
The Company also holds available-for-sale equity securities in its short-term
investment portfolio. As of January 31, 2001, unrealized losses on short-term
public equity securities totaled $8.3 million, which pertained primarily to the
Company's investments in Entrust ($7.6 million) and Caldera ($1.8 million). A
10% adverse change in prices of these short-term equity securities would result
in an approximate $3 million decrease in the fair value of the Company's
short-term investments.
In addition, the Company invests in long-term equity securities and venture
capital funds, included in its portfolio of investments, for the promotion of
business and strategic objectives. The investments are generally in small
capitalization stocks in the high-technology industry sector, both public and
private. Because of the nature of these investments, the Company is exposed to
equity price risks. The Company typically does not attempt to reduce or
eliminate its market exposure on these securities. As of January 31, 2001,
unrealized losses on long-term public equity securities totaled $91.0 million,
which pertained to the Company's investment in marchFIRST. A 10% adverse change
in equity prices of long-term equity securities, including those held in the
venture capital funds, would result in an approximate $14 million decrease in
the fair value of the Company's long-term equity security and venture capital
investments.
FOREIGN CURRENCY RISK
The Company hedges currency risks of investments denominated in foreign
currencies with currency forward contracts. Gains and losses on these foreign
currency investments would generally be offset by corresponding losses and gains
on the related hedging instruments, resulting in negligible net exposure to the
Company. A substantial majority of the Company's revenue, expense and capital
purchasing activities are transacted in U.S. dollars. However, the Company does
enter into transactions in other currencies, primarily Japanese yen and certain
other Asian and European currencies. To protect against reductions in value and
the volatility of future cash flows caused by changes in foreign exchange rates,
the Company has established balance sheet hedging programs. Currency forward
contracts and currency options are utilized in these hedging programs. The
Company's hedging programs reduce, but do not always entirely eliminate, the
impact of foreign currency exchange rate movements. If the Company did not hedge
against foreign currency exchange rate movement, an adverse change of 10% in
exchange rates would result in a decline in income before taxes of approximately
$6 million.
All of the potential changes noted above are based on sensitivity analyses
performed on the Company's financial position at January 31, 2001. Actual
results may differ materially.
PART II. OTHER INFORMATION
Except as listed below, all information required by items in Part II is omitted
because the items are inapplicable or the answer is negative.
ITEM 1. LEGAL PROCEEDINGS.
The information required by this item is incorporated herein by reference to
Footnote G of the Company's financial statements contained in Part I, Item 1 of
this Form 10-Q.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit
NUMBER DESCRIPTION
None
(b) Reports on Form 8-K.
Notice of Novell's scheduled report of fourth quarter results and related
conference call to be held on November 21, 2000, as filed on November 8,
2000 under Item 5.
Announcement of the formation of Novell's Executive Management Group, as
filed on November 13, 2000 under Item 5.
*Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Novell, Inc.
(Registrant)
Date: March 15, 2001 /S/ DENNIS R. RANEY
-----------------------------------
Dennis R. Raney
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)