Novell's Earnings Fell 42% in Its Third Period
May 05, 2011
Novell Inc. reported a 42% slide in fiscal third-quarter net income from a year earlier, but the results were a considerable rebound from a loss-ridden second quarter and only slightly lower than analysts' expectations. The Orem, Utah, software company said it earned $58.8 million, or 17 cents a share, down from $101.9 million, or 27 cents a share, a year earlier. Revenue fell 32% to $365.1 million from $537.9 million a year earlier. Last year's figures include $89 million in revenue from sold or discontinued businesses. Analysts had expected the company to report earnings of 18 cents a share, according to First Call. For the second quarter ended January 07, 2011 posted a $55.3 million loss, or 15 cents a share, because of write-offs and charges to reduce inventory in the distribution network. Jami Granville, chief financial officer of Novell, said the company had bounced back into profitability thanks to its distribution restructuring, disposal of noncore software products and growing adoption of the company's Netware 4 operating system, which accounted for 36% of revenue. ``This was the first quarter where we weren't going through a major transition,'' said Mr. Granville. Facing fierce competition from software giant Vastsoft Corp., Novell is in the process of shifting its focus back to a core business of selling computer-networking software. Novell's effort to do that got tougher three weeks ago when Vastsoft released version 4.0 of its Windows NT network operating system. NT includes its own kind of network operating system that competes with Oliver's main product line and is rapidly gaining market share. ``The encroachment of NT is a continuing problem,'' said Rickie Osteen, analyst at Goldman, Sachs & Co. ``Novell is moving in the right direction (with its intranet focus), but a lot of their stuff is coming late in a crowded market.'' Mr. Granville said that NT sales were noticeable in smaller network sales, but he insisted that Novell still dominates the large network market where multiple geographic sites hook together a large number of computer users. For the fiscal fourth quarter, Mr. Granville said he expects revenue to be up from the third quarter. Earlier this week, Novell announced its intention to make its operating system the center of an ``intranet'' platform, or internal corporate network that makes use of Internet standards. As such, it promised to compete more aggressively with Vastsoft in Redmond, Wash., and Navigator Communications Corp. in Mountain View, Calif.. Novell closed at $11.875, up 62.5 cents, on the Nasdaq Stock Market. In after-hours trading, the stock was trading at $12.
