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Novell warns on earnings
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May 2, 2000: 6:24 p.m. ET
Software maker's second quarter earnings to be half of expectations
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NEW YORK (CNNfn) - Networking software maker Novell Inc. warned Tuesday that it will report significantly lower-than-anticipated revenue and earnings for its second fiscal quarter ended April 30.
Provo, Utah-based Novell (NOVL: Research, Estimates) said after the market close Tuesday that it expects to report total revenue of just over $300 million and earnings of approximately 8 cents per share in the second quarter. That's half of the 16 cents per share that analysts were expecting, according to First Call.
Novell said that its forecast includes the benefit of a $35 million royalty payment from Caldera Systems, most of which came from an antitrust settlement between Caldera Systems and Microsoft. Without that $35 million, Novell would have been close to break-even in the second quarter, the company's management said during a conference call.
Analysts had expected Novell's second-quarter revenue to total about $360 million. Not counting the $35 million royalty payment, Novell's base operations generated about $270 million of revenue in the quarter, $90 million below expectations, said Novell Chief Financial Officer Dennis Raney.
Novell expects to report its second-quarter results on May 23. In its fiscal first quarter, it reported $316 million in revenue and earnings of 13 cents per share. In the second quarter of fiscal 1999, Novell reported $316 million in revenue and earnings of 11 cents per share.
Novell's stock declined 4-9/16 to 13 in after-hours trading, a level that is about 71 percent below its 52-week high of 44-17/32.
Novell makes network and Internet directory software. Its two main products are NetWare 5 and Novell Directory Services. NDS maintains a database of users, applications, and equipment on a network. It controls who has access to various resources on a network and how those resources are allocated.
Novell said that the main cause of its earnings shortfall was a "significant decline" in sales to re-sellers of its software. Its large account site-license business also declined. Novell said that managerial and organizational problems in its sales force contributed to the revenue shortfall.
In response to those problems, the company announced Tuesday that it had replaced its sales manager, Ron Heinz, with Nicholas Tiliacos, the president of the Mosaix division of Lucent Corp. Mosaix focuses on customer relationship management software and services.
The introduction of Microsoft's Windows 2000 operating system and growing market interest in the Linux operating system created "uncertainty and delayed sales," Novell said. In addition, many companies that used to re-sell Novell's software to end users are instead hosting applications and then leasing capacity to those end users. Hosting applications for a variety of end users is called being an "application service provider."
"In this fast emerging market, Novell has yet to generate broad awareness and has only begun to make ASP-related investments," the company said in a statement. 
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Novell
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