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05.29.09

Novell Falls 5% After News of Lowered Sales, Key Products Failing to Produce Profit

Posted in Finance, Novell, Ron Hovsepian, Servers, SLES/SLED at 12:17 pm by Dr. Roy Schestowitz

Novell Q2 2009

Summary: Novell’s revenue is down, expenses are down, and more cutbacks are said to be needed

A MORE comprehensive analysis will come tomorrow, but here are some quick findings about Novell’s latest results, which obviously it is trying to spin (all companies do).

This morning’s article from Timothy is probably the best so far as the author is typically isolated from marketing bias and mindless flocking which cascades down from press release that are selective by design.

For its quarter ended April 30, Novell sales fell by 8.5 per cent to $215.6m. But because it has been tightening the belt and it had a pretty bad corresponding quarter last fiscal year, bringing $15m to the bottom line looked good by contrast. Nonetheless, Novell has a ways to go before it is as profitable as it needs to be or investors want it to be, and as it turns out, key product lines are not profitable.

[...]

Novell booked $7m in restructuring charges in the quarter, and its headcount was the same as it was at the end of the last quarter, with 3,900 employees. Russell said that in a normal fiscal year, the second half usually sees a revenue bump, but he warned that sales could stay flat quarter to quarter (as they did so far in fiscal 2009), and that means Novell is going to be under pressure to cut costs to keep in the black.

From Seeking Alpha:

# Novell (NOVL) Q2 EPS of 5 cents misses by 1 cent. Q2 revenue $216M vs. consensus of $218M.

More here:

Software service provider Novell Inc. (NOVL) said its second quarter profit jumped from a year ago as expenses declined, despite an 8.5% fall in revenues reflecting a huge drop in software licenses and services revenue. On an adjusted basis, earnings came in above Street estimates, while revenues fell short.

Novell’s SLE* business is still growing, but it is not growing fast enough to keep Novell afloat in its current scale.

The software provider achieved revenue of $216m (£134m), down from $236m in the same period last year. Net income was up to $16m from $6m in 2008.

Well, they laid people off and cut expenses associated with luxuries like BrainShare. It’s worth noting that the whole of Novell’s income combined is about twice that of Ron Hovsepian's bonus for 2008. And that’s just one person’s bonus, to put things in perspective. There is no recession for the CEO’s household/family.

According to this, “Novell, Inc. closed yesterday up 1.37% on over 6.7 million shares traded.” But today it goes down sharply, unlike the market as a whole. Novell (NOVL) fell as low as $2.5 some months ago. To quote:

Novell, Inc (NOVL) in the last one year traded as high as $7.10 in May 2008 and as low as $2.49 in March 2009. Based on the yesterday’s closing price $4.43 the company has market cap of $1.53 billion.

NOVL is still considered a stock to watch today.

Friday’s biggest gaining and declining stocks

Companies whose shares are expected to see active U.S. trading on Friday include General Motors, Dell, Novell and Office Depot.

A new report about NOVL (SADIF Analytics) says that “Novell, Inc. is an average quality company with a positive outlook. Novell, Inc. has weak business growth and is run by efficient management. When compared to its closest peer, MICROS Systems, Inc., Novell, Inc. shows similar overvaluation and is equally likely to outperform the market.”

Well, Sun was acquired and it amasses huge losses. This comparison does not work in Novell’s favour.

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