Novell's Financial Results Disappoint Again (Revenue Misses Expectations)

Dr. Roy Schestowitz

2010-02-28 10:58:05 UTC
Modified: 2010-02-28 10:58:05 UTC

Summary: A look at all the coverage we could find about Novell's financial report from Thursday

LOOKING back at the past 2 weeks, we find that Novell's results did not surprise for the better. Here is a roundup of some posts on the subject, latter parts being more relevant than the former.

The Week Before

A week and a half before the results came out there was nothing particularly interesting in the news. Novell was just mentioned in:

● Stocks At 52-Week High (MAT, CAG, ARUN, NOVL)

Novell, Inc. (NASDAQ:NOVL) made a new 52-week high of $5.03 in the morning session. In the past one year, the stock has rallied over 47%.

● SmarTrend research report available on Novell

● Stocks At 52-Week High (MAT, CAG, ARUN, NOVL)

Novell, Inc. (NASDAQ:NOVL) made a new 52-week high of $5.03 in the morning session. In the past one year, the stock has rallied over 47%.

● SmarTrend research report available on Novell (NASDAQ:NOVL)

SmarTrend, our proprietary pattern recognition system, called an Uptrend for Novell (NASDAQ:NOVL) on January 06, 2010 at $4.53. Since then, Novell has returned 9.9% as of today's recent price of $4.98.

It didn't last long.

Results' Week

Things became a little more interesting days before the results came out, with coverage including:

● Unusual Trading Activity for Novell Inc (NOVL)

● Interesting Options Volume for Novell Inc (NOVL)

● This Weeks Earnings on Wall St

● Novell Broke Resistance

● Novell near Resistance

● Novell Closing in to Support

Results' Time

Here is Novell's press release and the transcript of the Earnings Call.

Coverage then included:

● Novell Guides Revenue Below Estimates

● Novell Ahead of Earnings

● Gap, Safeway, Blackstone

● Conference Calls Today: 5-5:30 P.M. EST

● Stocks Poised For Weak Open

Assured Guaranty (AGO), Crocs (CROX), Fluor (FLR), Gap Inc. (GPS), LaSalle Hotel (LHO), Novell (NOVL) and Universal Health (UHS) are among the major companies that will report their quarterly results after the markets close for trading.

● Wall Street Set For Higher Open

After the markets closed for trading in the previous session, software solutions provider Novell Inc. (NOVL) reported a higher profit in its first quarter, helped lower operating expenses, notwithstanding a decline in revenues. Earnings for the quarter were in line with estimates, but revenues fell short of expectations. Looking ahead to the second quarter, Novell expects sequential revenues to be flat.

● Novell profit rises as sales slip 6%

● Novell 1Q Earnings Match Street's View; Revenue Falls

Novell Inc. (NOVL) saw shares fall slightly after the company said fiscal first-quarter earnings per share were in-line with the Street’s view, but reported worse than expected quarterly revenue.

● Fluor cuts yearly forecast; Gap increases annual dividend

Novell shares slump after quarterly revenue outlook

[...]

Investors pushed Novell /quotes/comstock/15*!novl/quotes/nls/novl (NOVL 4.69, -0.01, -0.21%) shares down 1.3% to $4.75 after the business software provider said it expects second-quarter net revenue "to be similar" to first fiscal quarter that ended in January. Analysts had expected second-quarter revenue of $212 million. Novell reported first-quarter revenue of $202.4 million compared with $214.9 million in the year-ago period.

● Looking ahead to Novell Inc. earnings; NOVL, ASIA, MFE, CHKP

● Novell, Inc. Issues Q2 2010 Revenue Guidance Below Analysts' Estimates

Novell, Inc. announced that for second quarter of 2010, it expects net revenue to be similar to first quarter of 2010 revenue levels. The Company reported net revenue of $202 million in first quarter of 2010. According to Reuters Estimates, analysts were expecting the Company to report revenues of $212.6 million for second quarter of 2010.

● Novell Q1 Profit Rises

Earnings for the quarter were in line with estimates, but revenues fell short of expectations. Looking ahead to the second quarter, Novell expects sequential revenues to be flat.

Positive spin is not exactly justified.

Further Analysis

Here is an example of how to select statistics such that they support a point of view:

● Novell Net Up 89% After 2008 Charges; Shares Down On View -NOVL

Novell Inc.'s (NOVL) fiscal first-quarter profit surged 89% on higher margins and fewer charges, as the software company posted lower revenue.

● Novell posts 81% increase in Q1 profits - Regional

They compare a year of financial collapse to one that is less so. They also say nothing about the small margin, whose increase on an absolute scale is rather small. Here is what a Microsoft booster had to say and also another perspective:

Elsewhere, Novell Inc. (NOVL) reported first-quarter net income of $20.2 million, or 6 cents per share, on revenue of $202.4 million. Analysts had expected Novell to post a profit of 7 cents per share on $207.6 million in revenue. Options traders had high hopes for NOVL's quarterly report, with the stock's SOIR of 0.17 indicating that calls outnumbered puts by a factor of more than five to one. What's more, this ratio arrives at an annual low, meaning that these speculative investors have not been more bullishly aligned during the past year.

Here is what Novell boosters had to say, looking at just one portion of the business in isolation:

● Novell: Still Looking for its Mojo

Novell’s latest quarterly financial results, revealed today, were a mixed bag for the SUSE Linux provider. Novell made progress in some areas. But didn’t really thrive in others. Where does the company go from here. The answers will likely surface at the Novell BrainShare 2010 conference (March 21-25, Utah), where Novell will strive to energize channel partners and customers? In the meantime, here’s a look at Novell’s current business condition … through the eyes of The VAR Guy.

● Novell’s SUSE Linux Milestone: Proper Perspective

Initially, The VAR Guy wasn’t all that impressed with Novell’s latest financial results, announced Feb. 25. But our resident blogger overlooked one important fact: Novell’s SUSE Linux business is now break-even. That’s an important milestone — but what does it say about the broader open source industry’s march to profitability? Here are some clues.

There is a picture of a scale there, with people on one side and cash on the other. GNU/Linux in general is growing rapidly, but Novell broke even only after SUSE layoffs which cut expenses down. "Microsoft Deal Slumps," claims Sean Michael Kerner and Timothy Prickett Morgan more or less agrees with him about Novell's Ballnux business breaking even.

For the quarter, Novell continued its trend of ever-shrinking overall sales as its legacy NetWare operating system and GroupWise collaboration software business declines faster than SUSE Linux support revenues can fill in the gap. Total revenues for the quarter came to $202.4m, down 5.8 per cent, with software license sales plummeting 25 per cent to $21.2m (largely because of NetWare declines).

Days Afterwards

As the following chart hopefully shows, Novell's stock responded negatively to Thursday's report. It fell on Friday. ⬆

Comments

JohnD

2010-03-01 20:16:19

Isn't funny how my last submission didn't seem to get posted?

Roy Schestowitz

2010-03-01 23:49:34

Isn’t funny how my last submission didn’t seem to get posted?

Akismet flagged it.

http://akismet.com/

JohnD

2010-03-02 13:05:32

Why?

Roy Schestowitz

2010-03-02 13:20:30

I really don't know. It's an external service from WordPress, one that I don't control. It puts many other comments in the queue (among about 100 spam/day).

JohnD

2010-03-02 13:24:52

Perhaps my name isn't original enough. Thanks for the info.

JohnD

2010-03-01 16:52:46

And once again you continue to show us how you can select information to support your point of view as well Roy. This quarter's revenue was made without an additional 25 million from M$. The basic math will show that revenues did not drop by 25 million they dropped around 12 million - less than half. Which means they actually increased their own sales by approx. 13 million. That's not bad. At the same time you trivialize the operating margin increase by having a margin of 10.6% in this economy is pretty darn good. Improved profit margin - improving sales (outside of M$) and no major changes to cash on hand - Novell is not circling the financial drain as closely as you would have people believe. I would also point people to the significant improvement in investing performance - a swing from a loss of 40 million last year to a gain of 12 million this year. That's good stuff. I will say that this financial "review" is far more balanced than previous ones.

your_friend

2010-03-03 05:07:02

There's a lot of talk about Novell being bought today. It will be good to see Roy's analysis of this. Looks like they Novell be just like SCO sooner than later, that is down the drain. A company that has a major competitor like Microsoft is a major source of funding is company in big trouble.

Roy Schestowitz

2010-03-03 07:40:55

Yes, there is a lot to be said about it.

Roy Schestowitz

2010-03-01 23:48:27

And once again you continue to show us how you can select information to support your point of view as well Roy.

I put here every single article that I found.

JohnD

2010-03-02 13:18:04

Yes you did, which is probably the biggest reason it's more balanced than others, but it was this comment: 'They compare a year of financial collapse to one that is less so. They also say nothing about the small margin, whose increase on an absolute scale is rather small.' And how you organized the "supporting" articles that I was referring to. You continue to remark that Novell is in "financial collapse" while it's public accounting records continue to refute your claims. I realize your goal is to focus on any negative aspects of Novell to support your cause, but I will continue to take issue with statements that I feel are false or misleading. As I stated this summary of the financial report was much more balanced than the others you have done. What I'm not sure about is why. It may be that it was an honest attempt at being balanced or it may be that there just wasn't enough "dirt" this time around. I'm hoping for the former. Once again you did a good job of collecting related articles on this subject. Thanks for posting the links to them so readers can come to their own conclusions about the content.