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Big sales help Novell's earnings

The networking software player beats analysts' estimates by a cent, buoyed by strong third-party sales and sales to large accounts.

    Networking software player Novell beat analysts' estimates for its fiscal 1998 third quarter by a cent, buoyed by strong third-party sales and sales to large accounts.

    The company reported net earnings of $27 million or 7 cents per share for the quarter, compared with a loss of $122 million or 35 cents per share posted for the same period a year ago. Consensus estimates from First Call had pegged the company's earnings at 6 cents a share.

    Revenue for the quarter grew to $272 million, up $10 million Sequentially, marking the second consecutive quarter the company has posted an appreciation in revenue. Those figures compare with $90 million in revenue reported for the same period during the previous year, a quarter in which the company's new chairman and chief executive officer Eric Schmidt chose to clean out reseller inventories and take a significant hit in sales.

    Since that time, Novell slowly has climbed back from a prolonged period in which some wondered about its viability.

    The company said it experienced the largest sales ever to large accounts and original equipment manufacturers (OEMs) during its most recent quarter, with $165 million in revenue for the quarter derived from that segment.

    "Novell is a solidly different company today than it was one year ago--focused on directory technology for networks, led by a new management team, and delivering new products based on Internet standards," Schmidt said in a statement.

    Earnings for the company's third quarter were up $7 million from the 1998 second quarter.

    Novell is expected to get a significant revenue boost soon from the final shipment of an upgrade to its flagship product, the NetWare operating system, which is due to roll out in September.

    Sales of NetWare server software accounted for $160 million dollars in revenue for the quarter, with versions of the operating system that include the company's directory services technology up 15 percent quarter-to-quarter.

    Network services software accounted for $69 million in sales, and $43 million in revenue was gained from Novell's training, services, and consulting operations.

    The company said increased deferred revenue will affect its bottom line going forward. During the third quarter, the deferred revenue backlog reached $103 million, up $20 million from the previous quarter. The company said the growth in this segment is reflective of ongoing licensing programs with large accounts.

    Novell's upcoming release of NetWare 5.0 comes as software rival Microsoft continues an extensive testing process for Windows NT 5.0, the latest version of its operating system for corporations, which has taken market share away from the likes of Novell, IBM, and Sun Microsystems. Microsoft executives have hedged on a timetable for final release of NT 5.0, but most believe it will ship during the second half of next year.