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Novell earnings come in high

Networking software player Novell does something it hasn't done for some time--beat analysts' estimates.

3 min read
Networking software player Novell (NOVL) did something it hasn't done for some time--beat analysts' estimates.

The company reported earnings of $7 million, or 2 Novell at a glance cents per share, for the fourth quarter, compared with net profits of $59 million, or 17 cents a share, a year ago.

A consensus of analyst estimates compiled by First Call pegged Novell's earnings for the period at 1 cent per share.

The company pointed to strong sales of its software to large network accounts as the primary factor fueling the rebound. It reported a net loss of $122 million, or 35 cents a share, in the previous quarter, based on revenues of just over $90 million. That earlier performance was a downward surprise for analysts, who already had lowered their estimates for the third quarter.

Although Novell did better than Wall Street expected on the profit side, its revenues fell during its fourth quarter--to $269 million from $384 million a year ago, prompting some analysts to refrain from pushing up their ratings just yet.

BT Alex. Brown, for example, said that while the company has made "great progress" over the past six months, it is not yet out of the woods. The firm said Novell's stock remained an "excellent value," and maintained its "purchase" rating.

BT Alex. Brown said that there were two noteworthy aspects to Novell's fourth-quarter results: solid revenues and low channel inventories. Nevertheless, the firm pointed to larger-than-anticipated operating losses as a cautionary note, even as it noted that there were offsetting gains in other income.

Novell has been struggling in the revenues department for much of the year, as it seeks to launch forward following its restructuring.

The positive profit news could reinvigorate a company that has had its share of problems during the past year. In March, Novell's board wooed former Sun Microsystems Java guru Eric Schmidt to become its chairman and CEO. Since that time, Schmidt has laid off employees, cut costs, and stopped product shipments to sales channels in order to get a better read on the financial state of the company.

For the year, Novell posted a net loss of $78 million, or 22 cents per share, based on revenues of just over $1 billion. A third-quarter restructuring charge of 10 cents per share contributed to the net loss for the year.

The numbers, however, are far from the company's previous fiscal year, when Novell enjoyed earnings of $126 million, or 35 cents per share, on revenue of $1.4 billion.

Novell has taken great pains to explain its shift toward providing software that is Internet-friendly. The company maintains a huge installed base of users of its NetWare operating system, despite increasing encroachment from Microsoft's Windows NT.

"Fourth-quarter performance shows that the changes we've made in Novell's business are taking hold," Schmidt said in a prepared statement.

The company just released an initial beta of the next release of NetWare, code-named Moab, which is due by the middle of next year.

For the quarter, revenue from multiproduct sales channels and licensing programs was its best ever at $99 million, according to the company. Resellers of Novell products accounted for 54 percent of the company's sales.