Novell slumps to 52-week low on 4Q results, analyst comments

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Novell (Nasdaq: NOVL) shares fell $1.38, or 18 percent, to a 52-week low of $6.06 Wednesday, one day after it met consensus analyst estimates in the fourth quarter.

The vendor of network software and services reported breakeven results on a per share basis for the fiscal fourth quarter, excluding one-time charges.

On Wednesday, Goldman Sachs analyst Rick Sherlund cut the stock from a "market outperform" rating to a "market performer."

"In order for shares of Novell to see significant upside from current depressed levels, investors will likely wait for evidence of traction in Novell's newer strategic products and evidence of success in Novell's efforts to rebuild their reseller channel," Sherlund said in a research note. "This is developing slower than we had hoped for."

Bear Stearns analyst Bob Lam reiterated his "attractive" rating.

Wasserstein Perella's Stephen Dube maintains an "accumulate" recommendation and a 12-month price target of $25 a share.

"For the near term it may be difficult to properly evaluate Novell," Dube said in a research note. "Clearly recent quarters are to be regarded as meaningful disappointments. It will be management's challenge to convince investors of their ability to execute on the plan."

Novell is trading at a 52-week low. The stock has never recovered since plunging in May, following a profit warning.

Don't look for an immediate improvement in the first quarter. The fiscal first quarter historically is Novell's weakest, and that trend is expected to continue, the company said. Expenses in the first quarter and full fiscal 2001 will be higher than originally expected because the company wants to speed up the deployment of Content Exchange services, Novell said.

"We expect overall Novell revenue performance to continue to be soft until we gain the combined benefit of new eBusiness deployments and complete a shift in channel programs to include a new group of partners from the ranks of consulting systems integrators and other service providers," CFO Dennis Raney said.

First Call consensus currently predicts a profit of 7 cents per share for Novell's fiscal first quarter.

Including $47.9 million in previously-announced restructuring costs, Novell in the fourth quarter lost $35 million, or 11 cents per share.

Fourth quarter revenue fell 20.7 percent year-over-year and rose 1 percent sequentially to $273.3 million. Executives blamed the year-over-year drop on the ongoing decline in Novell's packaged software sales, as well as weakness in Europe, where the company's revenue retreated 33 percent from the year-ago period.

Other technology companies, including Dell (Nasdaq: DELL) and Intel (Nasdaq: INTC), have seen softness in the European corporate PC market.

Net services revenue increased 15 percent from the third quarter to $90 million. Server directory revenue fell 7 percent over the same period to $112 million. Service, education and consulting was flat at $55 million.

For the full fiscal 2000, Novell earned $49 million, or 15 cents per share, on revenue of $1.16 billion.

Tuesday's announcement marks the end of a disappointing year for Novell, as the company saw its core software business stagnate. "Growth in new Net services did not accelerate fast enough to offset this decline," said Eric Schmidt, chairman and CEO. "In 2001, our aim is to improve Novell's overall business performance around growth in new Net services."

Novell ended the fourth quarter with $203 million in deferred revenue, the company's highest level ever, Raney said.

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