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Novell losses worse than expected

The struggling networking software maker misses analysts' mark by a wide margin as charges and reduced shipments exact heavy punishment.

    Struggling networking software maker Novell (NOVL) today missed analysts' Novell at a glance mark by wide margin, reporting shrunken revenues as charges and reduced shipments took their toll.

    The company reported a net loss of $122 million, or 35 cents a share, compared to profits of $59 million, or 17 cents a share, the year before. The company attributed some of the losses to previously announced restructuring charges, but even without the $55 million charge, the company still fell short of expectations with a loss of 25 cents a share. Analysts estimated a third-quarter loss of 15 cents per share, according to First Call.

    The loss stems, in part, from moves that recently hired CEO Eric Schmidt made when poor second-quarter results were announced in May. In the aftermath of a 4 cent-per-share loss last quarter, Schmidt moved to clear out backlogged inventory by halting shipment of products to distributors--a segment that accounts for 54 percent of Novell's revenue--and cut the company workforce by 18 percent, or 1,000 people.

    Meanwhile, the company's revenue plunged 75 percent to $90.1 million, compared to revenue of $365.1 million for the same quarter a year earlier.

    The company said it isn't fair to make the year-over-year comparison, considering the recent changes.

    "Given our third-quarter 1997 actions, comparisons with previous periods are not indicative of Novell's market strength or opportunities," said Schmidt, in a statement.

    Since this year's second-quarter debacle, Schmidt has revamped the company's executive structure and brought in some new blood to help provide strategic direction. The former Java guru at Sun Microsystems, who took the Novell job in March, snagged two industry veterans for prominent posts in the past month: John Slitz, an IBM veteran, and Chris Stone, the founder and CEO of the Object Management Group and a CORBA (common object request broker architecture) advocate.

    The company may get a boost next week from the shipment of its BorderManager set of software services, which includes Web proxy caching, security, firewall, and VPN (virtual private networking) functions. The software is aimed at the junction points of networks where users traverse firewalls and connect from the public Internet to private intranets.