Uncertainty Over Novell's Future Takes Toll On Sales


Customer uncertainty over whether Novell will be acquired is having an impact on sales, the company said Thursday in announcing third-quarter revenue that fell below initial expectations.

Some sales were lost to competitors, some were delayed and others were completed at higher discounts because of the uncertainty, Ron Hovsepian, president and CEO said in a conference call with financial analysts.

For the third quarter ended July 31 Novell reported sales of $199 million, down 7.9 percent from the $216.1 million in sales the company recorded in the third quarter last year. Net income in the quarter fell 5.9 percent to $15.7 million from $16.7 million one year earlier.

On Aug. 9 Novell said it expected to report sales for the quarter between $197 million and $199 million, a reduction from an earlier forecast of $205 million to $210 million.

Sales of security management and operating platforms software were $108 million in the quarter, down 2 percent year-over-year, chief financial officer Dana Russell said on the conference call. Revenue from collaboration software was $69 million, down 14 percent, while sales of Linux platform products were down 7 percent to $36 million. Revenue from systems and resource management software was $38 million, down 4 percent.

The one product area that saw an increase in sales in the quarter was identity access and compliance management software, up 8 percent to $30 million, Russell said.

In March investment firm Elliott Associates made an unsolicited bid to acquire Novell for approximately $2 billion. Novell's board of directors rejected that offer, saying it undervalued the company, but indicated that it might accept higher bids from Elliott or any other suitor.

Since then there have been reports that as many as 20 companies, many of them private equity firms, have submitted acquisition bids.

On the Thursday conference call Hovsepian and Chief Financial Officer Dana Russell declined to comment on the status of any acquisition bids. The board is also exploring other potential ways to maximize shareholder value, including a stock buy-back.

Novell, once best known for its NetWare network operating system, is trying to re-invent itself as a supplier of "intelligent workload management" software. That includes the upcoming Novell Cloud Manager product, currently in beta and due later this year, for building and managing private clouds.