Novell Posts Surprise Profit, Sees Lower Revenue Ahead

Novell Inc.

Novell shares, which finished 2 cents higher at $4.09 in regular Nasdaq trade, slipped as low as $3.85 before clawing back to $3.99 after the company said it sees lower second-quarter revenue due to "additional weakening in the IT services consulting space," Novell Chief Financial Officer Ron Foster told Reuters.

Novell -- a former software powerhouse that has been shifting its focus since it purchased Cambridge Technology Partners last summer -- posted net income of $8.4 million, or 2 cents a share for the quarter ended Jan. 31. In the year-ago quarter, which did not include Cambridge operations, Novell had a net loss of $7.8 million, or 2 cents a share.

Revenues rose to $271.1 million from $245 million a year earlier, but were down from the prior quarter. Results from the 2002 fiscal first quarter included $58 million in revenue from Cambridge.

Consulting revenues fell more than expected for the latest quarter, particularly in North America, while software revenue related to Novell's network access, security and user provisioning products increased.

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Provo, Utah-based Novell had forecast that it would break even before charges on revenues of between $265 million and $275 million. The three analysts surveyed by Thomson Financial/First Call, on average, had projected a loss before charges of 1 cent a share.

For the period ended April 30, Novell said it expects to break-even on an earnings-per-share basis -- before restructuring and integration costs -- on revenue of $255 million to $265 million.

Foster forecast 2002 revenue in excess of $1.06 billion and said he sees Novell's software and consulting businesses stabilizing in the second half of fiscal 2002.

"I was disappointed that they indicated that they expected revenues to go down yet again," Drake Johnstone, an analyst at Richmond, Virginia-based regional brokerage firm Davenport and Co., said.

"Novell is a company that people have to have patience with," Johnstone said.

But, he noted, patience does have its limits.

"Getting into the latter part of this year, I would want the company to show some progress, especially if spending is picking up," said Johnstone.

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