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Novell Q3 beats street, clocks major revenue, income gains

Figures confirm Novell is beyond the recovery phase and into growth

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Novell turned in some tidy figures yesterday for its third quarter, with a 20 per cent revenue increase to $327 million, and net income of $49 million, up from $27 million in the year-earlier quarter. Earnings per share doubled to 14 cents compared with the prior year. Financial analysts had anticipated 13 cents a share. Wall Street was cool to the news, having marked Novell down 75 cents before the results were known, and a further 62.5 cents in trading after the results, closing at $24.25. There is something strange about a market that values Internet losers and scorns better-than-expected profits. This makes revenue for fiscal 1999 up 18 per cent and confirms that Novell is beyond the recovery phase and into growth. Revenue for the year should be around $1.3 billion, or more if the new products being released to the market kick in during this quarter. Novell has around $1 billion in the bank, so is comfortably positioned to fund development and make acquisitions. Novell's venture capital investments have now reached $170 million, and the board has authorised a further $30 million for Novell Ventures Fund, and an additional $45 million for separate VC-managed pools. Novell is now organised into three focus areas -- server, directory and service -- and all of them showed growth. NetWare revenue was $175 million. EMEA did particularly well, up 39 per cent year-on-year (to $100 million) as a result of good sales in Germany, UK, France, Netherlands, Spain and Russia. Asia Pacific was up 27 per cent (to $24 million), while US revenue grew 13 per cent to $183 million. The business objective is to grow the platform-independent directory business with NDS in mixed network environments. A new product category is the caching of Web pages: last month, Dell and Compaq began shipping Novell's Internet Caching System. ICS allows Web pages to be delivered from any Web server, whether it's running on Solaris, Unix, Linux, NetWare or NT. Novell is now getting new products to market more quickly, and basking in the window of opportunity that the delayed Windows 2000 has created. During the quarter, Novell delivered its Single Sign-on security product. Positioning itself better for growth seems tobe a good move for Novell. As current applications servers become displaced by the Open Application Server model, Novell should be in a good position with NetWare 5 to serve this market. NetWare is not an applications server, but it does bridge the gap between new applications servers and legacy applications. SQL Integrator allows developers to access relational data anywhere on the network and to create a common record, using NDS to manage the identity and access to the data. Novell claims that NDS is the only directory service capable of scaling to more than a billion objects with sub-second response time. Novell has become pretty chummy with IBM, which is probably no bad thing since IBM has a commanding position in e-commerce. Novell's particular expertise is its Host Integration Solution, which it developed with IBM, allowing Novell to offer IBM a platform for WebSphere. SQL Integrator makes it possible to access DB2. ®

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