Feeds

Uncertain future hits Novell's Q3

Revenues and profits dropping

SANS - Survey on application security programs

What a surprise. A company rejects an unsolicited takeover bid and its board of directors announces that the struggling company is looking at all alternatives, including selling itself or breaking itself up. And then sales unexpectedly go south.

It should have been no surprise to commercial operating system supplier Novell that the uncertainty hanging over its future would be reflected in its finances. But it looks like the financial hit is going to be a bit bigger than Novell expected.

In a statement released yesterday after the markets closed, Novell revised downward its guidance for the third quarter of fiscal 2010 ended July 31, saying that it now expects total revenues to be in the range of $197m to $199m, down from the company's previous guidance of sales hitting between $205m and $210m. Novell also took down its non-GAAP operating margins for fiscal Q3, saying they would now come in at between 13 and 15 cents, instead of the 15 cents previously anticipated.

The fact that Novell waited until the quarter closed and did some preliminary math suggests that a number of deals that might have closed in Q3 had been pushed out and that the company's salespeople were working hard to close those deals to avoid lowering guidance. It is hard to say whether the revenue shortfall is due to some of Novell's bigger customers having caught wind of a potential deal between Novell and some third party regarding its future, but this is also a possibility.

Back in March, Novell received an unsolicited takeover deal with a net value of around $940m from Elliott Associates, a New York hedge fund. Novell snubbed the deal three weeks later, and at the same time told Wall Street it was considering its options, including "a return of capital to stockholders through a stock repurchase or cash dividend, strategic partnerships and alliances, joint ventures, a recapitalization and a sale of the company". At the time, Novell was sitting on $991.3m in cash, which is why Elliott Associates is really interested in Novell.

In May, rumors were going around that Novell had indeed started playing The Dating Game, with some 20 different companies all taking a look at Novell to see what they might make of it. Novell refused to confirm the talks were ongoing, of course. But the effect of those talks can be felt just the same.

At the end of May, when Novell reported its second quarter financial results, Ron Hovsepian, Novell's president and chief executive officer, said that the strategic review and the offers it is considering had an adverse impact on deals, particularly those where customers are making long-term choices for operating system or identity management platforms.

Novell didn't say how much of an effect this strategic review was having on its numbers, but software license fees in Q2 were off 8.5 per cent to $27.7m and maintenance and subscription sales were off 2.8 per cent to $153.8m. Total revenues were $204m, down 5.4 per cent, but Novell was able to boost net income by 27.5 per cent to $19.2m.

In the third quarter of fiscal 2008, Novell's revenues were $245.2m, and fell by 11.9 per cent to $216.1m in the third quarter of fiscal 2009, largely because software license revenues plummeted by 49 per cent in the quarter to $27m. A year ago, the issue was NetWare sales collapsing and the economic meltdown holding down sales of SUSE Linux and identity management and security products, but then again, Linux rival Red Hat grew through the downturn and has accelerated its growth this year as the global economy has stabilized somewhat.

Obviously, Novell's shareholders had been hoping that the company would be able to hit the high point in its former guidance. Now, at the midpoint of the new guidance, Novell looks to contract by 8.4 per cent in the third quarter of fiscal 2010.

If Novell keeps contracting like this during a recovery, a $940m deal will look like a pretty good one. As we go to press, Novell shares are down 2.7 per cent to $5.85 a pop, giving Novell a market capitalization of $2.1bn. Wall Street doesn't think Novell is worth more than about $1.17bn at the moment, if you don't think the company should carry a premium over market cap minus cash in the bank.

Novell will report its financial results for the third quarter after the market closes on August 26. ®

3 Big data security analytics techniques

More from The Register

next story
This time it's 'Personal': new Office 365 sub covers just two devices
Redmond also brings Office into Google's back yard
Oh no, Joe: WinPhone users already griping over 8.1 mega-update
Hang on. Which bit of Developer Preview don't you understand?
Microsoft lobs pre-release Windows Phone 8.1 at devs who dare
App makers can load it before anyone else, but if they do they're stuck with it
Half of Twitter's 'active users' are SILENT STALKERS
Nearly 50% have NEVER tweeted a word
Internet-of-stuff startup dumps NoSQL for ... SQL?
NoSQL taste great at first but lacks proper nutrients, says startup cloud whiz
IRS boss on XP migration: 'Classic fix the airplane while you're flying it attempt'
Plus: Condoleezza Rice at Dropbox 'maybe she can find ... weapons of mass destruction'
Ditch the sync, paddle in the Streem: Upstart offers syncless sharing
Upload, delete and carry on sharing afterwards?
New Facebook phone app allows you to stalk your mates
Nearby Friends feature goes live in a few weeks
Microsoft TIER SMEAR changes app prices whether devs ask or not
Some go up, some go down, Redmond goes silent
prev story

Whitepapers

Securing web applications made simple and scalable
In this whitepaper learn how automated security testing can provide a simple and scalable way to protect your web applications.
3 Big data security analytics techniques
Applying these Big Data security analytics techniques can help you make your business safer by detecting attacks early, before significant damage is done.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Top three mobile application threats
Learn about three of the top mobile application security threats facing businesses today and recommendations on how to mitigate the risk.
Combat fraud and increase customer satisfaction
Based on their experience using HP ArcSight Enterprise Security Manager for IT security operations, Finansbank moved to HP ArcSight ESM for fraud management.