Novell reports 2nd quarter loss of $2 million
Job cuts raise expenses; earnings top estimates
The net loss was $2.19 million, or 1 cent a share, compared with profit of $3.34 million, or 1 cent, a year earlier, Novell, based in Waltham, Mass., said in a statement Wednesday. Taking out some costs, the company had a profit of 5 cents a share, compared with an average estimate of 1 cent in a Bloomberg survey. Sales also topped estimates, rising 2.6 percent to $239.2 million in the period ended April 30.
Novell Chief Executive Officer Ron Hovsepian is spending as much as $45 million to cut jobs and expenses in a bid to boost profit. Novell had lower-than-expected costs last quarter because it has incurred only $16 million of the planned restructuring costs so far and because the company trimmed spending in other areas. Sales of Novell's Linux operating system programs also surged, rising 83 percent to $19 million.
"There are positives around the revenue and operating income coming in higher than expected, and you have Linux doing well," said James Gilman, an analyst at Soleil Securities Corp., who rates the shares "sell." Gilman remains concerned about growth in other parts of Novell's business and about whether the company can cut as much of its costs as it has forecast.
The company said sales for the full year will be $925 million to $955 million, below the $957 million average estimate of analysts. That estimate included revenue from a consulting business that Novell sold off, Chief Financial Officer Dana Russell said in an interview.
Russell declined to say how many workers the company has fired. Headcount remained the same because the company is boosting hiring in countries such as India where the cost of labor is lower, he said.
The sales increase comes after five quarters of declines as the company's newer Linux programs failed to offset falling revenue from older products.
To boost Linux revenue and reassure customers that they won't be sued for using Novell's Suse Linux software, Hovsepian struck a deal in November with longtime rival Microsoft Corp.
Microsoft, which had complained that Linux violated its patents, agreed to make its software compatible with Novell's on server computers. Microsoft also is paying the company $442 million. The partnership has already won customers such as Wal-Mart Stores Inc. and Deutsche Bank AG.
Novell said last week that an internal review of its stock-option grants found no evidence of wrongdoing by current or former employees. The company also said it wouldn't need to restate results.
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