Novell Beats, But Guidance Disappoints

| About: Novell, Inc. (NOVL)
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Shares of Novell (NASDAQ:NOVL) ended 9.6% lower to $6.42 in late trading, following its report of a swing to a quarterly loss of $0.05/share (including -$0.03 for the sale of its Switzerland-based consulting division) and a disappointing 2008 outlook. Novell's fiscal Q4 net loss totaled $17.9M, versus a profit of $19.9M last year, however its adjusted EPS of $0.06 topped analyst expectations of $0.04. Revenues were also better than expected, rising 4.7% to $245M vs. analyst estimates of $242.2M. Novell's fiscal 2008 revenue guidance of $920M to $945M was well below the Street's average forecast of $982.2M, and reflects zero growth at the mid-range compared to its fiscal 2007 revenue of $932M. Its strategy in 2008 is to focus on driving higher-margin product revenue and shift lower-margin services revenue to partners. The company said it expects restructuring costs of $15M to $25M in fiscal 2008 after incurring related expenses of $47M during the past year.

"With expectations of flattish full-year 2008 revenue and 8% operating margins, we see little near-term for investors to get excited about. We note about $50M of our estimated FY-08 revenue will come from Microsoft (NASDAQ:MSFT) payments amortized from Novell's balance sheet," Citigroup analyst Brent Thill said in a post-earnings note.

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