Novell's earnings increase thanks to lawsuit, Linux

Published August 20, 2004 12:13 am
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Novell Inc., noting positive results from its embrace of the freely distributed Linux operating system, on Thursday reported $23.4 million in earnings, reversing a $12.4 million loss the same time last year.

The Provo-born company recorded a 6 cents gain per share on $304.6 million in revenue for the quarter ending July 3, compared with a 3-cent loss and $282.8 million revenue figure for the third quarter of 2003.

Those results included $12 million in revenue from Novell's new SuSE Linux Enterprise Server product sales, which topped 19,000 units during the quarter.

"One of the bright spots in the information technology market is the popularity of the Linux operating system," Jack Messman, Novell's chairman and chief executive, said during a teleconference. "Linux momentum is building . . . [and] we remain very positive on this market for the near and long term."

The quarterly results also included $19 million related to a judgment for Novell in a royalties-related lawsuit against Canopy Group. Messman said $14 million of that was recorded as revenue, with the remaining $5 million recorded as interest income.

Still, Novell's earnings per share for the quarter were off analysts' expectations. That also seemed reflected in after-hours trading following the company's quarterly report release after the markets closed Thursday: Novell stock, which had closed at $6.39, or down 16 cents, was going for $6.11, a 28-cent or 4 percent dip, an hour after the Nasdaq exchange closed.

Amy Feng of JMP Securities said Novell had missed the analysts' consensus by at least a cent. "That was in line with my expectations," she said. "I have been neutral-to-negative on the company for a while now."

Feng said she was pleasantly surprised with Novell's growing Linux business, but remained concerned about the status of the company's developing NetWare/Open Enterprise upgrades. "NetWare remains the core of their business," she said.

Messman acknowledged that revenue was not what he had hoped, but took solace in "improved earnings performance for the quarter and nine months period versus the same periods last year."


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