Analyst Conference Summary

conference date: August 28, 2008 @ 2:00 PM Pacific Time
for quarter ending: July 31, 2008 (3rd quarter fiscal 2008)

Forward-looking statements

Overview: Continuing slow growth despite PlateSpin acquisition. A $15 million impairment charge hurt GAAP numbers.

Basic data (GAAP) :

Revenue was $245 million, up 4% sequentialy from $236 million and up 3% from $237 million year-earlier.

Net loss from continuing operations was $15 million, down sequentially from a gain of $6 million, and down from a $4 million loss year-earlier.

EPS (earnings per share) were negative $0.04, down sequentially from positive $0.02, and down from a loss of $0.01 year-earlier.

Guidance:

Full fiscal 2008 revenue $940 and $970 million. Services revenue will decline y/y, product revenue up y/y. 8% to 10% non-GAAP operating margin. 32% to 37% effective non-GAAP tax rate.

Conference Highlights:

Operating margins expanded. We were pleased with our performance. 11% product revenue increase from year-earlier. Non-GAAP operating margin was 10%, up from 6% year-earlier.

Non-GAAP numbers: income from operations $24 million. Net income from continuing operations was $21 million. EPS $0.06. So up from $19 million or $0.05 year-earlier.

$33 million of product revenue was from Open Platform Solutions segment, with $31 million was from Linux Platform Products, up 30% year-over-year. Open Platform service revenue was $6.4 million. Identity and Security Management segment revenue was $37 million, up 22% year-over-year, and services were $13.5 million. Revenue from Systems and Resource Management was $47 million, up 25% year-over-year, and services were $5.7 million. Workgroup product revenue of $92 million was down 1% year-over-year, with services revenue of $11.2 million. Total service revenue was $37 million.

Cash, equivalents and short-term investments ended at $1.36 billion, with $29.6 million in long term investments. Deferred revenue was $726 million. Cash flow from operations was $30 million, up from $25 million year-earlier. $45 million was spent on share repurchases in the quarter, and $27 million was used to repurchase senior convertible debentures.

Cost of revenue was $60 million. Operating expenses of $184 million included $94 million for sales and marketing, $52 million for product development, $27 million general and administrative, and $11 million for restructuring and loss on subsidiary sales, leaving $1 million income from operations. Other net loss was $8.8 million. Income tax expense $7.3 million.

Microsoft will make four $25 million payments in the new Linux deal, with the first payment in the first fiscal quarter 2009. $176 million of original deal has been invoiced so far.

Our expense run rate will be down in 2009 due to restructuring planned for Q4. Headcount was 4100, down sequentially from 4200.

SUSE Linux application certification efforts have gone well.

Q&A:

Has workgroup business fully stabilized? Hopefully and with new software release that should help.

Margins next year? We feel good about how we are entering 2009.

Services revenue decline? Decline was ahead of where we expected, but it has resulted in increased product revenue. We are trying to drive profitability, so we don't know the level where services will even out. We are expecting Q4 to be about flat sequentially.

Qualitative Open Platform renewal rates? In large accounts, capturing most renewals.

Sales force execution in Americas? Pipeline built up in Q1 and Q2, with invoicing strong in Q3.

Will you be through the older Microsoft coupons by Q1? The new program is similar, but does not anticipate that the full $240 million of certificates will all be distributed. But the coupons are for the same products.

Growth specifics for 2009? Markets in identify are growing 11 to 13%. Linux at 17%. SRM market, desktop at 6 to 8%, datacenter products at 25%. So if we stabilize base business and services, these areas should provide growth. Partners are at the core of our strategy.

PlateSpin? Continues to track to plan. Revenue is included in SRM, was $7 million in quarter.

OpenIcon Analyst Conference Summaries Main Page
Novell Investor Relations page
OpenIcon NOVL main page

Search

More Analyst Conference Pages: