Networking software vendor Novell late Tuesday issued a profit warning for its second-quarter financial results, saying revenue and earnings will be substantially lower than the company had previously forecast. The main factor dragging down Novell's results is a major fall in channel sales, the vendor said.
For the second quarter of fiscal 2000 which closed April 30, Novell expects to announce total revenue slightly over $300 million and earnings per share of around 8 cents, the vendor said in a statement. The earnings per share figure is half that predicted by ten financial analysts polled by First Call/Thomson Financial who estimated the company's earnings per share would be 16 cents for the second quarter.
Novell is due to report its full second-quarter results May 23 after the markets close for the day.
The company recorded earnings per share of 11 cents on revenue of $316 million in the second quarter of fiscal 1999.
The fiscal 2000 second-quarter results will include a royalty payment of $35 million made to Novell by Caldera, the bulk of which relates to a January out-of-court antitrust settlement reached between Caldera and Microsoft.
Caldera, which acquired DR-DOS from Novell, had filed an antitrust lawsuit against Microsoft in 1996 alleging that the software giant had abused its dominant position in the operating system market to stifle the chances of DR-DOS being able to compete against Microsoft's rival operating system, MS-DOS. Microsoft agreed to pay Caldera a one-time charge of 3 cents per share, which analysts speculated was equivalent to between $250 million and $275 million.
As well as a fall in channel sales during the second quarter of fiscal 2000, Novell also reported a drop-off in its large account site license business. The company blamed the decline in its businesses on a management and organizational issue within its sales operations.
Novell is midway through efforts to address the Internet services market and build its presence in the enterprise network management market. It will take the company the rest of this fiscal year to ensure that customers are aware of its Net services software strategy, Novell officials said.
Sales globally were weak due to the arrival of Microsoft's new operating system Windows 2000 and the rise of open-source operating system Linux which resulted in delayed sales, Novell said. The company is also suffering due to its slow reaction to the growth of the application service provider business in which Novell is only now getting its feet wet.
The company also announced the appointment of a new senior vice president of worldwide sales. Nicholas Tiliacos is joining Novell from Lucent, where he headed up newly acquired customer relationship management business Mosaix. He replaces Ron Heinz.
Novell's shares ended Tuesday's trading at $17.56 down 7.26% from the previous day's close.
Novell, in Provo, Utah, can be reached at -800-222-6000 or at www.novell.com/.
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