Novell reports fourth-quarter loss on plummeting sales

Struggling Novell Inc. yesterday reported a net loss of $35 million for its fiscal fourth quarter ended Oct. 31, as revenue plummeted 21% from the same three-month period last year.

The fourth-quarter results reflect the problems Novell has encountered this year due to declining sales of its networking software and other products. The loss for the fourth quarter included a $47.9 million restructuring charge the Provo, Utah-based vendor took to pay for a 16% workforce reduction two months ago (see story).

Without the restructuring charge, Novell said, it essentially would have broken even in the fourth quarter. However, the company said revenue fell from $344.6 million in the year-earlier quarter to just $273.3 million. For fiscal 2000 as a whole, Novell reported net income of $49.5 million, down from $190.7 million during the previous fiscal year.

"We have had a pretty difficult year," said Eric Schmidt, Novell's chairman and CEO. He noted that the company is six months into a transformation announced last spring, under which Novell created four new business units in an attempt to reduce its reliance on sales of packaged software by focusing more on Internet-based services (see story).

"We are getting lots of validation that our strategy is correct," Schmidt said yesterday. But he added that revenue from new Web-based services such as Novell's DirXML connector technology hasn't grown fast enough thus far to offset "dramatic declines" in software sales.

Novell said its packaged software sales declined by 47% during fiscal 2000 as a whole and accounted for less than a quarter of the company's total revenue. Sales of its flagship NetWare software dropped 24% for the year as a whole, a decline Novell blamed partly on the flurry of spending before the Y2k deadline last year.

Schmidt said he wasn't ready to make any announcements about spinning off Novell's Net Content division into a separate company called Volera, a move sources have said is under consideration. But he did confirm that Novell is contemplating a spin-off of the business. "We are still analyzing it internally, and that analysis is favorable, but we continue to figure out how to structure [the new company]," Schmidt said.

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This story, "Novell reports fourth-quarter loss on plummeting sales" was originally published by Network World.

Copyright © 2000 IDG Communications, Inc.

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