Novell Pockets Some Cash: Fool by Numbers

On March 1, software maker Novell (Nasdaq: NOVL  ) released first-quarter earnings for the period ended Jan. 31.

  • You might wonder what's up with the massive cash-flow surge in this quarter. It's simply the entire anticipated gain of about $348 million from the Microsoft (Nasdaq: MSFT  ) cross-licensing, support, and co-marketing deal that got tagged as deferred revenue, and thus made it onto the cash flow sheet.
  • The product mix continues to shift away from the aging NetWare cash cow and onto the SUSE Linux platform. The faster, the better, if you ask me. That segment grew revenues by 46% over last year, but it's still small, with just $15 million of sales. Rival Linux vendor Red Hat (NYSE: RHT  ) , for example, brought in $106 million of essentially all-Linux sales in its latest reported quarter.
  • Management says that GAAP profitability is in sight and has set a 5% to 7% operating margin target for the fourth quarter.
  • It seems that Unix-like platforms don't impress our Motley Fool CAPS players very much. Novell is a one-star stock in that database, while most of its platform competition, including Red Hat, Sun Microsystems (Nasdaq: SUNW  ) , and IBM (NYSE: IBM  ) , carries two stars each. Hewlett-Packard (NYSE: HPQ  ) , which just released a new version of its HP-UX operating system, owns a third star, but then again, HP and IBM do much more than just Unix systems.

(Figures in millions, except per-share data)

Income Statement Highlights

Q1 2007

Q1 2006

Change

Sales

$229.6

$242.3

(5.2%)

Net Profit

-$19.9

$1.9

N/A

EPS

($0.06)

$0.00

N/A

Diluted Shares

345.5

394.5

(12.4%)



Get back to basics with a look at the income statement.

Margin Checkup

Q1 2007

Q1 2006

Change*

Gross Margin

67.7%

66.4%

1.3

Operating Margin

-13.6%

0.5%

(14.2)

Net Margin

-8.7%

0.8%

(9.4)

*Expressed in percentage points.

Margins are the earnings engine. See how they work.

Balance Sheet Highlights

Assets

Q1 2007

Q1 2006

Change

Cash + ST Invest.

$1,815.5

$1,685.6

7.7%

Accounts Rec.

$146.3

$185.3

(21.0%)



Liabilities

Q1 2007

Q1 2006

Change

Accounts Payable

$41.6

$43.6

(4.6%)

Long-Term Debt

$600.0

$600.0

0.0%



Learn the ways of the balance sheet.

Cash Flow Highlights

Q1 2007

Q1 2006

Change

Cash From Ops.

$347.5

$25.1

1283%

Capital Expenditures

$5.0

$7.6

(34.8%)

Free Cash Flow

$342.6

$17.5

1855%

Owner Earnings

-$1.4

$5.2

N/A



Find out why Fools always follow the money.

Related Foolishness:

Microsoft is a Motley Fool Inside Value pick. Find out why with a free 30-day trial at your side.

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

At the time of publication, Anders Bylund had no position in any company mentioned, and he prefers the community-supported Ubunty and Debian GNU/Linux flavors. Fool rules are here.


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