Novell Surfs on Gnarly Cash Flows: Fool by Numbers

By Anders Bylund – Updated Apr 5, 2017 at 4:52PM

Fast facts the Fool way.

On Dec. 14, longtime software wrangler Novell (NASDAQ:NOVL) released fourth-quarter 2007 earnings for the period ended Oct. 31, 2007.

If you back out restructuring expenses, stock-based compensation, and one-time charges the way most analysts do, you'd get non-GAAP earnings of $20 million or $0.06 per diluted share.
Novell has amassed enough cash that you start to wonder what it plans to do with the riches. But don't expect it to pay back debt any time soon; Novell made $23 million off its investments this quarter, and those senior debentures with a low, low 0.5% coupon rate don't mature for another 17 years.
Though GAAP-style earnings are in short supply, cash flows look healthy.

(Figures in millions, except per-share data; GAAP results from continuing operations)

Income Statement Highlights

	Q4 2007	Q4 2006	Change
Sales	$244.9	$233.8	4.8%
Net Profit	($17.9)	$19.9	N/A
EPS	($0.05)	$0.05	N/A
Diluted Shares	350.0	395.5	(11.5%)

Get back to basics with the income statement.

Margin Checkup

	Q4 2007	Q4 2006	Change*
Gross Margin	73.6%	71.3%	2.3
Net Margin	(7.3%)	8.5%	(15.8)

*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets	Q4 2007	Q4 2006	Change
Cash + ST Invest.	$1,857.6	$1,466.3	26.7%
Accounts Rec.	$208.3	$234.0	(11%)

Liabilities	Q4 2007	Q4 2006	Change
Accounts Payable	$45.1	$44.4	1.6%
Long-Term Debt	$600	$600	0%

The balance sheet reflects the company's health.

Cash Flow Highlights

	Q4 2007	Q4 2006	Change
Cash From Ops.	$76.9	$62.3	23.5%
Capital Expenditures	$7.8	$7.1	8.8%
Free Cash Flow	$69.1	$55.1	25.4%
Owner Earnings	($10.0)	$4.4	N/A

Free cash flow is a Fool's best friend.

Competitive Context

	Market Cap	Trailing P/E Ratio	CAPS Rating
Microsoft (NASDAQ:MSFT)	$333,330	23.3	***
International Business Machines (NYSE:IBM)	$144,730	15.5	***
Oracle (NASDAQ:ORCL)	$109,290	25.2	****
Red Hat (NYSE:RHT)	$3,720	57.9	**
Novell	$2,460	N/A	**

Using the latest reported numbers from Capital IQ.

Keep your partners close and the competition in your vest pocket.

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About the Author

Anders Bylund is a contributing Motley Fool media and technology analyst covering semiconductors, cloud computing, internet infrastructure, quantum computing, and streaming media. Previously, Anders was a systems administrator for Nielsen Technology and CSX, gaining hands-on experience with enterprise-class systems. He was also a freelance writer for Ars Technica, TIME, USA Today, CNN, WIRED, and AOL's Daily Finance. He holds a bachelor’s degree in English and a master’s degree in library and information sciences from Florida State University. He believes in coyotes and time as an abstract.

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