Novell, Inc. (NOVL) – a leading technology software company – reported first-quarter earnings of 7 cents that beat the Zacks Consensus Estimates by a penny.
However, quarterly revenue of $202 million decreased 6% from the year-ago figure. This was due to softness in 2009 invoicing and weakness in the company’s legacy products. Moreover, the decline was a result of a sharp drop in software license revenue, which fell 28% year over year. Services revenue declined 20.1% year over year, while maintenance and subscription revenue remained flat compared to the year-ago quarter.
By product line, Novell’s revenue from Linux Platform Products was up 6% year over year to $37 million, revenue from Identity, Access and Compliance Management was down 13% to $29 million, while revenue from Systems and Resource Management was down 5% to $38 million.
Linux-based products revenue in the quarter was $37 million, increasing 6% from the year-ago quarter. Linux invoicing was fairly consistent with the last few quarters, but was up 75% year over year. Renewal of Linux-based product distribution in association with Microsoft certificates began during the quarter, but the company realized much lower invoicing than the original agreement.
As a result of operating expenses declining 11.1% year over year (sales and marketing fell 10.4% and product and development expenses fell 12.5% year over year) non-GAAP operating margin improved to 10.6% in the quarter from 6.3% in the year-ago quarter.
Net income on GAAP basis for the first fiscal quarter of 2010 was $20 million, or 6 cents per share. This compares to GAAP net income of $11 million, or 3 cents per share, for the first fiscal quarter of 2009. Excluding special items like gain on sales of assets, income tax adjustments, income from discontinued operations, non-GAAP net income for the first fiscal quarter of 2010 was $25 million, or 7 cents per share. This compares to non-GAAP net income of $24.0 million, or 7 cents per share, for the first fiscal quarter of 2009.
Total headcount at the end of the quarter was 3500 down from 3600 in the prior quarter primarily due restructuring initiatives.
Novell’s balance sheet remains sound with no debt. The company exited the quarter with $991 million in cash and equivalents, up from $983.5 million in the previous quarter. Days sales outstanding was 50 days at the end of the first fiscal quarter of 2010, up from 46 days at the end of the year-ago quarter. Cash flow from operations for the quarter was $5.2 million.
Guidance
Novell expects second-quarter revenue to be similar to first-quarter levels and a non-GAAP operating margin of between 12% and 15%.
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