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Novell Q1 Profit Rises

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Software solutions provider Novell Inc. (NOVL) reported Thursday a higher profit in its first quarter, helped lower operating expenses, notwithstanding a decline in revenues. Earnings for the quarter were in line with estimates, but revenues fell short of expectations. Looking ahead to the second quarter, Novell expects sequential revenues to be flat.

The Waltham, Massachusetts-based company reported net income for the first quarter of $20 million or $0.06 per share, compared to $11.0 million or $0.03 per share in the year-ago quarter.

Results for the quarter were also benefited by a $5 million change in accounting estimate related to fiscal 2009 sales compensation, but was more than offset by a $6 million negative impact from foreign currency exchange rate. Foreign currency exchange rates favorably impacted net revenue by $1 million.

Excluding items, non-GAAP net income for the quarter grew to $25 million or $0.07 per share from $24 million or $0.07 per share in the same quarter last year.

On average, eight analysts polled by Thomson Reuters expected the company to earn $0.07 per share for the quarter. Analysts estimates typically exclude special items.

Income from operations for the first quarter was $21 million, compared to $14 million for the first fiscal quarter of 2009. On a non-GAAP basis, income from operations for the quarter decreased to $33 million from $34 million in the same period last year.

Revenues for the quarter decreased to $202 million from $215 million in the prior-year quarter. Eight analysts had a revenue consensus of $207.64 million for the first quarter.

In the immediately preceding quarter, Novell reported a wider net loss for the fourth quarter, hurt by goodwill impairment, and restructuring expenses. The company posted a net loss of $256 million or $0.74 per share, while non-GAAP net income rose to $38 million or $0.11 per share from $22 million in the fourth quarter. Novell's fourth quarter net revenue declined to $216 million from $245 million in the same quarter last year.

Among others in the industry, Red Hat Inc. (RHT) is scheduled to announce its fourth-quarter results on March 22. Wall Street currently expects earnings of $0.16 per share on revenues of $192.91 million. In the third quarter, Red Hat's profit fell 32.5% from a year ago, as higher operating expenses and a litigation settlement charge more than offset an 18% revenue growth.

Novell, the second largest seller of Linux software in the world, said Product revenue from Open Platform Solutions for the first quarter was $39.23 million, of which $37.47 million was from Linux Platform Products, up 6.4% over a year ago.

Product revenue from Identity and Security Management was $30.99 million, of which Identity, Access and Compliance Management was $29.49 million, up 12.8% from the year-ago quarter.

Product revenue from Systems and Resource Management decreased 4.5% to $38.45 million from $40.25 million year-over-year.

Cash, cash equivalents and short-term investments were $991 million at January 31, 2010, up from $983 million last quarter. Days sales outstanding in accounts receivable 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.

Total deferred revenue was $646 million at the end of the first fiscal quarter of 2010, down from $705 million at the end of the year-ago quarter.

For the first fiscal quarter of 2010, cash flow from operations was $5 million, compared to $13 million for the first fiscal quarter of 2009, which included a $25 million payment from Microsoft.

Looking ahead for the second quarter of fiscal 2010, Novell anticipates net revenue to be similar to first fiscal quarter of 2010 levels. Non-GAAP operating margin is expected to be between 12% and 15% for the second quarter.

Analysts currently expect the company to generate revenues of $212.00 for the second quarter.

NOVL closed Thursday's regular trading session at $4.81, down 5 cents or 1.03% on a volume of 4.63 million shares. In the after-hours, the shares lost 6 cents or 1.25%.

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