Novell posts loss on job cuts for 4th quarter; sales are up

Novell Inc., a seller of computer network software and consulting services, swung to a $5 million fourth-quarter loss as it cut jobs.

The loss amounted to 1 cent a share, compared with net income of $13.3 million, or 3 cents, a year earlier, according to a statement released by Novell, based in Waltham, Mass. Sales rose 6.5 percent to $320.3 million in the period ended Oct. 31.

Revenue from Linux-related products climbed to $61 million from $44 million in the third quarter. The company is building on a new strategy of selling Linux operating system software for corporate networks and personal computers. The company's legacy business, centered on NetWare and declining for many quarters, also produced improved sales, Chief Financial Officer Joseph Tibbetts Jr. said in an interview Thursday.

"We had a very strong finish to our year across our whole business," Tibbetts said in an interview. "It shows that our transformation from our core legacy business to expanding to newer markets is working."

Chief Executive Jack Messman on Nov. 2 said he would cut 10 percent of the work force, or about 600 jobs, as the company makes the strategic shift.

About 200 of those cuts hit employees in Provo, which was home to Novell's headquarters until 2004. The job cuts equated to about 10 percent of the company's Provo work force.

Excluding some costs, including $38 million in restructuring charges, fourth-quarter profit was $33 million, or 7 cents a share, Novell said, beating the 3 cents average estimate of 13 analysts surveyed by Thomson Financial. Sales topped the $300.4 million estimate of 13 analysts.

A $40 million deal with the U.K.'s National Health Service boosted sales by about $20 million in the fourth quarter and had a "nice impact" on profit, Tibbetts said Thursday.

Shares of Novell rose 18 cents to $7.85 in extended trading after the results were announced. The shares lost 11 cents to $7.67 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have climbed 27 percent since Novell reported third-quarter results, when profit excluding some costs topped analysts' expectations.

First-quarter profit will be 2 cents to 3 cents a share, excluding 3 cents for stock-based compensation expenses, the company said. Analysts had estimated 3 cents a share.

Novell forecast first-quarter sales of $260 million to $270 million, lower than the $288.1 million estimated by 10 analysts.

"Quarter one is historically a down quarter," Tibbetts said. "We think it's prudent."

Novell bought two Linux companies in 2003 and 2004. Novell's proprietary NetWare networking program has been losing market share to Microsoft Corp.'s Windows and Linux, and the company wants to switch NetWare customers to Linux programs. In March, Novell released an operating system for corporate networks called Open Enterprise Server, or OES, which contains elements of both NetWare and Linux.