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February 25, 1999

NOVELL TURNING IT AROUND ON NDS

By CBR Staff Writer

Novell Inc is getting back into Wall Street’s good books. Morgan Stanley upgraded the stock and NationsBanc Montgomery Securities initiated coverage yesterday when the company reported first- quarter net income up 105% at $28.9m over $14.1m on revenue which increased 13% to $285.8m from $252m. Earnings per share were $0.08, hitting the First Call consensus right on the nose. It’s clear CEO Eric Schmidt is having some success refocusing the company around its leading Novell Directory Services; the company is now saying that the three directory-related businesses contributed 88% of its revenue in the first quarter, and 27% more than in the prior period. Directory-enabled NetWare server sales were $146m, up 16% from the first quarter of 1998.GroupWise, ManageWise and ZEN revenues were up 50% at $53m. Directory- enabled infrastructure products – including NDS for NT and BorderManager brought in 68% more than last time at $15m. Service and training was worth $37m. Non-directory products declined 35% to $35m and now account for 12% of revenue. US revenue was up 9% at $156m, EMEA was up 31% at $94m, Asia was flat at $22m and the Americas down to $14m. Corporate, reseller and integrator license sales were worth $148m. The company’s balance sheet shows $1bn in cash and short-term investments.

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