Novell stockholders were unpleasantly surprised on Dec. 5, when instead of hearing from Novell on how the Linux distributor had done over the last quarter and the full 2007 fiscal year, they were presented with an earnings announcement postponement instead.
The cause for this last minute delay was a pair of unresolved issues with the Securities and Exchange Commission. The details of the SEC questions aren't available. What we do know is that the SEC asked questions in August about Novell's Form 10-K, a comprehensive overview of the company's business and financial condition, for the fiscal year ended Oct. 31, 2006, and its Form 10-Q, which contains unaudited financial statements and a view of the company's financial position, for the quarterly period that ended April 30, 2007.
Novell delivered a response letter to the SEC on Sept. 20, 2007. On Oct. 18, Novell received a second comment letter from the SEC indicating that the SEC had reviewed Novell's response to the Aug. 7, 2007 letter. The second comment letter was limited to certain accounting matters. Novell responded to the SEC's second comment letter on Nov. 7, 2007 and is still awaiting an SEC response.
With these issues still in the balance, Novell has elected to not issue its fourth quarter and year-end reports. "We are confident of our accounting and are working diligently with the SEC to respond to their inquiries," said Dana C. Russell, Novell's chief financial officer. "In an abundance of caution, we have chosen to postpone our earnings release. We look forward to completing our dialogue with the SEC."
Broadpoint Capital, an investment bank, expects Novell to report total fourth quarter revenues of $239-$252 million. Looking ahead, Broadpoint expects Novell's Linux revenue growth to continue at a healthy pace and its shift from direct sales to more of a channel-based approach to positively affect Novell's bottom line.
In its last reported quarter, Novell announced that it had net revenue of $243 million. At the same time, Novell said that its Linux business has exploded with a growth rate of 77 percent year over year.
Novell intends to release its fourth quarter and full year 2007 earnings upon the completion of the SEC's review. Novell is unable to estimate when the process will be completed, but currently expects to file its Form 10-K for the fiscal year ended Oct. 31, 2007 on or before its due date of Dec. 31, 2007.
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