Profit Grows at Novell

Updated from 5:17 p.m. EDT

Improved sales of Linux-related products helped Novell(NOVL Quote - Cramer on NOVL - Stock Picks) beat Wall Street's third-quarter earnings estimates, but revenue slipped year over year and is likely to slip again in the current quarter.

The company also said Tuesday that it has begun a voluntary review of its stock-based compensation policies but released few details. Any adjustments that have to be made will be reflected in the form 10-Q Novell will file for the July quarter.

Decreasing sales of older products have weighed on Novell for several years, and while investors were pleased to see a new CEO take the helm earlier this year, the July quarter did not show the improvement analysts had hoped for.

In after-hours trading on Instinet, shares were off 4 cents to $6.74.

Novell, which sells a variety of networking software and its own version of the Linux operating system, posted a profit of $11.6 million, or 3 cents a share, up from $2.1 million, or break-even EPS, a year ago.

Revenue slipped 4% to $241.4 million.

Excluding the expense of stock options, severance costs, and other items, Novell earned a profit of $20 million, or 5 cents a share. Analysts polled by Thomson First Call were looking for EPS of 3 cents on sales of $242.3 million, on the same basis.

Novell's forecast for the fourth quarter calls for sales to range from $246 million to $256 million, compared with First Call consensus of $261 million. Non-GAAP EPS, which excludes 3 cents a share for the cost of options as well as other items, will likely be 4 cents a share, which falls a penny short of Wall Street's expectations.

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