425 1 d425.txt FORM 425 Filed by Novell, Inc. and Cambridge Technology Partners (Massachusetts), Inc. Pursuant to Rule 425 under the Securities Act of 1933 And deemed filed pursuant to Rule 14a-12 of the Securities Exchange Act of 1934 Subject Company: Cambridge Technology Partners (Massachusetts), Inc. Commission File No. of Filing Person: 0-21040 Novell, Inc. ("Novell") and Cambridge Technology Partners (Massachusetts), Inc. ("Cambridge") filed a joint proxy statement/prospectus with the Securities and Exchange Commission on a Form S-4 Registration Statement. THE JOINT PROXY STATEMENT/PROSPECTUS CONTAINS IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE MERGER. The joint proxy statement/prospectus is available to all shareholders of Cambridge at no expense to them. The joint proxy statement/prospectus is also be available for free at the Commission's Web site at www.sec.gov. Information regarding the participants in the solicitation and a description of their interest in the proposed transaction is contained in the proxy statement-prospectus. -------------------------------------------------------------------------------- The following statements were made during Novell's Second Quarter Earnings Results Conference Call on May 22, 2001 -------------------------------------------------------------------------------- Remarks by Peter Troop, Moderator. Eric Schmidt, Chairman and Chief Executive Officer of Novell, is on the call with us from California. I'm in Provo, Utah with Dennis Raney, who's Executive Vice President and Chief Financial Officer here at Novell. Also, joining us in Provo for the Q&A segment on this call is Stewart Nelson, who is Executive Vice President and Chief Operating Officer (of) the company. As well, we will be joined by Jack Messman, who is currently President and Chief Executive Officer of Cambridge Technology Partners and is slated to become CEO of Novell after the anticipated completion of the Cambridge acquisition this summer. And Jack is with us from his offices in Cambridge. On this call, we will make forward- looking statements regarding future events and the future financial performance of Novell and Cambridge. Actual events or results may differ materially from those in the forward- looking statements, due to a number of risks and uncertainties, including assumptions about future events based on current expectations, plans, business development efforts, near and long-term objectives, potential new business strategies, organization changes, changing markets, marketing efforts, the new net services, anticipated demand for new offerings from markets that Novell is just beginning to enter and future business performance and outlook. Among the important factors that could cause actual results to differ materially from those in the projections and other forward-looking statements are potential fluctuations in quarterly results, dependence on new product development, rapid technology and market change, acquisition strategy, risk associated with business conditions in the general economy and then, of course, changes in business choices and business partners, competitive factors, sales and marketing execution, shifts in technology and also, market demand for (IT) products and software, in particular. You should also reference information concerning factors that could cause results to differ materially from projected statements in Novell's fiscal 2000 annual report, which is on our Form 10-K, as well as with our 10-Q filings with the SEC. Remarks by Dr. Eric Schmidt, Chairman I'd like to give some context to of the Board and Chief Executive today's announcement and offer you all Officer of Novell. a perspective or my perspective, anyway, on Novell moving forward. It's useful to underscore that today's announcement reflects both the continuing downturn in the Internet sector, as well as the continuing decline in IT spending, which everyone's read about. Novell, of course, is not alone. We also have our own issues, in particular, the requirement to better engage customers around Web-based solutions. And the changes that we're implementing this year, mostly driven, I think, now by the acquisition of Cambridge Technology Partners, will position Novell to move beyond this difficult phase of our business. Jack and I and a number of others just came back from the European Brain Share Conference, where I can report to you that again, the technology reception for these new products is very, very positive. Now, on the top of these new versions of our core products, we have newer product accolades, as well. ZENworks is the best desktop management tool in the market. It's becoming a more important product. Customers are needing tools to deploy and manage new Windows 2000 deployments. ZENworks revenue growth has -- now represents $120 million of business within Novell, which I'm very proud of. So observations of industry analysts and updates in Novell traditional products and growth, popularity, new additions to product portfolio all underscore the logic of our acquisition of CTP. 2 Dennis will give you all an update on the integration deployment that's well underway. I can add that during the Brain Share conferences that -- both in Utah, of course, first and in Europe last week, the feedback for the merger has been very favorable and very well received. Jack and I heard from numerous customers, partners and analysts over the last week. We have become even more assured that the acquisition is the right move for Novell. I can tell you that I continue to believe that the selection of Jack as the new CEO continues to be validated by everything I've seen that he's done and his very quick learning curve [regarding the] core business within Novell. Remarks by Dennis Raney, Executive Regarding share repurchases, as we Vice President and Chief Financial publicly acknowledged during the Officer of Novell. quarter, we were not able to repurchase shares during Q2 due to the pending acquisition of Cambridge. We expect to be back in the market this quarter balancing repurchases with cash requirements for potential acquisitions. As to the status of the Cambridge acquisition, we are awaiting final clearance from the SEC on the S-4. With it, Cambridge will promptly schedule a shareholder vote, which could come as early as late June. We expect the acquisition to close in our third fiscal quarter. And, meanwhile, an integration task force is underway to drive planning with participants from the two companies in management and strategic services input from both Deloitte & Touche and McKinsey. We've had several handshaking [meetings] between our various offices and personnel involved. Both of our organizations are committed to rapidly aligning our companies in gaining the advantages that we bring to one another following a successful vote, approving the acquisition. As to the outlook for the remainder of the year, we do not anticipate significant software and IT market conditions. We don't anticipate a return to growth until 2002. The client and package software sales could continue. We believe it will take Novell several quarters and the integration of Cambridge to complete its move to a more effective solution selling model. These and other factors could lead to a sequential revenue decline in Q3, by as much as five percent before an improvement in Q4. Total Revenue for the second half of fiscal 2001 is now expected to be less than $475 million. 3 We do believe we can achieve significant cost savings as Eric noted to plan job reductions, control and travel, advertising reductions and savings in recruitment expenses, telecom and equipment purchases. Before the end of May the company is implementing a job reduction of approximately five percent from within its worldwide workforce of 5,200 full- time and contract employees. We expect restructuring charges related to these actions and other integration costs related to the Cambridge acquisition to exceed $12 million in Q3. Our objective is to reduce operating expenses from their Q2 levels by about 10 percent in Q3. With savings of this magnitude, Novell earnings could be slightly positive in Q3. For fiscal 2001, we now expect earnings without the effect of the Q2 write down, restructuring and integration of Cambridge of approximately three cents per share. A final comment regarding expenses. Within our overall expense flow, we are continuing to invest approximately $35 million per quarter and $17 million per quarter as strategic investments in directory and content networking management respectively. These two efforts are squarely directed at the one net vision and is a tremendous potential for Novell as the directory and net services leader in a world that increasingly requires the security and management attributes that our infrastructure software brings to solutions. The markets we're entering with these businesses are in ascent. Our over- riding focus through these challenging times is to expand Novell's reach at every level with customers, ISPs, OEMs and IT service partners. We believe we're on the right track with respect to directory. We can see the market convergence to these technologies building in our business already. With our maintenance of a solid balance sheet and financials and with the integration planning effort with Cambridge, that is moving very rapidly. Question by Analyst. I was wondering if you could give us top line guidance for Q3 and Q4 including the impact from the Cambridge Technology acquisition. And then perhaps, Eric, if could just give us some color on the spending trends you're seeing out in the marketplace? Perhaps you could comment on different geographies? Remarks by Dennis Raney, in response As I mentioned we expect Q3 to be down to an analyst's from where we're at Q2 levels. This could be in the $ 233 [million] range. We're also expecting to come 4 question about the impact from up from that to have a higher revenue the Cambridge acquisition. in Q4. And that increase could roughly be in the three to four percent over the Q3 level. Those are the plans we have to date. We have not built out a plan based on the integration of Cambridge revenue numbers in our plan and the reason for that is that we simply don't control the date by which the merger will be complete. So I can't respond to that at this point. Question by Analyst. I was wondering if you could tell me what alternatives some of the customers were looking at? And what type of competition you see in the solutions? And, also, to what extent are you working with applications partners in the development of these solutions? Remarks by Dr. Eric Schmidt in We have been pushing something called response to an analyst's questions Novell portal services, which is a way regarding applications partners. to access the directory and get an instant on portal as well. There was a lot of activity in Europe last week and in Brain Share a month earlier those vendors showing what are called widgets that plug into these portals that show various value added on top of the directory. If I could criticize the directory strategy, I would tell you that it's still waiting for the broadly deployed enterprise ap besides authentication and e-commerce. And, again, we hope by virtue of doing our merger, that we will be able to pioneer those applications, which, unfortunately, are highly custom at this time. Question by Analyst. I'm looking at the guidance you're giving us this time around and I am wondering what changes the way you craft your guidance? And, given the environment was probably as bad three months ago as it is today, and we -- it seems are in a better position today than we were six months ago, yet things fail to take hold. Is there any sort of synopsis you could make that I could go to guys who have been holding this thing for a year and a half and tell them that the sunshine might be six months away or something like that? Remarks by Dr. Eric Schmidt, in I think it's a mistake for me to try to response to an analyst's questions and give you a precise time period. And I comments regarding guidance about understand that you would like that. Novell's financial results. Because there are so many macro factors at work with respect to aggregate IT spending. I think what we would like for you to do is to watch for the success of the new deals both in terms of our direct business and our new accounts -- new ISV announcements - those sorts of things, which we're busy working on. Those will be as good a proxy as I know to show when the real engine starts working here. Obviously, the merger, once that's complete, will 5 provide tremendous Sun integration resources that the company did not have. So to me that's an opportunity to really set the clock properly for real revenue growth. Just to be clear, the principle here is we tell you what we know as best we know it and as directly as we can. That's what we try to do. As you can see from our earnings -- sorry -- our revenue, our real focus in here is additional revenue carrying capacity. And that's not a one month kind of a problem. But my view is that the combination of the merger is really the bet, if you will, that we're placing. The underlying technology is clearly there. The customers tell us that they clearly want it. And so then the question is, how quickly can the implementation plan and the merger actually really hit the ground running? And, Jack, you may want to add your perspective on this. Remarks by Jack L. Messman, in Yeah, I would say that the -- there is response to an analyst's questions and this trend toward convergence of comments regarding guidance about hardware and software products and Novell's financial results. services into solutions. We believe that the higher up you sell in an organization, the less the executives know about the technology itself. And more that they care about the solution than what the return on investment is. The business climate right now is that clients are making -- are still spending if they see a good ROI or a short pay back. And they're focused on removing cost from their value chains. But for all other projects they are deferring. They have budgets but they have no visibility, therefore, they're holding. There are some things happening that tend to lend credibility to the strategy that Novell's on. And just yesterday Lou Gerstner of IBM said that despite the bursting of the bubble of the Internet, there is a massive investment in the networking technology by big customers. And he also said that the services offering is increasingly leading the customer decision dragging along the hardware and software product sales and not the other way around. And he believes that IBMs's growth will accelerate if they can fulfill their vision for leading the way in networking computing. So there's a lot of good things going on. I would say also that there has been a slowdown, I believe, in the acceptance of some of Novell's new products caused by the slowdown in spending. Many of the Novell -- the new Novell products have just been released in the last -- since March of last year. And based on the evidence I see on the number of consulting firms that showed up at our conferences, they're now becoming aware of the capabilities of this software. Some of them have stepped up and become partners. These are people who are competitors for Cambridge. And they are stepping up and becoming partners. And Novell has signed a 6 number of agreements with them. So I think many consulting firms are now seeing that the solutions that are required to the problems their clients have and are looking at using the Novell directory technology as a way of solving those. Initially I believe that Cambridge will use the -- will use the directory technology to differentiate the solutions that we offer. But ultimately I believe that firms such as Siebel and PeopleSoft are seeing the advances that consulting firms will make in integrating their software with directory at client offices will ultimately themselves integrate directory into their products. So I think the consulting firms are the leading indicator of what will ultimately happen to the software firms. The other important factor is that we did learn through Y2K that you don't want to mess with legacy systems. The cost of doing that is very, very high. And many of these companies -- many of our clients are getting ready for the Internet technology and its impact on their value chains -- their supply chain management and other parts of their value chain, many of which contain legacy systems. And I believe they will not want to rewrite those systems because of their Y2K experience. And, therefore, the Novell technology, which is a directory as an interface to all kinds of utilities and the direct XML technology, which allows you to connect legacy applications and databases together without rewriting them would be very powerful technology. And I see all of that occurring in an accelerated fashion once the IP spending starts picking up. Question by Analyst. Given the fact that Volera is still in its [early] stages but you've had some experience, could you talk about whether there's going to be any strategic tweaking of the concept necessary to get Volera where you want to go? Just what has the early experience been qualitatively as opposed to quantitatively? Remarks by Dr. Eric Schmidt in We started off with essentially a proxy response to an analyst's question cash strategy. And it turned out that regarding Volera. the customers who are buying accelerated Internet really want a solutions sale. So when we founded Volera and brought in Nortel to complete the partnership as well as Accenture to help do the solutions sale. We also believe that the Cambridge merger creates additional synergies there as well. So I think the early feedback from customers is that people will not buy a proxy cash appliance by itself. What they really want is a content distribution network or a so-called CDN solution, which includes manageability and deployment characteristics. 7 Question by Analyst. Given the newer lower guidance top line, what can we expect on the associated operating expense side or is this too early given the Cambridge merger has not been consummated? I also want to know if you're seeing a backlog build up in services as you move towards a Web-based solution model. Remarks by Dr. Eric Schmidt in Independent of the integration with response to an analyst's question and Cambridge, we expect the actions that comment regarding future Novell we announced today on the call to operating expenses. diminish our operating expenses by roughly $30 million in Q3 and somewhere in the upper $30s by -- through Q4. With regard to the pipeline, yes, we are seeing an increase in our consulting pipeline. Our consulting business is growing again. And we just came back from an interesting review of the European operations where the consulting business over there was well as in the United States is showing an increase in pipeline. We don't provide numbers on the pipeline and nor do we report backlog because we basically ship everything -- on the software side we ship everything the moment we get the order. We generally turn those orders around within one or two days so we don't report backlog. Now perhaps as we move into a much more consulting intensive business model with the innovation of Cambridge, we will talk about their backlog. But I have to say at this moment that I'm not familiar with their policies in this area and that's something we haven't discussed. Question by Analyst. Can we get any update or is there any changes on the synergies with Cambridge? And, Jack, if you're still on the line, if you could reflect a little bit on the Cambridge understanding of Novell and its solutions between March and May? Remarks by Jack L. Messman, in I would say the more I get involved, response to an analyst's question though, with the integration effort, regarding synergies between Cambridge the more convinced I am that there are and Novell. significant opportunities for growth in the two companies. The synergies that we're expecting -- we're still in the $40 to $43 million range in the expected synergies. We still expect to have to spend $10 million to get that in capital. We expect that most of the -- a significant portion of synergies will come in real estate consolidation and therefore will stretch over a period of time because it takes time to get out of leases and consolidate offices and things of that nature. So I think we're still on target with regard to those numbers. 8