MANDRIVA (ex Mandrakesoft)

Fiscal Year 2005/2006

(M€)	2004/05 Audited	2005/06 Unaudited	Variation
	ME	ME	%	ME
Sales	5.45	5.66	+3.8%
Operating revenues	6.52	6.61	+1.4%
Operating result	-1.10	-2.08		-0.98
Financial result	-0.46	-0.05		+0.41
Underlying earnings	-1.56	-2.13		-0.57
Exceptional result	1.47	0.31		-1.16
Income tax ("crédit d'impôt recherche")	0.28	0.11		-0.17
Result before goodwill amortization	0.19	-1.71		-1.90
Goodwill amortization	-0.23	-1.13		-0.90
Net result	-0.04	-2.84		-2.80

Fiscal year ends on Sept 30th.

Results

Mandriva during its fiscal year 2005-06 had consolidated revenues of 5.66M€ (+3.8%) and operating revenues of 6.61M€ (+1.4%), compared to 5.45M€ and 5.52M€ respectively in the previous year.
These numbers include Conectiva, the Brazilian subsidiary of Mandriva and Edge-IT, both for the whole year.
The difference between revenue and operating revenue is essentially due to subventions for cooperative r&d projects for an amount of 0.52M€.
During this fiscal year, the company showed an operating loss of 2.08M€, compared to an operating loss of 1.1M€ over the same period a year
ago.

The consolidated exceptional result includes:

• the positive impact, for 0.72M€ of a provision reversal concerning a tax liability of the Brazilian operation: this liability had been identified prior to the acquisition and a conservative provision was taken. The company opted for the tax amnesty process “Revis III” which allows us to spread the payment over 10 years for a total amount of 0.35M€.

• restructuring expenses charged in fiscal Q2 for 0.24M€.

The net result of the previous year included an exceptional result of 1.47M€ due to the negotiation of creditor liabilities in the chapt 11 process and the impact of the settlement of the Hearst litigation which had been provisioned for a higher amount.
After the standard goodwill depreciation on Edge-IT and Conectiva for 0.41M€ and an exceptional 0.72M€ depreciation on Conectiva goodwill (to take into account the equivalent provision reversal), the net consolidate result is a loss of 2.84M€

Consolidated revenues for 2005-2006 can be broken into 2.54M€

• for the consumer market (including distributors, OEM sales, e-commerce and Club) showing a 23.4% decrease

• 3.13M€ for the corporate market (including consulting, support, maintenance and training), showing a 46.4% growth.

Comments

Losses for the year can be explained as follows:

• increased spending at the beginning of the fiscal year to boost the sales of Mandriva 2006, which did not result in a corresponding revenue growth,

• move from two versions per year to one version per year which had a negative impact on retail, e-commerce and Club sales,

• disappointing consulting sales in France.

To fix these issues, we already took the following actions:

• expense reductions: monthly group expenses decreased from 670K€ in Q1 2005/2006 to 530K€ in Q1 2006/2007,

• return to the 6 month cycle release for consumer products: Mandriva Linux 2007 shipped in October 2006 and the next version is scheduled for
  early spring 2007. We expect growth on the three corresponding revenue lines,
  

• New corporate sales organization in France under the management of Philippe Spénato, recently hired as France Corporate Sales VP.

We also expect improvements from:

• the recent launch of an international “franchisee” program,

• a recent growth in OEM sales in Latin America thanks to the HP partnership in this territory.

About Mandriva

Mandriva is one of the world leading editors of Linux operating systems and open-source software. The company develops and markets the Mandriva Linux operating system. Several hundred developers worldwide contribute to the constant improvement of our product via the internet and to its internationalisation (it is now available in nearly 70 languages). Mandriva also provides associated off-line services such as consultancy, training and support, alongside on-line services including technical back-up and the Mandriva Users Club.
Mandriva has its headquarters in Paris and offices in the USA and Brazil.
The company is listed on the Marché Libre of Euronext Paris.

ISIN: FR0004159382

Reuters: MAKE.PA

Number of shares: 5,908,889

Contact

François Bancilhon

Thierry Bossut

investors at mandriva dot com

Tél.: +33 (0)1 40 41 00 41