Home > Company > Investors > Newsletter > Sn060307

March 07th - 2006

Consolidated results for the first quarter of 2005/2006 (Oct 2005-Dec 2005)

In € millions (Oct. - Dec.)



Change €

Change %


3 months

3 months







Operating revenue





Gross margin





% gross margin




Operating result





Profit before goodwill amortisation





Net result





(*) Non-audited consolidated sales

Mandriva’s financial results for the first quarter of 2005-2006 are disappointing.

There are several explanations:

- The ramp-up of new OEM contracts is proving slower than expected,

- A downward slide of sales in the retail market linked to the spread of broadband internet,

- Enterprise services are up sharply to represent 42% of consolidated sales over the quarter, compared to 24% in Q1 2004/05. Some of these contracts include a phase of initial investment in new technologies – mainly Pulse, the software and system administration tool. These investments have necessitated the sharing of costs between Mandriva and the leading large accounts, which in turn hit the gross margin,

- Conditions in Brazil were difficult due to general economic factors rather than for structural reasons,

- Marketing and communication spending rose steeply due to the Mandriva Linux 2006 distribution.

Recall that the net result for 2004/05 benefited from a one-off profit of €0.74m following the debt renegotiation carried out under the terms of the company’s continuation plan. Note also that the 2005/2006 net result includes a €0.1m amortisation payment on the goodwill from the Edge-IT and Conectiva acquisitions.

We remain confident for the group’s long-term prospects and the strength of its assets and contacts. We see the partnership with HP, the alliance with Intel, the Linux distributions and the Pulse administration tool as particularly positive. But a swift reaction was required to address the problems and we have already set up a two-pronged strategy.

The first set of measures aims to cut costs. They include redundancies in France and Brazil and the termination of certain expenses judged to be non-essential. These initiatives have already been implemented and the resulting restructuring costs will be booked in the second quarter of the current FY (January to March 2006).

The objective of the second wave of measures is to develop our commercial activities:

- An official launch for the Pulse administration tool is imminent, targeted at the large accounts,

- A new distribution christened Mandriva One is set for launch, aimed at individual users. A new update service called Kiosk will also be announced soon.

The overall aim is to bring Mandriva to breakeven as quickly as possible.

On the management front, Jacques Le Marois has decided to stand down as the Chairman of the Board, while remaining member of the Board of Directors and his seat on the Strategic Committee. He has proposed that François Bancilhon, currently the Chief Executive Officer, replace him as Chairman.

A resolution for the nomination of François Bancilhon has been tabled for the AGM on 31 March 2006. The Board will gather immediately after the general meeting in order to validate the changes to the management structure and the nomination of François Bancilhon as Chairman of the Mandriva Board of Directors.

About Mandriva

Mandriva is one of the world?s 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.

For more information go to: mandriva.com/company/investors/newsletter

ISIN: FR0004159382
Reuters: MAKE.PA
Number of shares: 5,593,405
Contact Mandriva François Bancilhon / Thierry Bossut investors at mandriva.com Tel.: +33 (0)1 40 41 00 41