Mandriva to hold shareholder meeting, publishes 2006-2007 results

Mandriva to hold shareholder meeting, publishes 2006-2007 results, and announces raise of 1M€ in equity from key existing shareholders.

Paris, March 20th , 2008- Mandriva will hold its annual shareholder meeting on April 28th, 2008. Several items will be presented and voted upon during this meeting, the key points being the 2006-2007 financial results and a reserved increase in capital of 1M€.

Key facts during Fiscal 2007-2008

Two connected key events characterize this year:

1. a capital increase led by Occam
2. restructuring of the company and redefinition of strategy

Occam Capital, a European VC fund, led a 3M€ round of financing in May 2007 and became the reference shareholder for the company. At the same time, we acquired Linbox for its team, technology and customase. We reduced costs, restructured and redefined the company focus and strategy.

The company is now organized in 3 business units:

  • The Corporate Business Unit focuses on large organizations and delivering our Pulse, MSD, CD and CS products.
  • Community focuses on the Linux user market and delivers Powerpack and Mandriva Flash through the retail and e-commerce channel.
  • OEM focuses on agreements with PC vendors to install Mandriva Linux on their hardware.

Key accomplishments for the period are as follows:

On the Corporate side, we have:

  • integrated Linbox and the Mandriva Corporate team
  • defined a roadmap for product integration and delivered the first version of Pulse 2
  • sold some major accounts for Pulse 2 and MDS (Mandriva Directory Server)

On the Community front we have:

  • redefined and simplified the product line, revised our prices
  • opened the Club to our entire community
  • restructured our website to take all this into account
  • seen a further increase in the number of products sold via e-commerce

On the OEM front we have:

  • won successful deals (in Brazil with Positivo, in Argentina with HP, in Nigeria with Intel) grown our numbers
  • properly identified a new and exciting market, that of low cost PCs in emerging markets, positioned ourselves on that market with the right partners and the right technology.

We consider the evolution of the results quarter by quarter over the period as a clear sign that the situation is improving. Revenues have been growing sequentially for the past 3 quarters: from 0.87M€ anuary-March, to 1.02ME in April-June, to 1.13M€ in July-September, to 1.50M€ in October-December.
15 month fiscal year numbers (October 06 / December 07)
Mandriva has changed its fiscal year dates to switch to a January-December year, in order to make the consolidation of financial data easier for the group. So, we are exceptionally reporting on a 15 month period.

(M€)

Q1

(10-12/06)

(1)

Q2

(01-03/07)

(1)

Q3

(04-06/07)

(1)

Q4

(07-09/07)

(1)

Q5

(10-12/07)

(1)

12/31/07

(10/06-12/07)

(2)

09/30/06

(10/05-09/06)

(2)

3
m

3
m

3
m

3
m

3
m

15
m

12
m

Sales

1.25

0.87

1.02

1.13

1.51

5.78

5.66

Operating
revenues

1.52

1.09

1.18

1.24

1.95

6.99

6.61

Operating
expenses

1.90

1.89

1.78

1.76

2.12

9.45

8.69

Operating
result

-0.37

-0.80

-0.60

-0.52

-0.17

-2.46

-2.08

Financial
result

-0.02

-0.02

-0.03

-0.06

-0.10

-0.23

+0.05

Underlying
result

-0.39

-0.82

-0.63

-0.58

-0.27

-2.69

-2.13

Exceptional
result

-

0.02

-0.23

-0.09

-0.25

-0.55

0.31

Income
tax ("crédit d'impôt recherche")

-

-

-

-

-

0.01

0.11

Result
before goodwill amortization

-0.40

-0.81

-0.86

-0.66

-0.60

-3.23

-1.71

Goodwill
amortization

-0.10

-0.10

-0.11

-0.14

-1.41

-1.86

-1.13

Net
result

-0.50

-0.91

-0.97

-0.80

-1.91

-5.09

-2.84

Comments on 15 months numbers

  • Most of the difference between sales and operating revenue is due to funding of R&D projects to an amount of 0.93M€.
  • Exceptional loss of 0.55M€ is mainly due to restructuring costs (0.23M€ and provisions on our Brazilian operation due to tax liabilities of 0.21M€.
  • Goodwill amortization of 1.86M€ includes the complete depreciation of the Conectiva goodwill (see below).

Comments Q5 (October to December 2007) numbers

  • R&D funding for the quarter was 0.37M€.
  • The surge in operating expenses compared to the previous semester can be explained by 0.2M€ in provision for doubtful accounts and by an increase of 0.1M€ in cost of sales.
  • Exceptional loss of 0.25M€ is essentially due to provisions for tax liabilities in Brazil.
  • Goodwill amortization of 1.41M€ includes 1.27M€ for the complete depreciation of Conectiva and Edge-IT goodwill.

R&D activity

On the R&D project front, we continue to invest heavily in innovation and we make sure that our investment is partly covered by dedicated funded from French and European programs. We were a key player in putting in place a new open source group within the "Pôle de Compétivité System@tic". Out of the new projects funded in this framework, two have Mandriva as a member. For the period, we recognize3M€in R&D funding.

Brazil goodwill depreciation

The Brazilian operation remains critical to implement the strategy of the company: the Brazilian engineering team has a important contribution to the development of the distribution, our Angolan contract is delivered by our Brazilian team and two of our key OEM deals (HP and Positivo) are sold and delivered in Latin America.
However, the actual assets of the companies and some of the remaining liabilities do not justify the current book value of the company. We made the decision, in agreement with our auditors, to completely erase the goodwill associated to Conectiva. This operation has no cash impact on the company and appears as a non cash expense for 1.2M€ in our 2006-2007 numbers. The same operation was applied to Edge-IT foe remaining goodwill of 0.07M€.
The only remaining goodwill in the balance sheet is associated to the Linbox acquisition for a net amount of 0.63M€.

New Board Member

After the departure of Jacques Le Marois and Windhurst Participation (represented by François-Denis Poitrinal), who have expressed the wish to be relieved of their board duties, the board co opted Pierre Céss
arini. Pierre Césarini is the CEO of Aonix, has a successful track record of 20 years in the software industry with companies such as Temposoft, and brings strong expertise to the board.

Increase in capital

To complete the restructuring and implement the new strategy, the company needed more cash than originally scheduled and Occam and Millennium accepted to put in place 1M€ of bridge financing, which the any has started drawing on. After shareholders approval, this bridge will be converted into equity at a share value identical to the one of the previous raise (0.34€ per share), plus 588,200 warrants (B.As))

About Mandriva

Mandriva, formerly known as Mandrakesoft, is the publisher of Mandriva Linux, an easy-to-use and innovative operating system. It is one of the most popular Linux editions in the world. Dedicated to making open source technologies accessible to all users, the company offers a full range of products and services to individuals, enterprises and government organizations. Mandriva products are available online in 80 languages and in more than 140 countries through dedicated channels. Headquartered in Paris, France, the company is publicly traded on the Euronext Marché Libre.

More information at:
https://mandriva.com