Novell Reports Financial Results for First Fiscal Quarter 2009

Novell, Inc. (NASDAQ: NOVL | Quote | Chart | News | PowerRating) today announced financial results for its
first fiscal quarter ended January 31, 2009. For the quarter, Novell
reported net revenue of $215 million. This compares to net revenue of
$231 million for the first fiscal quarter of 2008. Income from
operations for the first fiscal quarter of 2009 was $14 million,
compared to income from operations of $8 million for the first fiscal
quarter of 2008. Net income in the first fiscal quarter of 2009 was $11
million, or $0.03 per share. This compares to net income of $17 million,
or $0.05 per share, for the first fiscal quarter of 2008. In the first
fiscal quarter of 2009, foreign currency exchange rates negatively
impacted net revenue by $3 million and favorably impacted operating
expenses by $11 million and income from operations by $8 million
compared to the same period last year.

On a non-GAAP basis, income from operations for the first fiscal quarter
of 2009 was $34 million. This compares to non-GAAP income from
operations of $25 million in the year-ago quarter. Non-GAAP net income
for the first fiscal quarter of 2009 was $24 million, or $0.07 per
share. This compares to non-GAAP net income of $30 million, or $0.09 per
share, for the first fiscal quarter of 2008.

Novell reported $37 million of product revenue from Open Platform
Solutions, of which $35 million was from Linux Platform Products, up 24%
compared to the same period last year. Product revenue from Identity and
Security Management was $28 million, of which Identity, Access and
Compliance Management (formerly called Identity and Access Management)
was $26 million, down 8% compared to the same period last year. Product
revenue from Systems and Resource Management was $40 million, up 9%
compared to the same period last year. Workgroup product revenue of $81
million decreased 9% compared to the same period last year.

"While our invoicing was below our expectations in this weak economy, we
continued to take actions to carefully manage our operating margin,"
said Ron Hovsepian, President and CEO of Novell. "We are confident about
our long-term growth opportunities and remain committed to maintaining
our target profitability levels."

Cash, cash equivalents and short-term investments were $1.0 billion at
January 31, 2009, consistent with last quarter. Days sales outstanding
in accounts receivable was 46 days at the end of the first fiscal
quarter of 2009, down from 51 days at the end of the year-ago quarter.
Total deferred revenue was $705 million at the end of the first fiscal
quarter of 2009, down from $723 million at the end of the year-ago
quarter. For the first fiscal quarter of 2009, cash flow from operations
was $14 million and included a $25 million payment from Microsoft. This
compares to cash flow from operations of negative $26 million in the
first fiscal quarter of 2008.

Novell did not repurchase any shares of common stock during the quarter
under its share repurchase program. There is currently $33 million
remaining under the share repurchase program, and Novell intends to use
the program to maintain a steady level of shares outstanding.

During the quarter, Novell used $4 million of cash to repurchase a
portion of its outstanding 0.5% senior convertible debentures.

Full details on Novell's reported results, including a reconciliation of
the non-GAAP results, are included in the financial schedules that are a
part of this release.

Financial Outlook

Novell management remains committed to long-term sustainable
profitability. Novell management reiterates its target of no less than
10% non-GAAP operating margin in the full fiscal year 2009.

Conference Call Notification and Web Access Detail

A one-hour conference call with Novell management to discuss the quarter
will be broadcast at 5:00 PM ET on February 26, 2009. The conference
call will be available live as a listen-only webcast from Novell's
Investor Relations web page at: www.novell.com/company/ir/qresults.
The domestic toll-free dial-in number is 866-335-5255, password
"Novell". The international dial-in number is +1-706-679-2263, password
"Novell".

Following the live event, an archived version of the webcast will be
available for twelve months on the Novell Investor Relations web page
at: www.novell.com/company/ir/qresults.

A copy of this press release is posted on the Novell Investor Relations
web page at: www.novell.com/company/ir/qresults.

Non-GAAP Financial Measures

We supplement our consolidated unaudited condensed financial statements
presented in accordance with GAAP with certain non-GAAP financial
measures. These non-GAAP measures include adjusted income from
operations, adjusted operating margin, adjusted income from continuing
operations, adjusted net income, adjusted income per share from
continuing operations and adjusted net income per share. We provide
non-GAAP financial measures to enhance an overall understanding of our
current financial performance and prospects for the future and to enable
investors to evaluate our performance in the same way that management
does. Management uses these same non-GAAP financial measures to evaluate
performance, allocate resources, and determine bonuses. The non-GAAP
financial measures do not replace the presentation of our GAAP financial
results, but they eliminate expenses and gains that are excluded from
most analysts' consensus estimates, that are unusual, and/or that arise
outside of the ordinary course of business, such as, but not limited to,
those related to stock-based compensation, acquisition-related
intangible asset amortization, restructuring, asset impairments,
litigation judgments and settlements, purchased in-process research and
development, and the sale of business operations, long-term investments,
and property, plant and equipment.

Legal Notice Regarding Forward-Looking Statements

This press release includes statements that are not historical in nature
and that may be characterized as "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act, including those
related to future financial and operating results, future opportunities,
the benefits and synergies of our brands, strategies and acquisitions,
and the growth of the Linux Platform Products, Identity, Access and
Compliance Management, and Systems and Resource Management markets.
Actual results may differ materially from the results discussed in or
implied by such forward-looking statements, which are based upon
information that is currently available to us and/or management's
current expectations, speak only as of the date hereof, and are subject
to a number of factors, including, but not limited to: difficulties,
delays or unexpected costs in completing our cost reduction and sales
growth strategic initiatives; our ability to attract and retain new
customers through our indirect sales strategy; our reliance on an
indirect sales channel for the distribution of products; our ability to
renew SLES subscriptions with those customers who have received SLES
certificates from Microsoft; an accelerated decline in our OES and
NetWare-related revenue stream; the ability of our Open Platform
Solutions, Identity and Security Management, and Systems and Resource
Management business unit segments to grow at expected rates; our ability
to successfully integrate acquired companies; our ability to compete in
markets for infrastructure software services; our ability to meet
customer demand for technical support services; our ability to maintain
a strong brand; delays in the introduction of new products; increased
foreign research and development operations; reliance on software
licensed from third parties; our ability to attract and retain talented
employees; claims that we have infringed the intellectual property
rights of others; adverse results in legal disputes; our ability to
protect our confidential information; impairment of goodwill or
amortizable intangible assets causing a charge to earnings; exposure to
increased economic and regulatory uncertainties from operating a global
business; cancellations or reductions in the scope of our engagements
with professional services clients; and uncertain economic conditions
and reductions in IT spending.

A detailed discussion of these and other factors that could affect our
results is included in our SEC filings, including, but not limited to,
our Annual Report on Form 10-K for the Fiscal Year Ended October 31,
2008 filed with the SEC on December 23, 2008, which may be obtained by
calling (800) 317- 3195, or at our Investor Relations web site at http://www.novell.com/company/ir.

We expressly disclaim any obligation, except as required by law, or
undertaking to update or revise any forward-looking statements contained
in this press release to reflect any change of expectations with regard
thereto or to reflect any change in events, conditions, or circumstances
on which any such forward-looking statement is based, in whole or in
part.

About Novell

Novell, Inc. (NASDAQ: NOVL | Quote | Chart | News | PowerRating) delivers an interoperable Linux* platform
and a portfolio of integrated IT management software designed to help
customers around the world reduce cost, complexity and risk. With our
infrastructure software and ecosystem of partnerships, Novell
harmoniously integrates mixed IT environments, allowing people and
technology to work as one. For more information, visit www.novell.com.

Novell and the Novell logo are registered trademarks of Novell, Inc. in
the United States and other countries. *All third party marks are the
property of their respective owners.

Novell, Inc.
Consolidated Unaudited Condensed Statements of Operations
(In thousands, except per share data)
                                                  Fiscal Quarter Ended
                                                  Jan 31, 2009       Jan 31, 2008
Net revenue:
Software licenses                                 $       28,267     $       40,202
Maintenance and subscriptions                             158,815            150,067
Services (1)                                              27,789             40,657
Total net revenue                                         214,871            230,926
Cost of revenue:
Software licenses                                         2,526              3,099
Maintenance and subscriptions                             12,899             10,941
Services                                                  31,472             43,901
Total cost of revenue                                     46,897             57,941
Gross profit                                              167,974            172,985
Operating expenses:
Sales and marketing                                       76,894             88,005
Product development                                       45,392             44,735
General and administrative                                24,195             27,397
Other operating expenses (2)                              7,849              4,367
Total operating expenses                                  154,330            164,504
Income from operations                                    13,644             8,481
Operating margin %                                        6.3     %          3.7     %
Other income, net:
Interest income, net                                      5,790              16,449
Other                                                     (3,426  )          707
Total other income, net                                   2,364              17,156
Income from continuing operations before taxes            16,008             25,637
Income tax expense                                        6,367              10,953
Income from continuing operations                         9,641              14,684
Income from discontinued operations before taxes          1,036              1,285
Income tax benefit on discontinued operations             -                  (836    )
Income from discontinued operations                       1,036              2,121
Net Income                                        $       10,677     $       16,805
Diluted earnings per share:
Continuing operations                             $       0.03       $       0.04
Net income                                        $       0.03       $       0.05
Weighted average shares                                   344,281            353,047
(1) Services includes professional services, technical support and
training services.
(2) See Page 8 of 11 for a detail of other operating expenses.
Revisions were made to prior period amounts in order to conform to
the current period's presentation.

Novell, Inc.
Consolidated Unaudited Condensed Balance Sheets
(In thousands)
                                            Jan 31, 2009      Oct 31, 2008
Assets
Current assets:
Cash and cash equivalents                   $      648,093    $      680,034
Short-term investments                             387,334           387,813
Restricted cash                                    52,879            52,701
Receivables, net                                   111,775           193,088
Prepaid expenses                                   32,508            34,365
Current deferred tax assets                        4,718             5,685
Other current assets                               25,705            32,006
Total current assets                               1,263,012         1,385,692
Property, plant and equipment, net                 168,126           174,978
Long-term investments                              12,991            14,972
Goodwill                                           616,801           582,117
Intangible assets, net                             57,817            53,320
Deferred income taxes                              36,483            36,244
Other assets                                       21,848            22,026
Total assets                                $      2,177,078  $      2,269,349
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable                            $      28,544     $      36,982
Accrued compensation                               61,908            102,317
Other accrued liabilities                          92,884            108,929
Income taxes payable                               4,851             22,563
Senior convertible debentures                      121,668           125,668
Deferred revenue                                   487,412           503,174
Total current liabilities                          797,267           899,633
Deferred income taxes                              11,643            11,725
Other long-term liabilities                        46,354            43,587
Long-term deferred revenue                         217,205           226,876
Total liabilities                                  1,072,469         1,181,821
Stockholders' equity                               1,104,609         1,087,528
Total liabilities and stockholders' equity  $      2,177,078  $      2,269,349

Novell, Inc.
Consolidated Unaudited Condensed Statements of Cash Flows
(In thousands)
                                                                   Fiscal Quarter Ended
                                                                   Jan 31, 2009      Jan 31, 2008
Cash flows from operating activities
Net income                                                         $      10,677     $      16,805
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Stock-based compensation expense                                          8,031             10,767
Depreciation and amortization                                             11,021            9,000
Change in accounts receivable allowances                                  216               (363      )
Utilization of previously reserved acquired net operating losses          1,102             5,002
Gain on debenture repurchases                                             (68     )         -
Gain on discontinued operations, before taxes                             (1,036  )         (1,180    )
Impairment of investments                                                 1,677             -
Gain on sale of subsidiaries                                              (200    )         -
Changes in current assets and liabilities, excluding acquisitions         (17,287 )         (66,317   )
and dispositions
Net cash provided by (used in) operating activities                       14,133            (26,286   )
Cash flows from investing activities
Purchases of property, plant and equipment                                (3,512  )         (5,859    )
Short-term investment activity                                            6,543             34,518
Long-term investment activity                                             535               -
Cash restricted due to litigation                                         (178    )         (51,495   )
Net proceeds from sale of discontinued operations                         1,036             (3,417    )
Net cash paid for acquisitions                                            (42,950 )         -
Other                                                                     (3,015  )         (921      )
Net cash used in investing activities                                     (41,541 )         (27,174   )
Cash flows from financing activities
(Surrenders) issuance of common stock, net                                (498    )         2,582
Excess tax benefits from stock-based compensation                         26                9,680
Debt repayment                                                            (192    )         -
Debenture repurchases                                                     (3,869  )         -
Net cash (used in) provided by financing activities                       (4,533  )         12,262
Decrease in cash and cash equivalents                                     (31,941 )         (41,198   )
Cash and cash equivalents - beginning of period                           680,034           1,079,819
Cash and cash equivalents - end of period                          $      648,093    $      1,038,621

Novell, Inc.
Unaudited Non-GAAP Adjusted Income From Operations
(In thousands, except per share data)
                                                            Fiscal Quarter Ended
                                                            Jan 31, 2009      Jan 31, 2008
GAAP income from operations                                 $    13,644       $    8,481
        Adjustments:
        Stock-based compensation expense:
                         Cost of revenue                         912               1,297
                         Sales and marketing                     2,563             3,417
                         Product development                     2,505             3,004
                         General and administrative              2,051             3,049
                                          Sub-total              8,031             10,767
        Acquisition-related intangible asset amortization:
                         Cost of revenue                         2,753             1,192
                         Sales and marketing                     1,550             350
                                          Sub-total              4,303             1,542
        Other operating expenses (income):
                         Restructuring expenses                  8,049             4,367
                         Gain on sale of subsidiaries            (200   )          -
                                          Sub-total              7,849             4,367
        Total operating adjustments                              20,183            16,676
Non-GAAP income from operations                             $    33,827       $    25,157
        Operating margin %                                       15.7   %          10.9   %

Novell, Inc.
Unaudited Non-GAAP Adjusted Net Income
(In thousands, except per share data)
                                                                  Fiscal Quarter Ended
                                                                  Jan 31, 2009     Jan 31, 2008
GAAP net income                                                   $     10,677     $     16,805
              Operating adjustments (detailed above)                    20,183           16,676
              Non-operating expenses (income) adjustments:
                               Gain on debenture repurchases            (68     )        -
                               Impairment of investments                1,677            -
                                                Sub-total               1,609            -
              Total pre-tax adjustments                                 21,792           16,676
              Income tax adjustments                                    (7,023  )        (1,152  )
              Income from discontinued operations, net of taxes         (1,036  )        (2,121  )
              Total net adjustments                                     13,733           13,403
Non-GAAP net income and non-GAAP income from continuing           $     24,410     $     30,208
operations
GAAP net income per share                                         $     0.03       $     0.05
                               Total adjustments detailed above         0.04             0.04
Non-GAAP net income per share and non-GAAP income from            $     0.07       $     0.09
continuing operations per share
Non-GAAP weighted average shares                                        344,281          353,047
Revisions were made to prior period amounts in order to conform to
the current period's presentation.

SOURCE: Novell, Inc.

Press Contact: 
Novell, Inc. 
Ian Bruce, 781-464-8034 
ibruce@novell.com 
or 
Investor Relations Contact: 
Novell, Inc. 
Susan Walker White, 800-317-3195 
swhite@novell.com

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