Novell Second Fiscal Quarter 2000 Revenue and Earnings Will Be Lower Than Expected

Novell, Inc. (NASDAQ:NOVL) today announced that it will report significantly lower-than-anticipated revenue and earnings for its second fiscal quarter ended April 30, 2000. The company expects to report total revenue of over just $300 million and earnings of approximately $0.08 per share, including the benefit of a $35 million royalty payment from Caldera, Inc. the principal portion of which relates to an antitrust settlement between Caldera, Inc. and Microsoft.

The company expects to report full financial results for the second quarter after the close of market on Tuesday, May 23rd. In the first quarter of fiscal 2000, Novell reported $316 million in revenue and $0.13 per share. In the second quarter of fiscal 1999, Novell reported $316 million in revenue and earnings of $0.11 per share.

Novell said that a significant decline in channel sales was the primary factor in the lower-than-expected revenues. Also contributing was a decline in the company's large account site-license business. Novell believes that management and organizational issues in sales are a primary cause for the decline. The company is in the midst of changing its go-to-market strategies to address a new Net services market, in addition to expanding sales in its traditional enterprise network management market.

The company experienced weak sales across its global channel as the introduction of Windows 2000 and growing market interest in the Linux operating system created uncertainty and delayed sales. In addition, many channel partners are rapidly transitioning to an application service provider (ASP) role. In this fast emerging market Novell has yet to generate broad awareness and has only begun to make ASP related investments. Slowed large account sales reflected a lack of demand generation by Novell among new customers for new Net services products.

"We have already started to take actions to realign our sales and marketing efforts around our recently introduced Net services software strategy," said Dennis Raney, Novell senior vice president and chief financial officer. "We need to accelerate our transformation to this strategy by enhancing overall sales execution, increasing our support of existing and emerging channels and more aggressively broadening market awareness. We anticipate that as customers gain experience with our new Net services solutions, demand for our new offerings will increase. We believe these changes will take the remainder of fiscal 2000 to be deployed."

Channel inventories of Novell product were reduced in the quarter by more than 40 percent to less than $30 million to reflect lower market demand and to conservatively manage inventory levels.

This press release contains forward-looking statements about expected second quarter revenue and earnings, changing market strategies, Net services, expanding sales in the company's traditional market and anticipated demand for new offerings. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially. The risks and uncertainties include the following: business conditions and the general economy; changes in distribution choices and channel partners; competitive factors; sales and marketing execution; shifts in technologies or market demand. Additional information covering factors that could cause results to differ materially from projected statements can be found in Novell's fiscal 1999 report on Form 10-K, as well as in its annual report and Form 10-Q filings.

About Novell

Novell, Inc. (NASDAQ:NOVL), is a leading provider of Net services software that delivers services to secure and power all types of networks the Internet, intranets and extranets; wired to wireless; corporate and public across leading operating systems. Novell's Net services software provides the foundation for one Net a single global network that supports new applications and forms of business. Net services software gives IT organizations a way to adapt and accelerate their transformation to eBusiness, simplify the management and control of all networks, create a secure foundation for doing business on the Net, and help deliver a consistent and high-quality experience to end users in all locations. Worldwide channel, consulting, education and technical support programs, along with strategic alliances, combine Novell Net services software with third-party products and services to form complete Net solutions.

For information on Novell's complete range of products and services, contact Novell's Customer Response Center at (888) 321-4CRC (4272), or visit Novell's Web site at www.novell.com. Press may access Novell announcements and company information on the World Wide Web at www.novell.com/pressroom. In addition, detailed comparisons between Novell products and competitive offerings from other vendors are available on the Web at www.novell.com/advantage.