Novell Reports Financial Results for Fourth Fiscal Quarter and Full Fiscal Year 2008

Novell, Inc. (NASDAQ: NOVL) today announced financial results for its fourth fiscal quarter and full fiscal year ended October 31, 2008. For the quarter, Novell reported net revenue of $245 million, consistent with the fourth fiscal quarter of 2007. Loss from operations for the fourth fiscal quarter of 2008 was $6 million, compared to a loss from operations of $13 million for the fourth fiscal quarter of 2007. Net loss in the fourth fiscal quarter of 2008 was $16 million, or $(0.05) per share, which included a $14 million impairment charge related to the Company's auction-rate securities. This compares to a net loss of $18 million, or $(0.05) per share, for the fourth fiscal quarter of 2007. In the fourth fiscal quarter of 2008, foreign currency exchange rates did not materially impact net revenue and favorably impacted operating expenses and loss from operations by $1 million compared to the same period last year.

On a non-GAAP basis, income from operations for the fourth fiscal quarter of 2008 was $32 million. This compares to non-GAAP income from operations of $21 million in the year-ago quarter. Non-GAAP net income for the fourth fiscal quarter of 2008 was $20 million, or $0.06 per share. This compares to non-GAAP net income of $23 million, or $0.07 per share, for the fourth fiscal quarter of 2007.

For the full fiscal year 2008, Novell reported net revenue of $957 million and income from operations of $5 million. Comparatively, net revenue for the full fiscal year 2007 was $932 million and the loss from operations was $56 million. Net loss for the full fiscal year 2008 was $9 million, or $(0.02) per share, which included a $29 million impairment charge related to the Company's auction-rate securities. This compares to a net loss of $44 million, or $(0.13) per share, for the full fiscal year 2007. In the full fiscal year 2008, foreign currency exchange rates favorably impacted net revenue by approximately $22 million, negatively impacted operating expenses by approximately $22 million and did not materially impact income from operations compared to the same period last year.

On a non-GAAP basis, income from operations for the full fiscal year 2008 was $97 million. This compares to non-GAAP income from operations of $46 million a year ago. Non-GAAP net income for the full fiscal year 2008 was $93 million, or $0.27 per share. This compares to non-GAAP net income of $66 million, or $0.19 per share, for the full fiscal year 2007.

For the fourth fiscal quarter of 2008, product revenue increased 6% which was offset by a services revenue decline of 26%, resulting in total revenue that is consistent with the same period last year. Novell reported $36 million of product revenue from Open Platform Solutions, of which $33 million was from Linux Platform Products, up 33% compared to the same period last year. Product revenue from Identity and Security was $37 million, of which Security was $35 million, up 11% compared to the same period last year. Product revenue from Systems and Resource Management was $45 million, up 15% compared to the same period last year. Workgroup product revenue of $92 million decreased 6% compared to the same period last year.

For the full fiscal year 2008, product revenue increased 8% which was partially offset by a services revenue decline of 20% such that total revenue increased 3% compared to the full fiscal year 2007. Novell reported $129 million of product revenue from Open Platform Solutions, of which $120 million was from Linux Platform Products, up 38% compared to last year. Product revenue from Identity and Security was $137 million, of which Security was $124 million, up 15% compared to last year. Product revenue from Systems and Resource Management was $170 million, up 15% compared to last year. Workgroup product revenue of $366 million decreased 2% compared to last year.

"I am pleased with our fourth quarter and annual product revenue and non-GAAP operating margin results. We have substantially completed our two-year transformation, repositioning Novell as a leader in infrastructure software," said Ron Hovsepian, President and CEO of Novell. "We have a large, recurring revenue stream, a strong balance sheet, expanding partnerships and excellent products in broad and growing markets which we believe positions us well in this challenging environment."

Cash, cash equivalents and short-term investments were $1.1 billion at October 31, 2008, down from $1.9 billion at October 31, 2007, primarily due to the repurchase of a significant portion of the debentures, the acquisition of PlateSpin and the stock repurchase program. Days sales outstanding in accounts receivable was 72 days at the end of the fourth fiscal quarter of 2008, down from 77 days at the end of the year-ago quarter. Total deferred revenue was $730 million at the end of the fourth fiscal quarter of 2008, down from $768 million at the end of the year-ago quarter. Cash flow from operations was $67 million for the fourth fiscal quarter of 2008. This compares to cash flow from operations of $77 million in the fourth fiscal quarter of 2007.

With regard to the Company's previously announced share repurchase program, Novell repurchased four million shares of common stock at a cost of $22 million during the quarter. During the full fiscal year 2008, the Company repurchased 12 million shares at a cost of $67 million. The Company currently has $33 million remaining under the existing share repurchase program, and, going forward intends to use the program to maintain a steady level of shares outstanding.

During the quarter, Novell used $314 million of cash to repurchase a portion of its outstanding 0.5% senior convertible debentures. During the full fiscal year 2008, $457 million of cash was used for these repurchases.

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. For the full fiscal year 2008, Novell achieved non-GAAP operating margin of 10%. Going forward, Novell management expects to improve on these results, but in light of these uncertain economic times, is targeting no less than 10% non-GAAP operating margin in the full fiscal year 2009.

Conference Call Notification and Web Access Detail

A live Webcast of a Novell conference call to discuss the quarter and the year will be broadcast at 5:00 PM ET December 4, 2008, from Novell's Investor Relations Web page: http://www.novell.com/company/ir/qresults/. The domestic conference call dial-in number is 866-335-5255, password "Novell", and the international dial-in number is +1-706-679-2263, password "Novell".

The call will be archived on the Novell Web site approximately two hours after its conclusion for 12 months. The call will also be available for telephone playback through midnight ET, December 19, 2008. The domestic toll-free replay number is 800-642-1687, and the international replay number is +1-706-645-9291. Replay listeners must enter conference ID number 71160968.

A copy of this press release is posted on Novell's Web site at: http://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 the company's brands, strategies and acquisitions, and the growth of the Linux Platform Products, Security, and Systems and Resource Management markets. You should be aware that Novell's actual results could differ materially from those contained in the forward-looking statements, which are based on current expectations of Novell management and are subject to a number of risks and uncertainties, including, but not limited to, Novell's ability to transform its business through the implementation of its strategic plan, Novell's ability to realize the benefits anticipated from the Microsoft transactions, including the pricing of any renewals of Microsoft certificates previously sold, and other transactions, Novell's ability to realize the benefits anticipated from its restructuring plan, and the expected charges to be incurred and payments to be made under the restructuring plan, Novell's ability to achieve its expense targets, Novell's success in executing its Linux Platform Products, Security, and Systems and Resource Management strategies, Novell's ability to take a competitive position in the Linux Platform Products, Security, and Systems and Resource Management industries, business conditions and the general economy, market opportunities, potential new business strategies, competitive factors, sales and marketing execution, shifts in technologies or market demand, Novell's ability to integrate acquired operations and employees, and the other factors described in Novell's Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 21, 2007. Novell disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this press release except as required by the securities laws.