Novell Reports Third Fiscal Quarter 2001 Results

Novell, Inc. (NASDAQ:NOVL) today reported total revenue of $247 million for its third fiscal quarter ended July 31, 2001, and a loss of $0.06 cents per share, largely reflecting non-recurring restructuring, integration and investment impairment charges of $39 million taken against its third fiscal quarter results. Excluding non-recurring items, the company achieved earnings of $0.04 per share for its third fiscal quarter 2001.

Novell results for the quarter include the operations of Cambridge Technology Partners for the period from July 11 through July 31, 2001. Novell acquired Cambridge on July 10, and as a subsidiary of Novell it contributed $20 million in revenue during the quarter and added $27 million in costs. Excluding Cambridge, Novell reduced operating expenses within its core business by $33 million during the quarter.

"The pronounced, and continuing, IT market downturn means lessened expenditures for network infrastructure, and solutions consulting, and this has impacted Novell," said Jack Messman, president and chief executive officer of Novell. "Novell's growth is dependent on an improving IT market moving to eBusiness solutions. It's positive for Novell that eBusiness solutions are the leading priority in IT planning. While these solutions promise high ROI, it is apparent that it could take until the second half of 2002 before improving conditions open up this market broadly."

The results for Novell's third fiscal quarter compare to revenue of $270 million, and diluted earnings per share of $0.03 in the same period a year ago. For the first nine months of fiscal 2001, Novell reported revenue of $732 million and a net loss of $178 million, or $0.55 per share. Excluding non-recurring restructuring and integration charges, investment write-downs and the cumulative effect an accounting change in the first quarter, the net earnings for the first nine months of 2001 was $7 million, or $0.02 per share. For the first nine months of fiscal 2000, the company reported revenue of $888 million and net income of $84 million or $0.25 per share.

Review of Q3 Performance
In Novell's third fiscal quarter, the company's large network site-license business declined sequentially from the second quarter 2001 by 3 percent to $167 million, or 68 percent of total revenue. Packaged software license sales for smaller networks were down 9 percent, to $33 million, or 13 percent of total Novell revenue.

>>> Revenue by product category: Net Management Services revenue declined 6 percent sequentially from the second fiscal quarter to $170 million in the third quarter. Net Directory Services revenue was $5 million, down 39 percent from the second fiscal quarter 2001. Volera, Inc., a Novell subsidiary, increased its revenue to $2.2 million from $1.9 million in the third fiscal quarter. Total customer service, education and consulting revenue was $69 million, up following the addition of services revenue from Cambridge.

>>> Revenue by geography: During the third fiscal quarter 2001, revenue from the United States, was $140 million. The Europe, Middle East and Africa region, contributed $75 million in revenue, Asia Pacific $16 million, and Canada and the Americas $16 million.

>>> Other Income, net contributed $11 million, primarily due to interest income.

On the balance sheet, cash and short term investments were $687 million at the end of the third quarter, compared with $698 million at the October 2000 fiscal year-end. Cash flow from operations for the quarter was a negative $5 million largely due to losses following one-time charges and the timing of payment obligations primarily severance, related to the company's third quarter 2001 restructuring. Days sales outstanding (DSO) increased to 85 days, reflecting the impact of Cambridge revenue for only 21 days, and the transfer of its full receivables balance. When normalized, DSO stands at 67 days, an improvement from the 72 days in the third quarter of last year.

Novell now carries almost a full quarter of yet-to-be recognized future revenue on its balance sheet. Deferred revenue was up 19 percent over the third quarter of last year, to $220 million, due to growth in maintenance renewals for large network site-licenses. These dollars represent pre-paid service and upgrade support associated with Novell's large network site license business, and are recognized over the maintenance period.

Business Outlook
With continued weak economic conditions, the company could see only slight sequential revenue improvement in its software business, and a contribution of approximately $80 million in services revenue from its Cambridge subsidiary. The company expects that in its fourth fiscal quarter ending October 31, 2001, revenue for Novell, with a full quarter of Cambridge as a subsidiary, will be between $305 and $315 million. Revenue at these levels would leave the company at approximately breakeven for its fourth fiscal quarter, before the impact of restructuring and integration costs.

Conference Call Notification with Web Access Detail
A live Web cast of a Novell conference call to discuss the third fiscal quarter results with financial analysts will be broadcast at 5 p.m. EDT August 23, on the Quarterly Results page at Novell's Investor Relations Web page: http://www.novell.com/company/ir/qresults/. Through midnight, August 30, an audio replay of the call will be available on the Quarterly Results page of Novell's Investor Relations Web page at: http://www.novell.com/company/ir/qresults/. A telephone replay of the conference call will be available after 6:30 p.m. EDT August 23, through midnight, August 30. To access the playback dial: 888-566-0787.

Forward Looking Statements
This press release contains forward-looking statements that involve a number of risks and uncertainties, as well as assumptions about changing markets and market conditions, marketing efforts, near and long-term objectives, potential new business, strategies, new methods of distribution, Net services, anticipated demand for new offerings from markets that Novell is entering, future business performance and outlook. These forward-looking statements are neither promises nor guarantees and involve a number of risks and uncertainties that could cause actual results to differ materially. The risks and uncertainties include, but are not limited to, 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, the successful integration of Novell and Cambridge Technology Partners and other risks identified in the company's SEC filings, including information under the heading "forward looking statements" its Form 10-K for the fiscal year 2000 and in the Form S-4 registration statement filed in connection with the merger with Cambridge Technology Partners.

About Novell
Novell, Inc. (NASDAQ: NOVL), is a leader in eBusiness solutions and Net services software designed to secure and power the networked world. Novell and its subsidiary, Cambridge Technology Partners, help organizations solve complex business challenges, simplify their systems and processes, and capture new opportunities with one Net solutions. Novell provides worldwide channel, consulting, education and developer programs to support its offerings.

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 http://www.novell.com. Information on eBusiness and e-integration solutions from Cambridge Technology Partners can be accessed at http://www.ctp.com. Press may access Novell announcements and company information on the World Wide Web at http://www.novell.com/pressroom.

Novell is a registered trademark of Novell, Inc. in the United States and other countries. Cambridge Technology Partners is a registered trademark of Cambridge Technology Partners, Inc.