Novell Reports Financial Results for First Fiscal Quarter 2006

WALTHAM, Mass. – March 2, 2006 – Novell, Inc. (NASDAQ:NOVL) today announced financial results for its first fiscal quarter ended Jan. 31, 2006. For the quarter, Novell reported revenue of US$274 million, compared to revenue of $290 million for the first fiscal quarter 2005. Net income available to common stockholders in the first fiscal quarter 2006 was $2 million or $0.00 per diluted common share. This compared to net income available to common stockholders of $392 million, or $0.90 per diluted common share, for the first fiscal quarter 2005, which included a $448 million net gain related to the settlement with Microsoft in that quarter.

On a non-GAAP basis, adjusted net income available to common stockholders for the first fiscal quarter 2006 was $18 million, or $0.04 per diluted common share, excluding stock-based compensation expense, the benefit from restructuring reversals and adjustments for income taxes, debt interest expense and the allocation of earnings to preferred stockholders. This compares to non-GAAP adjusted net income available to common stockholders for the first fiscal quarter 2005 of $10 million, or $0.03 per diluted common share, excluding the gain from the legal settlement with Microsoft, restructuring expenses, a gain on a sale of property, long-term investment impairments, and adjustments for income taxes, debt interest expense and the allocation of earnings to preferred stockholders.

In the first fiscal quarter 2006, foreign currency exchange rates unfavourably impacted total revenue by approximately $7 million year-over-year. Foreign currency exchange rates favourably impacted net income by $1 million year-over-year.

During the first fiscal quarter 2006, Novell recognized total Open Platform Solutions revenue of $56 million, which was up from $14 million in the year ago period. Total Open Platform Solutions included $43 million from sales of Open Enterprise Server (OES) and $13 million of revenue from other Linux* Platform Products and Other Open Platform Products. The year ago period did not include revenue from OES as it was introduced in the second fiscal quarter of 2005.

During the first fiscal quarter 2006, Novell recognized $63 million of Systems, Security and Identity Management revenue, up 20 per cent year-over-year.

Also in the first fiscal quarter 2006, revenue from OES and NetWare-related products declined 11 per cent from the year ago period.

For a description of new solution revenue categories, please refer to http://www.novell.com/company/ir/qresults/ for the financial schedules that are a part of this release.

“We are pleased with the continued improvement in the core business this quarter,” said Jack Messman, chairman and CEO of Novell. “Our growth businesses of Linux, Identity and Resource Management are performing well, and we believe we will continue to see growth throughout the fiscal year.”

Cash, cash equivalents and short-term investments were $1.7 billion at Jan. 31, 2006, consistent with last quarter. Days sales outstanding in accounts receivable was 59 days at the end of the first fiscal quarter 2006, consistent with the year ago quarter. Deferred revenue was $367 million at the end of the first fiscal quarter 2006, up $24 million or seven per cent from the prior year. Cash flow from operations was $25 million for the first fiscal quarter 2006, up from $4 million in the first fiscal quarter 2005, excluding the Microsoft settlement payment.

Full details on Novell’s reported results, including a reconciliation of the non-GAAP adjusted results, are included in the financial schedules which can be found on Novell’s web site at http://www.novell.com/company/ir/qresults/.

With regard to the previously announced common stock repurchase plan, Novell has not repurchased any of its common stock to date because it has been continuously subject to self-imposed trading blackouts.

Financial Outlook

Novell management provided the following financial guidance: Net revenue for the second fiscal quarter 2006 is expected to be between $272 million and $282 million. On a non-GAAP basis, net income per diluted common share for the second fiscal quarter 2006 is expected to be between $0.02 and $0.03, excluding an estimated $0.02 per share expense from stock-based compensation.

A summary of Novell’s vision, mission and strategy can be accessed on the Novell® Web site at: http://www.novell.com/company/ir/qresults/.

Conference call notification and Web access detail
A live Webcast of a Novell conference call to discuss the quarter will be broadcast at 5:00 PM ET March 2, 2006, 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 Web site approximately 15 minutes after its conclusion, and will be available for telephone playback through midnight ET, March 16. 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 4945003.

A copy of this press release is posted on Novell’s Web site at: http://www.novell.com/company/ir/qresults/.

About Novell
Novell, Inc. (Nasdaq: NOVL) delivers Software for the Open EnterpriseTM. With more than 50,000 customers in 43 countries, Novell helps customers manage, simplify, secure and integrate their technology environments by leveraging best-of-breed, open standards-based software. With over 20 years of experience, more than 5,000 employees, 5,000 partners and support centres around the world, Novell helps customers gain control over their IT operating environment while reducing cost. More information about Novell can be found at http://www.novell.com.