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Thursday, February 26, 2009

Novell Reports Financial Results for First Fiscal Quarter 2009

Novell Reports Financial Results for First Fiscal Quarter 2009

- Delivers strong operating margin performance
- Reiterates operating margin target for full fiscal year 2009

WALTHAM, Mass. -- Feb. 26, 2009 -- Novell, Inc. (NASDAQ: NOVL) 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) 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 .

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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.


Press Contact:
Ian Bruce
Novell, Inc.
Phone: 781-464-8034
E-Mail: ibruce@novell.com

Investor Relations Contact:
Susan Walker White
Novell, Inc.
Phone: 800-317-3195
E-Mail: swhite@novell.com


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