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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Washington, D.C. 20549
Form 10-K
| [X] |
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 For the Fiscal Year Ended October 31, 1997 |
|
or
|
|
| [ ] |
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 For the transition period from  to |
Commission File Number: 0-13351
NOVELL, INC.
(Exact name of registrant as specified in its charter)
(Exact name of registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation or organization) |
87-0393339 (I.R.S. Employer Identification No.) |
122 East 1700 South
Provo, Utah 84606
(Address of principal executive offices and zip code)
Provo, Utah 84606
(Address of principal executive offices and zip code)
(801) 861-7000
(Registrant's telephone number, including area code)
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.10 per share
Preferred Share Purchase Rights
Common Stock, par value $.10 per share
Preferred Share Purchase Rights
|
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the registrant's common stock held by nonaffiliates on December 31, 1997 (based on the last reported price of the Common Stock on the NASDAQ National Market System on such date) was $2,600,886,744. As of December 31, 1997 there were 351,058,686 shares of the registrant's common stock outstanding. Portions of Registrant's Annual Report to Shareholders for the fiscal year ended December 31, 1997, are incorporated by reference in Parts II and IV of this Form 10-K to the extent stated herein. Portions of Registrant's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on April 7, 1998, are incorporated by reference in Part III of this Form 10-K to the extent stated herein. |
PART I
| ITEM 1. Business The Company Novell, Inc. ("Novell" or the "Company") is the world's leading provider of network software. The Company offers a wide range of network solutions, education, and support for distributed network, Internet, and small-business markets. The Company was incorporated in Delaware on January 25, 1983. Novell's executive offices are located at 122 East 1700 South, Provo, Utah 84606. Its telephone number at that address is (801) 861-7000 The Company markets its products through 36 U.S. and 60 international sales offices. The Company sells its products through distributors and national retail chains, who in turn sell the Company's products to retail dealers. The Company also sells its products to OEMs, system integrators, and VARs as well as direct to end users through licensing agreements. The Company primarily conducts product development activities in San Jose, California; and Provo and Orem, Utah. It also contracts out some product development activities to third-party developers. During the third quarter of fiscal 1997, Novell took measures to reduce and realign its resources and better manage and control its business. These measures were in response to declines in sales of boxed products through the indirect distribution channel customers, controlled shifts to multi-product licenses, lower licensed revenue of certain older products to OEM's, as well as competitive pressures in the small network market. Specifically, the Company did not ship boxed products to its indirect distribution channel customers except to accommodate product exchanges and returns. The Company believes this action, which significantly reduced reported revenue in the quarter, brought indirect distribution channel inventories of boxed software products in line with current market demand. The decision to withhold shipments to the Company's indirect distributor channel resulted in an operating loss in the third quarter of fiscal 1997. In addition, the Company reduced its workforce by approximately 1,000 employees or 17%, and consolidated a number of facilities. This resulted in a one-time restructuring charge of $55 million, principally comprised of severance and excess facilities costs. The restructuring charge contributed a loss of $0.10 per share, net of tax, to the reported loss in fiscal 1997. The workforce reduction and associated consolidation of facilities returned the Company to break even for the fourth quarter of fiscal 1997 and is expected to lower future operating expenses by approximately $100 million annually. During the second quarter of fiscal 1996, the Company implemented a change to its traditional distribution stocking policy that significantly reduced revenue and earnings in that quarter. The change in the Company's traditional distribution stocking policy was to respond to changing market conditions over the prior two years. Direct customer and OEM licensing programs grew from less than 5% of revenue to more than 40% of revenue. This shift in customer buying preferences changed the Company's reliance on boxed product flowing through an indirect distribution channel. In order to deal with this changing environment, the Company did not ship boxed product to its indirect distribution channel customers except to accommodate product exchanges and returns during the second quarter of fiscal 1996, which had the effect of reducing inventories within the indirect distribution channel, as well as significantly reducing revenue in the quarter. In March 1996, the Company completed the sale of its personal productivity applications product line to Corel Corporation (Corel). The Company received approximately 10 million shares of Corel common stock and approximately $11 million of cash. This resulted in an ownership position of approximately 17% of the outstanding Corel common stock. The Company reported a one-time gain of $20 million in the second quarter of fiscal 1996 related to this transaction. Net of tax, the gain was $13 million, or $0.04 per share. Additionally, Corel licensed GroupWise client software, Envoy electronic publishing software, and other technologies from Novell for a minimum royalty obligation of approximately $50 million over the next five years. During fiscal 1997, Novell sold approximately one million shares of Corel common stock at a loss of approximately $6 million which was more than offset by gains on the sales of other equity securities. In December 1995, Novell sold its UnixWare product line to the Santa Cruz Operation, Inc. (SCO). The Company realized a small gain and recorded $19 million of Unix technology royalty revenue from this transaction in the first quarter of fiscal 1996. Under the agreement, Novell received approximately six million shares of SCO common stock, resulting in ownership of approximately 17% of the outstanding SCO common stock. In addition, Novell continues to receive revenue from previously existing licenses for certain versions of UNIX System source code shipped prior to the sale to SCO. Business Strategy Novell provides standards-based network software for intranets and the Internet. The Internet has accelerated the pace at which networks are becoming the center of information technology solutions. Networks have become the primary information asset in business. Novell provides network software to make these information resources available to network users where and when they are needed. The Company's network solutions enable businesses to protect and expand their investments in information resources in an increasingly networked world. Novell's network solutions integrate information resources and provide necessary network management, messaging and groupware capabilities for customers worldwide. Networks are inherently a mix of varied computer systems, applications and other devices. Novell software creates an infrastructure for managing, maintaining and accessing distributed network resources. Through Novell's Open Solutions Architecture, Novell has oriented all of its products to Internet standards, enabling customers to increase the performance of traditional local and wide area networks. Today, businesses are rapidly developing corporate intranets that leverage the rapid and easy file access available on the World Wide Web. Corporate intranets maintain and provide secure access to distributed information assets across networks. Novell network software provides customers with choices for significantly enhancing the affordability, management, and ease of use of the changing mix of computer operating systems and applications that are important to information technology solutions. Together with its partners, the Company is a driving force in expanding the value of networks for customers worldwide. Technologies Establishing Novell Directory Services as a de facto industry standard. Novell Directory Services (NDS) is a key part of Novell's strategy for providing infrastructure software for business intranets and the Internet. NDS is a distributed database of users, network equipment, computer systems, applications, files and other network resources. It provides distributed centralized access control, security, management and administration of information resources across computer networks. NDS is integrated with the company's NetWare server operating system and in 1997 became available as a standalone product for single servers that run other leading server operating systems. NDS provides full support for Internet protocols, including the lightweight directory access protocol (LDAP). To establish NDS as the de facto industry standard for all server platforms, Novell distributed in 1997, single-server NDS royalty-free to computer server OEMs to include with their UNIX server operating systems. Novell will also make a binary version of NDS that runs on the Windows NT server operating system available to manufacturers of Intel servers. With NDS on leading server platforms, Novell and its partners will provide value-added network services software that uses the directory as a foundation. The first of these products from Novell will enable replication and synchronization of the directory between individual servers on the network. Providing Novell Directory Services for the Internet. Since 1994, Novell has been partnering with telecommunications carriers and Internet service providers (ISPs) to provide NDS for the Internet. Novell's partners use NDS as the basis for business intranet services that enable their customers to out-source the complexity and lower the cost of maintaining wide-area networks. These services provide managed Internet access that authenticates users and provides secure, reliable communications and access to confidential business information resources over the Internet. AT&T in the United States and NTT in Japan were the first to make NDS for the Internet available. Other carriers and ISPs plan to make the service available in 1998. Novell's partners are cooperating to provide interoperability between their networks and maintain a replicated NDS directory that spans between their different services. Providing value-added network services software for business intranets and the Internet. Novell delivers network services that run on the company's NetWare network operating system for business intranets and the Internet. These network services add intelligence to the network to reduce costs of ownership and administration, simplify management tasks for administrators, and make access to network-based information easier for end users. In the first release of NetWare, network services encompassed only file and print. Over the past decade, network services provided by Novell have expanded to include host communications, network management, collaboration and messaging, Web services, security, and advanced file and print. Providing network applications for network solutions. GroupWise is Novell's leading network application, providing electronic mail, calendaring, scheduling, and task and document management features. GroupWise can be hosted on servers running the NetWare, Windows NT and UNIX operating systems. In 1996, the Company expanded the functionality of GroupWise by including Internet access and greater integration with network directories and management products. ManageWise is the market leading management software offering for managing all network resources from the servers that run NetWare and NT server operating systems to the clients, computers, and other devices that access information resources. To provide complete network management solutions, ManageWise integrates with enterprise management products from Hewlett Packard, IBM, Sun and others. Programs Technical Support Alliance. In May 1991, Novell announced the formation of the Technical Support Alliance (TSA), with 40 current members including Apple, Compaq, Hewlett-Packard, Intel, IBM, Lotus, Microsoft, and Oracle. The TSA was organized to provide one-stop multivendor support. Member companies provide cooperative efforts to support their customers. Certified Novell Engineer Program. Through the Certified Novell Engineer (CNE) program, Novell is strengthening the networking industry's Level I support self-sufficiency. CNEs are individuals who receive high-level training, information, and advanced technical telephone support (Level II) from Novell. CNEs may be employed by resellers, independent support organizations, or Novell Support Organizations (NSOs). The NSO program pools the capabilities of the industry's best support providers. NSOs have contractual agreements with Novell that are designed to ensure quality service on a national or global level for NetWare and other Novell products. Novell Authorized Education Centers. Novell offers education to end users through nearly 1,300 independent Novell Authorized Education Centers (NAECs) worldwide, which use Novell-developed courses to instruct students in the use and maintenance of Novell products. Novell also offers self-paced training products. DeveloperNet. Novell's DeveloperNet delivers software, tools, training, education, support and partnering opportunities to developers through the global DeveloperNet subscription. This program is the primary communication channel to the developer community, with over 15,000 DeveloperNet subscribers. Novell's development initiative gives developers the flexibility to build network-aware applications for the Internet and business intranets by using the development tools of their choice. Through Novell's Open Solution Architecture, Novell is committed to making its network services accessible to developers using Java, Scripting, RAD Components and C/C++. DeveloperNet Labs. DeveloperNet Labs works with third-party manufacturers to test and certify hardware and software components designed to interoperate with Novell products. Novell distributes these test results to inform customers about products that have formally demonstrated Novell product compatibility. DeveloperNet Lab certification programs help vendors to market their products through Novell's distribution channels. The primary goal of DeveloperNet Labs is to foster working relationships between Novell and third-party hardware and software suppliers. Secondary goals include promoting certified products to industry resellers, anticipating industry products' direction through co-marketing efforts, and working with vendors to co-develop critical network components. Yes Program. Novell developed the Yes program and the Yes logo to help customers identify and purchase third-party hardware and software products that are compatible with Novell products. The program is designed to be the method by which third-party compatible products are branded and recognized by Novell. The Yes logo is recognized around the world as a mark that indicates a specific product's compatibility with Novell products. Partnerships Development Partners. When customers request a new service or function be added to Novell products, Novell investigates the most effective way to deliver that functionality to the user. Sometimes the best way is for Novell to partner with a company who has expertise in that specific area. By partnering, the combination of Novell's core expertise in networks and the partner's expertise in the given product area combine to deliver a better solution faster than if Novell would have attempted to develop it alone. Systems Partners. Novell partners with companies who have complimentary software and hardware. The resulting solution is a powerful combination of products that deliver enterprise-wide connectivity solutions. These partners include system suppliers like IBM, Compaq, DEC and HP, as well as system integration experts like Memorex Telex, Arthur Andersen, and EDS. Application Partners. Novell works very closely with application developers to provide integrated software products and support for end users. As network applications grow in importance, this program will help assure broad availability of well integrated multivendor applications. Enterprise Consulting Partners. This select group of the industry's leading systems integrators and consulting organizations work with Novell to deliver distributed client/server solutions for customers with large enterprise-wide networks. Multiple Channel Distribution Network. The Company markets its products through a broad range of distributors, dealers, value added resellers, systems integrators, and OEMs as well as to major end users. Worldwide Service and Support. The Company is committed to providing service and support on a worldwide basis to its resellers and to their end-user customers. The Company has established agreements with third-party service vendors to expand and complement the service provided directly by the Company's service personnel and the Company's resellers. Novell Products The Company's products fall within three categories: Server Operating Environments, Network Services, and Collaboration Products. Novell products work together, interoperate with thousands of third-party solutions, and span data networks from workgroup LANs to the Internet. Server Operating Environmentsprovide the foundation of networking and network services that can be extended throughout an organization's network, intranets and the Internet. These product include: NetWare 3 network operating system, which provides users with access to data and resources controlled by a single server, NetWare 4 network operating system, which features NetWare Directory Services (NDS) and provides the user with access to the resources of the entire enterprise or wide-area network and adds Intranet/Internet connectivity and Web site hosting capabilities; and NetWare for Small Business, a version of NetWare that leverages the strengths of NetWare and GroupWise with ease of installation and administration required by small business. NetWare 5, the latest version of the NetWare product line, is currently in beta testing. Network Servicesimprove the manageability and productivity of the network and increase network efficiency. Products include: NDS, NDS for NT, Border Manager, Border Manager Fast Cache, Novell Application Launcher, Novell Replication Services, NetWare for SAA, NetWare Host Publisher, and ManageWise. Collaboration Productsutilize NetWare network services to provide rich access to network-based information. The Company's GroupWise family of groupware products now serves over 8 million users with integrated E-Mail, group calendaring, scheduling, online conferencing, and forms and document management. GroupWise is the premier collaboration product for intranets and the Internet and integrates these capabilities along with Internet E-mail, fax and voice messages. Product Development Due to the rapid pace of technological change in its industry, the Company believes that its future success will depend, in part, on its ability to enhance and develop its software products to satisfactorily meet dynamic market needs. During fiscal 1997, 1996, and 1995, product development expenses were approximately $283 million, $276 million, and $368 million, respectively. The Company's product development effort consists primarily of work performed by employees; however, the Company also utilizes third-party technology partners to assist with product development. Sales and Marketing Novell markets its NetWare family of network products through distributors, dealers, vertical market resellers, systems integrators, and OEMs who meet the Company's criteria, as well as to major end users. In addition, the Company conducts sales and marketing activities and provides technical support, training, and field service to its customers from its offices in San Jose, California; Provo and Orem, Utah; and from its 36 U.S. and 60 international sales offices. Distributors. Novell has established a network of independent distributors, which resell the Company's products to dealers, VARs, and computer retail outlets. As of December 31, 1997, there were approximately 10 U.S. distributors and approximately 100 international distributors. Dealers. The Company also markets its products to large-volume dealers and regional and national computer retail chains. VARs and Systems Integrators. Novell also sells directly to value added resellers and systems integrators who market data processing systems to vertical markets, and whose volume of purchases warrants buying directly from the Company. OEMs. The Company licenses its systems software to domestic and international OEMs for integration with their products. End Users. Generally, the Company refers prospective end-user customers to its resellers. However, the Company has the internal resources to work directly with major end users and has developed U.S. and international master license agreements with approximately 800 of them to date. Additionally, some upgrade products are sold directly to end users. International Sales. In fiscal 1997, 1996, and 1995, approximately 45%, 50%, and 47%, respectively, of the Company's net sales were to customers outside the U.S. To date, substantially all international sales except Japanese sales, Indian sales, and certain European sales to non-multinational distributors that were shipped from its distribution center in Dublin, Ireland have been invoiced by the Company in U.S. dollars. In fiscal 1998 the Company anticipates that a portion of international revenues will continue to be invoiced in U.S. dollars. The exceptions to the U.S. dollar invoicing will be Japanese sales through the Company's joint venture in Japan, Indian sales through the Company's joint venture in India and certain sales from its distribution center in Dublin, Ireland. No one foreign country accounted for more than 10% of net sales in any period. In fiscal 1997 and 1995, the Company had one multinational distributor which accounted for 11% and 15% of revenue, respectively. Otherwise, no customer accounted for more than 10% of revenue in any period. Marketing. The Company's marketing activities include distribution of sales literature and press releases, advertising, periodic product announcements, support of NetWare user groups, publication of technical and other articles in the trade press, and participation in industry seminars, conferences, and trade shows. The marketing departments of the Company employ many technical laboratories which test and evaluate networked computer equipment and individual devices. The knowledge derived from these laboratories is the basis for the technical literature published by the Company. These activities are designed to educate the market about networks in general, as well as to promote the Company's products. Through the Professional Developers Program, the Company strongly supports independent software and hardware vendors in developing products that work on Novell networks. Thousands of multiuser application software packages are now compatible with the NetWare operating system. In March 1997, the thirteenth annual BrainShare Conference was held to inform and educate developers about Novell product strategy, Novell open architecture programming interfaces, and Novell third-party product certification programs. Technical Services and Education Novell's Customer Services is composed of Technical Services and Education. The Technical Services Group has an established infrastructure worldwide with support centers in the United States, Europe and Asia. These centers are World Class and have established quality standards with ISO 9001 certification around the world. Novell Technical Services offers a wide variety of flexible support offerings. Novell Education is the pioneer in the networking certification arena. Novell Education has certified over 120,000 CNE and 250,000 Certified Novell Administrators (CNAs) at its customer and partner sites around the world. Novell education continues to pioneer the certification process with its newest program, "Certified Internet Professional." Manufacturing Suppliers The Company's products, which consist primarily of software diskettes and manuals, are duplicated by outside vendors. This allows the Company to minimize the need for expensive capital equipment in an industry in which multiple high-volume manufacturers are available. Backlog Lead times for the Company's products are typically short. Consequently, the Company does not believe that backlog is a reliable indicator of future sales or earnings. The Company's practice is to ship its products promptly upon the receipt of purchase orders from its customers and, therefore, backlog is not significant. Competition Novell competes in the highly competitive market for computer software. Novell believes that the principal competitive factors are technical innovation to meet dynamic market needs, marketing strength, system/performance, customer service and support, reliability, ease of use, and price/performance. The market for computer software, has become increasingly competitive due to Microsoft's growing presence in all sectors of the software business. The Company does not have the product breadth and market power of Microsoft. Microsoft's dominant position provides it with distinct competitive advantages. This position may enable Microsoft to increase its market position even if the Company succeeds in introducing products with performance and features superior to those offered by Microsoft. Microsoft's increasing ability to ship networking products with features and functionality which are competitive with Novell, together with its ability to offer incentives to customers to purchase certain products in order to obtain favorable sales terms or necessary compatibility or information with respect to other products, may significantly inhibit the Company's ability to grow its business. In addition, as Microsoft creates new operating systems and applications, there can be no assurance that Novell will be able to ensure that its products will be compatible with those of Microsoft. Additionally, the Company may face competition from other industry companies which could introduce competitive operating systems. If any of these competing products achieves market acceptance, Novell's business and results of operations could be materially adversely affected. Copyright, Licenses, Patents and Trademarks The Company relies on copyright, patent, trade secret and trademark law, as well as provisions in its license, distribution and other agreements in order to protect its intellectual property rights. The Company has been issued what it considers to be valuable patents and has numerous other patents pending. No assurance can be given that the patents pending will be issued or, if issued, will provide protection for the Company's competitive position. The Company has an increasing concern that Computer industry companies that have huge financial resources and patent portfolios such as Lucent, AT&T, Microsoft, and IBM, will increasingly assert patent infringement claims against smaller companies such as Novell. While Novell has no reason to think it would not have defensible claims, the cost and time of defending such claims can be enormous. Although Novell intends to protect its patent rights vigorously, there can be no assurance that these measures will be successful nor that the claims on any patents held by the Company will be sufficiently broad to protect the Company's technology. In addition, no assurance can be given that any patents issued to the Company will not be challenged, invalidated or circumvented or that the rights granted thereunder will provide competitive advantages to the Company. The loss of patent protection on the Company's technology or the circumvention of its patent protection by competitors could have a material adverse effect on the Company's ability to compete successfully in its business. The software industry is characterized by frequent litigation regarding copyright, patent and other intellectual property rights. The Company has from time to time had infringement claims asserted by third parties against it and its products. While there are no known or pending threatened claims against the Company, the unsatisfactory resolution of which would have a material adverse effect on the Company's results of operations and financial condition, there can be no assurance that such third party claims will not be asserted, or if asserted, will be resolved in a satisfactory manner. In addition, there can be no assurance that third parties will not assert other claims against the Company with respect to any third-party technology. In the event of litigation to determine the validity of any third-party claims, such litigation could result in significant expense to the Company and divert the efforts of the Company's technical and management personnel, whether or not such litigation is determined in favor of the Company. In the event of an adverse result in any such litigation, the Company could be required to expend significant resources to develop non-infringing technology or to obtain licenses to the technology which is the subject of the litigation. There can be no assurance that the Company would be successful in such development or that any such licenses would be available. In addition, the laws of certain countries in which Novell's products are or may be developed, manufactured or sold may not protect the Company's products and intellectual property rights to the same extent as the laws of the United States. Employees As of December 31, 1997, the Company had 4,797 employees. The functional distribution of its employees was: sales and marketing -- 1,426; product development -- 1,643; general and administrative -- 763; service, support, education, and operations -- 965. Of these, 1,546 employees are in offices outside the U.S. All other Company personnel are based at the Company's facilities in Utah, California, and various U.S. field offices. None of the employees is represented by a labor union, and the Company considers its employee relations to be excellent. Competition for qualified personnel in the computer industry is intense. To make a long-term relationship with the Company rewarding, Novell endeavors to give its employees and in some cases its consultants, challenging work, educational opportunities, competitive wages, sales commission plans, bonuses, and through stock option and, stock purchase plans, opportunities to participate financially in the ownership and success of the Company. Factors Affecting Earnings and Stock Price In addition to factors described above under "Competition" which may adversely affect the Company's earnings and stock price, other factors may also adversely affect the Company's earnings and stock price. The ability of the Company to maintain its competitive technological position will depend, in large part, on its ability to attract and retain highly qualified development and managerial personnel. Competition for such personnel is intense and there is a risk of departure due to the competitive environment in the software industry. The loss of a significant group of key personnel would adversely affect the Company's product development efforts. As is common in the computer software industry, Novell has experienced delays in the introduction of new products, due to the complexity of software products, the need for extensive testing of software to ensure compatibility of new releases with a wide variety of application software and hardware devices and the need to "debug" products prior to extensive distribution. Significant delays in developing, completing or shipping new or enhanced products would adversely affect the Company. Moreover, the Company may experience delays in market acceptance of new releases of its products as the Company engages in marketing and education of the user base regarding the advantages and system requirements for the new products and as customers evaluate the advantages and disadvantages of upgrading. The Company has encountered these issues on each major new release of its products, and expects that it will encounter such issues in the future. Novell's ability to achieve desired levels of sales growth depends at least in part on the successful completion, introduction and sale of new versions of its products. There can be no assurance that the Company will be able to respond effectively to technological changes or new product announcements by others, or that the Company's research and development efforts will be successful. Should Novell experience material delays or sales shortfalls with respect to new product releases, the Company's sales and net income could be adversely affected. A goal of the Company is to deliver groupware application solutions combining network services and workgroup applications. The future success of this strategy will depend in part on the Company's ability to develop and market new competitive products for workgroup productivity and information processing. Development of these products has already required and will continue to require a substantial investment in research and development, particularly as a result of the decision to offer products across multiple operating environments. Although Novell's existing network of distributors should assist in this transition, marketing and distribution of these products may require developing new marketing and sales strategies and will entail significant expense. The Company has had only limited experience in the market for these products, and there can be no assurance that the Company will be successful in developing and marketing these new products. The Company's future earnings and stock price could be subject to significant volatility, particularly on a quarterly basis. The Company's revenues and earnings may be unpredictable due to its shipment patterns. As is typical in the software industry, a high percentage of the Company's revenues are expected to be earned in the third month of each fiscal quarter and will tend to be concentrated in the latter half of that month. Accordingly, quarterly financial results will be difficult to predict and quarterly financial results may fall short of anticipated levels. Because the Company's backlog early in a quarter will not generally be large enough to assure that it will meet its revenue targets for any particular quarter, quarterly results may be difficult to predict until the end of the quarter. A shortfall in shipments at the end of any particular quarter may cause the results of that quarter to fall significantly short of anticipated levels. Due to analysts' expectations of continued growth, any such shortfall in earnings can be expected to have an immediate and very significant adverse effect on the trading price of Novell's Common Stock in any given period. The past pattern of new product introductions has caused revenues to fluctuate, sometimes significantly, on a quarter-by-quarter basis. Such revenue fluctuations may contribute to the volatility of the trading price of Novell Common Stock in any given period. In addition, the market prices for securities of software companies have been historically volatile. The market price of Novell Common Stock, in particular, has been subject to wide fluctuations in the past. As a result of the foregoing factors and other factors that may arise in the future, the market price of Novell's Common Stock may be subject to significant fluctuations within a short period of time. These fluctuations may be due to factors specific to the Company, to changes in analysts' earnings estimates, or to factors affecting the computer industry or the securities markets in general. |
| ITEM 1a. Executive Officers of the Registrant Set forth below are the names, ages, titles with Novell, and present and past positions of the persons currently serving as executive officers of Novell. |
| Name | Age | Has Been Officer Since |
Position Or Office |
| Eric E. Schmidt | 42 | 1997 | Chairman of the Board and Chief Executive Officer |
| David R. Bradford | 47 | 1986 | Senior Vice President, General Counsel, and Corporate Secretary |
| Ronald E. Heinz, Jr. | 39 | 1996 | Senior Vice President, Worldwide Sales |
| Jennifer A. Konecny-Costa | 51 | 1996 | Senior Vice President, Human Resources |
| Stewart G. Nelson | 37 | 1997 | Vice President, Product Development |
| Darcy G. Mott | 45 | 1989 | Vice President and Treasurer |
| Richard A. Nortz | 53 | 1997 | Senior Vice President, Customer Services |
| Glenn Ricart | 48 | 1996 | Senior Vice President and Chief Technology Officer |
| John F. Slitz, Jr. | 48 | 1997 | Senior Vice President, Marketing |
| Christopher M. Stone | 41 | 1997 | Senior Vice President, Strategic Business Development |
| James R. Tolonen | 48 | 1989 | Senior Vice President and Chief Financial Officer |
| Eric E. Schmidt joined the Company in March 1997 and became Chairman of the Board and Chief Executive
Officer in April 1997. Prior to joining Novell, he served as Chief Technology Officer and Corporate Executive Officer
at Sun Microsystems, Inc. (Sun). In his 14 years at Sun, he held a range of progressively more responsible executive positions. David R. Bradford joined the Company in October 1985 as Corporate Counsel. He became Corporate Secretary in January 1986, Senior Corporate Counsel in April 1986, and Senior Vice President, General Counsel, and Corporate Secretary in April 1989. Ronald E. Heinz, Jr. joined the Company in February 1989 and has served in various sales and marketing positions including Vice President, North America and Latin America Sales and Marketing. In January 1997 he became Senior Vice President, Worldwide Sales and was elected a corporate officer. Jennifer A. Konecny-Costa joined the Company in June 1996 as Senior Vice President, Human Resources and was elected a corporate officer. From 1994 to June 1996, she was Vice President, Human Resources at Wilson, Sonsini, Goodrich & Rosati, a law firm representing high technology companies. Prior to that, she was Vice President, Human Resources from 1988 through 1994 at Silicon Graphics, a software company. Darcy G. Mott, a Certified Public Accountant, joined the Company in September 1986. He served in various finance positions and became Corporate Controller in February 1989. He was elected a corporate officer in November 1989 and became Treasurer in January 1991. In December 1995 he became Vice President and Treasurer. Stewart G. Nelson joined the Company in June 1994 through the WordPerfect merger and has served in various product development positions including Vice President and General Manger, Applications. In October 1997, he became Vice President, Product Development and was elected a corporate officer. Prior to joining Novell, he held various product development positions at WordPerfect from 1987 to 1994. Richard A. Nortz joined the Company in October 1995 as Senior Vice President, Technical Services. In February 1997, he became Senior Vice President, Customer Services and was elected a corporate officer. Prior to joining Novell, he was Senior Vice President for Wang Laboratories' worldwide customer service business, and also spent time as acting General Manager of Wang's European Operations from 1991 - 1995. Glenn Ricart joined the Company in August 1995 as Senior Vice President, Corporate Research and Development. In February 1996 he became the Chief Technology Officer and was elected a corporate officer. Prior to joining Novell, he served at the University of Maryland since 1982 in various capacities including, Director of the Computer Science Center, Affiliate Associate Professor of the Computer Science Department and as the Assistant Vice Chancellor for Academic Information Technology. In September 1994 he began a sabbatical at the Advanced Research Projects Agency, a branch of the United States Department of Defense. John F. Slitz, Jr. joined the Company in August 1997 as Senior Vice President, Marketing and was elected a corporate officer. From 1995 to July 1997, he was Vice President of Object Technology/Application Development Marketing at International Business Machines (IBM). Prior to joining IBM, he was Vice President of Marketing at Object Management Group, Inc. from 1990 to 1995. Christopher M. Stone joined the Company in September 1997 as Senior Vice President, Strategic Business Development and was elected a corporate officer. Prior to joining Novell, he founded and was Chairman of the Board and Chief Executive Officer of the Object Management Group from 1989 to August 1997. James R. Tolonen, a Certified Public Accountant, joined the Company in 1989 through the Excelan merger and became a Senior Vice President and Chief Financial Officer in August 1989 and was elected a corporate officer. ITEM 2. Properties The Company owns and occupies a 1,000,000 square-foot office complex on 99 acres in Orem, Utah, which is used as a product development center and administrative offices, of which, approximately 250,000 square-feet is subleased to various tenants. It also owns and occupies a 550,000 square-foot office complex, with plans to expand the complex by up to 580,000 square-feet in fiscal 2000, on 46 acres in Provo, Utah, which is used as corporate headquarters and a product development center. It also owns a 380,000 square-foot manufacturing and distribution facility on 23 acres in Lindon, Utah, all of which is leased to a third party manufacturer. The Company also owns a 100,000 square-foot office building in Herndon, Virginia. The Company occupies approximately 1/3 of the space in this building and leases the remainder to tenants. The Company also owns two buildings, totaling 90,000 square feet in San Jose, California, which are used primarily for product development. The Company also has an Irish subsidiary which owns a 72,000 square-foot office building in the United Kingdom and leases the building to the Company's United Kingdom subsidiary. Additionally, the Company owns approximately 48 acres of land in San Jose, California on which it is currently constructing a 530,000 square-foot office complex to replace the buildings it currently owns and leases in San Jose, California. The campus is expected to be complete and occupied in fiscal 1999. The Company also has the capacity to expand on its land in Provo and Orem, Utah. The Company has subsidiaries in Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, Colombia, Czech Republic, Denmark, Finland, France, Germany, Hong Kong, Hungary, India, Ireland, Israel, Italy, Japan, Korea, Mexico, Netherlands, New Zealand, Norway, Poland, Singapore, South Africa, Spain, Sweden, Switzerland, United Kingdom, Uruguay, and Venezuela -- each of which leases its facilities. The Company leases offices for product development in San Jose, California and Berkeley Heights, New Jersey; and a distribution facility in San Jose, California. The Company also leases sales and support offices in Arizona, California (6), Colorado, Connecticut, Florida (2), Georgia, Illinois, Massachusetts, Michigan, Minnesota, Missouri (2), New York (2), North Carolina, Ohio (3), Oregon, Pennsylvania (2), Tennessee, Texas (3), Utah, Washington, China, Malaysia, Russia, Taiwan, Thailand, and United Arab Emirates. The terms of such leases vary from month to month to up to ten years. ITEM 3. Legal Proceedings In 1993, a suit was filed due to a failed contract against a company that Novell subsequently acquired. The plaintiff obtained a jury verdict against the acquired company in 1996. Novell does not believe the resolution of this legal matter will have a material adverse effect on its financial position, results of operations, or cash flows. The Company is a party to a number of additional legal claims arising in the ordinary course of its business. The Company believes the ultimate resolution of these claims will not have a material adverse effect on its financial position, results of operations, or cash flows. ITEM 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report. |
PART II
| ITEM 5. Market for Registrant'S Common Stock and Related Stockholder
Matters The information required by Item 5 of Form 10-K is incorporated herein by reference to the information contained in the section captioned "Selected Consolidated Quarterly Financial Data" on page 26 of the Company's Annual Report to Shareholders for the fiscal year ended October 31, 1997. ITEM 6. Selected Financial Data The information required by Item 6 of Form 10-K is incorporated herein by reference to the information contained in the section captioned "Selected Consolidated Financial Data" on page 5 of the Company's Annual Report to Shareholders for the fiscal year ended October 31, 1997. ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The information required by Item 7 of Form 10-K is incorporated herein by reference to the information contained in the section captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 6 through 10 of the Company's Annual Report to Shareholders for the fiscal year ended October 31, 1997. ITEM 8. Financial Statements and Supplementary Data The information required by Item 8 of Form 10-K is incorporated herein by reference to the Company's consolidated financial statements and related notes thereto, together with the report of the independent auditors presented on pages 11 through 25 of the Company's Annual Report to Shareholders for the fiscal year ended October 31, 1997, and to the information contained in the section captioned "Selected Consolidated Quarterly Financial Data" on page 26 of the Company's Annual Report to Shareholders for the fiscal year ended October 31, 1997. ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. |
PART III
| ITEM 10. Directors and Executive Officers of Registrant The information required with respect to identification of directors is incorporated herein by reference to the information contained in the section captioned "Election of Directors" of the Registrant's definitive Proxy Statement for the Annual Meeting of Shareholders to be held April 7, 1998, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities and Exchange Act of 1934, as amended. Information regarding executive officers of Novell is set forth under the caption "Executive Officers" in Item 1a hereof. Each director and each officer of the Company who is subject to Section 16 of the Securities Exchange Act of 1934 (the "Act") is required by Section 16(a) of the Act to report to the Securities and Exchange Commission by a specified date his or her transactions in the Company's securities. In fiscal 1997, there were no compliance exceptions to this requirement. ITEM 11. Executive Compensation The information required by Item 11 of Form 10-K is incorporated by reference to the information contained in the sections captioned "Executive Compensation" of the Registrant's definitive Proxy Statement for the Annual Meeting of Shareholders to be held April 7, 1998, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. ITEM 12. Security Ownership of Certain Beneficial Owners and Management The information required by Item 12 of Form 10-K is incorporated by reference to the information contained in the section captioned "Securities Ownership of Certain Beneficial Owners and Management" of the Registrant's definitive Proxy Statement for the Annual Meeting of Shareholders to be held April 7, 1998, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. ITEM 13. Certain Relationships and Related Transactions The information required by Item 13 of Form 10-K is incorporated by reference to the information contained in the section captioned "Certain Transactions" of the Registrant's definitive Proxy Statement for the Annual Meeting of Shareholders to be held April 7, 1998, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Act of 1934, as amended. |
PART IV
| ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K |
| (a) The following documents are filed as a part of this annual report on Form 10-K for Novell, Inc.:
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| 1. | The Consolidated Financial Statements, the Notes to Consolidated Financial Statements and the Report of Ernst & Young LLP, Independent Auditors, listed below are incorporated herein by reference to pages 11 through 25 of the Company's Annual Report to Shareholders for the fiscal year ended October 31, 1997. Consolidated Statements of Operations for the fiscal years ended October 31, 1997, October 26, 1996, and October 28, 1995. Consolidated Balance Sheets at October 31, 1997 and October 26, 1996. Consolidated Statements of Shareholders' Equity for the fiscal years ended October 31, 1997, October 26, 1996, and October 28, 1995. Consolidated Statements of Cash Flows for the fiscal years ended October 31, 1997, October 26, 1996, and October 28, 1995. Notes to Consolidated Financial Statements. Report of Ernst & Young LLP, Independent Auditors.
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| Page | ||
| 2. | Financial Statement Schedules:
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| Schedule II Valuation and Qualifying Accounts Schedules other than that listed above are omitted because they are not required, not applicable or because the required information is shown in the consolidated financial statements or notes thereto.
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14 | |
| 3. | Exhibits: A list of the exhibits required to be filed as part of this report is set forth in the Exhibit Index, which immediately precedes such exhibits, and is incorporated herein by this reference thereto. |
15 |
(b) Reports on Form 8-K No reports on Form 8-K were filed by the Registrant during the quarter ended October 31, 1997. |
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SIGNATURES
| Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| Novell, Inc. (Registrant)
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By /s/ Dr. Eric Schmidt (Dr. Eric Schmidt, Chairman of the Board and Chief Executive Officer)
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| Date: January 26, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
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| Name
|
Title
|
Date
|
| /s/ Dr. Eric Schmidt (Dr. Eric Schmidt)
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Chairman of the Board, Chief Operating Officer and Director(Principal Executive Officer)
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January 26, 1998
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| /s/ JAMES R. TOLONEN (James R. Tolonen)
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Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
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January 26, 1998
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| /s/ ELAINE R. BOND (Elaine R. Bond)
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Director
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January 26, 1998
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| /s/ HANS-WERNER HECTOR (Hans-Werner Hector)
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Director
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January 26, 1998
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| /s/ JACK L. MESSMAN (Jack L. Messman)
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Director
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January 26, 1998
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| /s/ LARRY W. SONSINI (Larry W. Sonsini)
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Director
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January 26, 1998
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| /s/ IAN R. WILSON (Ian R. Wilson)
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Director
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January 26, 1998
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| /s/ JOHN A. YOUNG (John A. Young)
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Director
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January 26, 1998
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NOVELL, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
| Accounts Receivable Allowance | ||||||
| Balance at Beginning of Period |
Additions Charged to Return Reserves |
Additions Charged to Bad Debt Reserves |
Deductions From Return Reserves |
Deductions From Bad Debt Reserves |
Balance at at End of Period |
|
| (In thousands) | ||||||
| Fiscal year ended October 28, 1995 | $ 82,934 | $ 290,613 | $ 10,470 | $ 305,679 | $ 3,481 | $ 74,857 |
| Fiscal year ended October 26, 1996 | $ 74,857 | $ 314,979 | $ 6,481 | $ 323,438 | $ 11,939 | $ 60,940 |
| Fiscal year ended October 31, 1997 | $ 60,940 | $ 185,545 | $ 4,437 | $ 210,205 | $ 7,664 | $ 33,053 |
EXHIBIT INDEX
| Exhibit Number |
Description |
| 3.1 | Restated Certificate of Incorporation.(4)(Exhibit 3.1) |
| 3.2 | By-Laws.(1)(Exhibit 3.1) |
| 4.1 | Reference is made to Exhibit 3.1. |
| 4.2 | Form of certificate representing the shares of Novell Common Stock.(1)(Exhibit 4.3) |
| 4.3 | Rights Agreement dated December 7, 1988, between Novell, Inc. and Mellon Bank (East) N.A., as Rights Agent, relating to the Shareholder Rights Plan.(3)(Exhibit 1) |
| 10.1 | Novell, Inc., Employee Retirement and Savings Plan dated December 8, 1996. (2) (Exhibit 10.9) |
| 10.2 | Agreement and Plan of Reorganization dated March 23, 1989, among Novell, Inc.; Lansub Corporation; and Excelan, Inc.(5)(Appendix A) |
| 10.3 | Novell, Inc. 1989 Employee Stock Purchase Plan.(6)(Exhibit 4.1) |
| 10.4 | Agreement and Plan of Reorganization dated July 16, 1991, among Novell, Inc.; MDAC Corp.; and Digital Research Inc. (7)(Appendix A) |
| 10.5 | Novell, Inc. 1991 Stock Plan.(8)(Exhibit 4.1) |
| 10.6 | Agreement and Plan of Reorganization and Merger dated February 12, 1993, among Novell, Inc.; Novell Acquisition Corp.; UNIX System Laboratories, Inc.; and American Telephone and Telegraph Company. (9)(Appendix A) |
| 10.7 | UNIX System Laboratories, Inc. Stock Option Plan.(10)(Exhibit 4.3) |
| 10.8 | Agreement and Plan of Reorganization dated March 21, 1994 and amended May 31, 1994, among Novell, Inc.; Novell Acquisition Corp.; WordPerfect Corporation, Alan C. Ashton, Bruce W. Bastian, and Melanie L. Bastian.(11)(Appendix A & Exhibit 1.1) |
| 10.9 | Novell, Inc. Novell/WordPerfect Stock Plan.(12)(Exhibit 10.1) |
| 10.10 | Novell, Inc. Stock Option Plan for Non-Employee Directors. (13) (Exhibit 4.1) |
| 11 | Statement regarding computation of per share earnings.(14) |
| 13 | Company's Annual Report to Shareholders for the fiscal year ended October 26, 1996.(14) |
| 21 | Subsidiaries of the Registrant.(14) |
| 23.1 | Consent of Ernst & Young LLP, independent auditors.(14) |
| 27 | Financial Data Schedule.(14) |
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|
|
| (1) | Incorporated by reference to the Exhibit identified in parentheses, filed as an exhibit in the Registrant's Registration Statement on Form S-1, filed November 30, 1984, and amendments thereto(File No. 2-94613). |
| (2) | Incorporated by reference to the Exhibit identified in parentheses, filed as an exhibit in the Registrant's Annual Report on Form 10-K, filed for the fiscal year ended October 25, 1986(File No. 0-13351). |
| (3) | Incorporated by reference to the Exhibit identified in parentheses, filed as an exhibit in the Registrant's Current Report on Form 8-K, dated December 7, 1988(File No. 0-13351). |
| (4) | Incorporated by reference to the Exhibit identified in parentheses, filed as an exhibit in the Registrant's Annual Report on Form 10-K, filed for the fiscal year ended October 29, 1988 (File No. 0-13351). |
| (5) | Incorporated by reference to the Appendix identified in parentheses, filed as an appendix in the Registrant's Registration Statement on Form S-4, filed May 9, 1989 (File No. 33-28470). |
| (6) | Incorporated by reference to the Exhibit identified in parentheses, filed as an exhibit in the Registrant's Registration Statement on Form S-8, filed October 22, 1997 (File No. 333-38435). |
| (7) | Incorporated by reference to the Appendix identified in parentheses, filed as an appendix in the Registrant's Registration Statement on Form S-4, filed September 24, 1991 (File No. 33-42254). |
| (8) | Incorporated by reference to the Exhibit identified in parentheses, filed as an exhibit in the Registrant's Registration Statement on Form S-8, filed May 29, 1996 (File No. 333-04775). |
| (9) | Incorporated by reference to the Exhibit identified in parentheses, filed as an exhibit in the Registrant's Registration Statement of Form S-4, filed May 13, 1993 (File No. 33-60120). |
| (10) | Incorporated by reference to the Exhibit identified in parentheses, filed as an exhibit in the Registrant's Registration Statement on Form S-8, filed July 2, 1993 (File No. 33-65440). |
| (11) | Incorporated by reference to the Appendix and Exhibit identified in parentheses, filed as an appendix and exhibit in the Registrant's Registration Statement on Form S-4, filed June 13, 1994 (File No. 33-53215). |
| (12) | Incorporated by reference to the Exhibit identified in parentheses, filed as an exhibit in the Registrant's Registration Statement of Form S-8, filed July 8, 1994 (File No. 33-54483). |
| (13) | Incorporated by reference to the Exhibit identified in parentheses, filed as an exhibit in the Registrant's Registration Statement of Form S-8, filed May 30, 1996 (File No. 333-04823). |
| (14) | Filed herewith. |
| EXHIBIT 11 |
NOVELL, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
| The computation of common and common share equivalents is as follows (in thousands): |
| Fiscal Year Ended | |||
| October 28, 1995 |
October 26, 1996 |
October 31, 1997 |
|
| Weighted average number of common shares outstanding | 367,963 | 355,478 | 348,148 |
| Number of common share equivalents resulting from stock options, computed using the treasury stock method |
006,621 | 002,441 | 001,281 |
| Number of common and common share equivalents used in computation |
374,584 | 357,919 | 349,429 |
| EXHIBIT 21 |
NOVELL, INC.
SUBSIDIARIES OF THE REGISTRANT
SUBSIDIARIES OF THE REGISTRANT
| As of October 31, 1997, the following companies were subsidiaries of Novell, Inc.: |
| Wholly Owned | State of Incorporation or Country in which Organized |
|
| Fluent, Inc. | Delaware | |
| Novell de Argentina S.A. | Argentina | |
| Novell Austria | Austria | |
| Novell Belgium B.V.B.A. | Belgium | |
| Novell do Brasil Software Ltda. | Brazil | |
| Novell Canada, Ltd. | Canada | |
| Novell Chile | Chile | |
| Novell Columbia | Columbia | |
| Novell Czech Republic | Czech Republic | |
| Novell Denmark A/S | Denmark | |
| Novell Europe, Inc. | Delaware | |
| Novell European Support Center GmbH | Germany | |
| Novell Finland OY | Finland | |
| Novell GmbH | Germany | |
| Novell Hong Kong | Hong Kong | |
| Novell Hungary KFT | Hungary | |
| Novell International, Ltd. | Barbados | |
| Novell Ireland Software Limited | Ireland | |
| Novell Israel | Israel | |
| Novell Italia S.R.L. | Italy | |
| Novell Korea Co., Ltd. | Korea | |
| Novell Latino America Norte, CA | Venezuela | |
| Novell de Mexico, S.A.D.E. C.V. | Mexico | |
| Novell Netherland B.V. | Netherlands | |
| Novell New Zealand | New Zealand | |
| Novell Norge A/S | Norway | |
| Novell Peru | Peru | |
| Novell Polska Sp.Zo.o. | Poland | |
| Novell Portugal Informatica LDA | Portugal | |
| Novell Pty, Ltd. | Australia | |
| Novell S.A.R.L. | France | |
| Novell Services Asia Pacific Pty Ltd. | Australia | |
| Novell Singapore | Singapore | |
| Novell Software Development Pvt., Ltd. | India | |
| Novell South Africa Proprietary Ltd. | South Africa | |
| Novell Spain S.A. | Spain | |
| Novell Svenska A.B. | Sweden | |
| Novell Schweiz A.G. | Switzerland | |
| Novell U.K., Ltd. | United Kingdom | |
| Novell Uruguay | Uruguay | |
| Majority Owned | ||
| Novell Japan, Ltd. | Japan | |
| Novonyx, Inc | Delaware | |
| Onward Novell Software Pvt., Ltd. | India |
| EXHIBIT 23.1 |
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
| We consent to the incorporation by reference in this Annual Report (Form 10-K) of Novell, Inc. of our report dated November 24, 1997, included in the 1997 Annual Report to Shareholders of Novell, Inc. Our audits also included the financial statement schedule of Novell, Inc., listed in Item 14(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in the Registration Statements (Form S-8 No. 33-14531, No. 33-29798, No. 33-36673, No. 33-54483, No. 33-64998, No. 33-65440, No. 33-66704, No. 33-67276, No. 33-68336, No. 333-04775, No. 333-04823, and No. 333-38435) pertaining to the Employee Stock Option and Stock Purchase Plans of Novell, Inc. of our report dated November 24, 1997, with respect to the consolidated financial statements incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedule included in this Annual Report (Form 10-K) of Novell, Inc.
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/s/ ERNST & YOUNG LLP
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| San Jose, California January 27, 1998 |
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