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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

[X]	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Quarter Ended April 30, 1998
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)

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)

(801) 861-7000
(Registrant's telephone number, including area code)

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 [ ]

As of May 31, 1998 there were 353,436,064 shares of the registrant's common stock outstanding.

Part I. Financial Information, Item 1. Financial Statements

NOVELL, INC.
CONSOLIDATED UNAUDITED CONDENSED BALANCE SHEETS

Dollars in thousands, except per share data	Apr. 30, 1998	Oct. 26, 1997


ASSETS Current assets
Cash and short-term investments Receivables, less allowances($34,841 - April; $33,053 - October) Inventories Prepaid expenses Deferred income taxes	$ 1,084,635 220,128 6,316 62,152 117,849	$ 1,033,473 234,358 10,656 57,685 134,210

Total current assets Property, plant and equipment, net Other assets	1,491,080 340,708 83,397	1,470,382 373,865 66,402

Total assets	$ 1,915,185	$ 1,910,649


LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities
Accounts payable Accrued compensation Accrued marketing liabilities Other accrued liabilities Income taxes payable Deferred revenue	$ 60,875 47,344 17,741 71,453 3,839 83,251	$ 82,759 51,397 27,728 85,157 -- 74,915

Total current liabilities Minority interests	284,503 18,681	321,956 23,276

Shareholders' equity
Common stock, par value $.10 a share Authorized - 600,000,000 shares Issued - 353,037,548 shares-April Issued - 350,937,812 shares-October Additional paid-in capital Retained earnings Unearned stock compensation Cumulative translation adjustment Unrealized gain (loss) on investments	35,304 393,952 1,221,762 (6,157) (498) (32,362)	35,094 378,582 1,188,361 (7,189) (666) (28,765)

Total shareholders' equity	1,612,001	1,565,417

Total liabilities and shareholders' equity	$ 1,915,185	$ 1,910,649

See notes to consolidated unaudited condensed financial statements.

NOVELL, INC.
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

	Fiscal Quarter Ended		Six Months Ended

Amounts in thousands, except per share data	Apr. 30, 1998	Apr. 30, 1997	Apr. 30, 1998	Apr. 30, 1997

Net sales Cost of sales	$ 262,250 57,021	$ 273,107 77,175	$ 514,292 112,160	$ 647,954 153,146


Gross profit	205,229	195,932	402,132	494,808

Operating expenses
Sales and marketing Product development General and administrative	98,253 58,046 34,582	116,068 68,442 39,517	199,988 115,832 67,032	243,958 140,197 77,248


Total operating expenses	190,881	224,027	382,852	461,403

Income (loss) from operations	14,348	(28,095)	19,280	33,405

Other income (expense)
Investment income Other, net	15,456 (2,989)	9,921 (3,506)	29,855 (2,745)	26,535 (6,343)

Other income, net	12,467	6,415	27,110	20,192

Income (loss) before taxes Income taxes	26,815 7,508	(21,680) (7,046)	46,390 12,989	53,597 17,419

Net income (loss)	$ 19,307	$ (14,634)	$ 33,401	$ 36,178

Weighted average shares outstanding Basic Diluted	351,762 356,586	347,320 347,904	351,396 354,779	346,913 347,499

Net income (loss) per share Basic Diluted	$ 0.05 $ 0.05	$ (0.04) $ (0.04)	$ 0.10 $ 0.09	$ 0.10 $ 0.10

See notes to consolidated unaudited condensed financial statements.

NOVELL, INC.
CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

	Six Months Ended

Amounts in thousands	Apr. 30, 1998	Apr. 30, 1997


Cash flows from operating activities Net income	$ 33,401	$ 36,178

Adjustments to reconcile net income to net cash provided (used) by operating activities
Depreciation and amortization Stock plans' income tax benefits Decrease in receivables (Decrease) increase in inventories (Increase) in prepaid expenses (Decrease) increase in deferred income taxes (Decrease) in current liabilities, net	40,227 1,150 14,230 4,340 (4,467) 17,860 (37,453)	46,266 2,356 119,820 (1,563) (11,905) (34,532) (47,864)

Net cash provided from operating activities	69,288	108,756


Cash flows from financing activities
Issuance of common stock, net Sale of put warrants Settlement of put warrants	13,923 -- --	7,673 2,300 (14,494)
Net cash (used) from financing activities	13,923	(4,521)


Cash flows from investing activities
Expenditures for property, plant and equipment Purchases of short-term investments Maturities of short-term investments Sales of short-term investments Other	(17,231) (1,037,871) 552,398 379,014 (11,221)	(47,738) (1,271,326) 951,279 303,908 3,661

Net cash (used) provided by investing activities	(134,911)	(60,216)

Total (decrease) increase in cash and cash equivalents Cash and cash equivalents - beginning of period	$ (51,700) 208,543	$ (44,019) 145,521

Cash and cash equivalents - end of period Short-term investments - end of period	156,843 927,792	189,540 854,566

Cash and short-term investments - end of period	$ 1,084,635	$ 1,044,106

See notes to consolidated unaudited condensed financial statements.

NOVELL, INC.
NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS

A. Quarterly Financial Statements

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. The accompanying consolidated unaudited condensed financial statements have been prepared in accordance with the instructions to Form 10-Q but do not include all of the information and footnotes required by generally accepted accounting principles and should, therefore, be read in conjunction with the Company's fiscal 1997 Annual Report to Shareholders. These statements do include all normal recurring adjustments which the Company believes necessary for a fair presentation of the statements. The interim operating results are not necessarily indicative of the results for a full year. Certain reclassifications, none of which affected net income, have been made to the prior years' amounts in order to conform to the current year's presentation.

In the first quarter of fiscal 1997, the Company implemented a change to its fiscal year and month ending dates. The Company now recognizes its fiscal year end on the last calendar day of October, as opposed to prior years on the last Saturday in October. Likewise, each fiscal month now ends on the last calendar day of each month, and each fiscal quarter will have a unique number of days as opposed to the consistent 13 weeks in prior years. Implementing this change resulted in an extra five days in the first fiscal quarter of 1997 which the Company believes did not have a material impact on its financial position, results of operations, or cash flows.

B. Significant Events

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 indirect distribution channel customers, controlled shifts to multi-product licenses, lower licensing 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. In addition, the Company reduced its workforce by 17%, or approximately 1,000 employees, 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.

C. Cash and Short-term Investments

All marketable debt and equity securities are included in cash and short-term investments and are considered available-for-sale and carried at fair market value, with the unrealized gains and losses, net of tax, included in shareholders' equity. Municipal securities included in short-term investments have contractual maturities from 1-5 years. Money market preferreds have contractual maturities of less than 180 days. No other short-term investments have contractual maturities. The cost of securities sold is based on the specific identification method. Such securities are anticipated to be used for current operations and are therefore classified as current assets, even though some maturities may extend beyond one year.

The following is a summary of cash and short-term investments, all of which are considered available-for-sale.

(Dollars in thousands)	Cost at Apr. 30, 1998	Gross Unrealized Gains	Gross Unrealized Losses	Fair Market Value at Apr. 30, 1998

Cash and cash equivalents
Cash Repurchase agreements Taxable money market fund Municipal securities	$ 70,712 4,610 19,796 61,725	$ -- -- -- --	$ -- -- -- --	$ 70,712 4,610 19,796 61,725

Cash and cash equivalents	$ 156,843	$ --	$ --	$ 156,843

Short-term investments
Municipal securities Money market mutual funds Money market preferreds Mutual funds Equity securities	$ 485,683 93,311 235,743 14,999 150,746	$ 2,901 -- -- 14 26,254	$ (82) -- (43) (10) (81,724)	$ 488,502 93,311 235,700 15,003 95,276

Short-term investments	$ 980,482	$ 29,169	$ (81,859)	$ 927,792

Cash and short-term investments	$ 1,137,325	$ 29,169	$ (81,859)	$ 1,084,635


(Dollars in thousands)	Cost at Oct. 31, 1997	Gross Unrealized Gains	Gross Unrealized Losses	Fair Market Value at Oct. 31, 1997

Cash and cash equivalents
Cash Repurchase agreements Money market fund Municipal securities	$ 84,151 4,932 42,581 76,879	$ -- -- -- --	$ -- -- -- --	$ 84,151 4,932 42,581 76,879

Cash and cash equivalents	$ 208,543	$ --	$ --	$ 208,543


Short-term investments
Municipal securities Money market mutual funds Money market preferreds Mutual funds Equity securities	$ 463,443 88,999 150,817 14,721 153,785	$ 4,551 -- -- 33 25,829	$ (84) -- (17) (1) (77,146)	$ 467,910 88,999 150,800 14,753 102,468

Short-term investments	$ 871,765	$ 30,413	$ (77,248)	$ 824,930

Cash and short-term investments	$ 1,080,308	$ 30,413	$ (77,248)	$ 1,033,473

During the first six months of fiscal 1998 the Company had realized gains of $5 million on the sale of securities compared to realized gains of $5 million in the first six months of fiscal 1997, while realizing losses on sales of securities of $2 million in the first six months of fiscal 1998.

D. Income Taxes

The Company's estimated effective tax rate for the first six months of fiscal 1998 was 28.0% compared to 32.5% in the first six months of fiscal 1997. The Company paid cash amounts for income taxes of $10 million and $7 million, in the first six months of fiscal 1998 and 1997, respectively.

E. Commitments and Contingencies

The Company currently has a $10 million unsecured revolving bank line of credit, with interest at the prime rate. The line can be used for either letter of credit or working capital purposes. The line is subject to the terms of a loan agreement containing financial covenants and restrictions, none of which are expected to significantly affect the Company's operations. At April 30, 1998 there were no borrowings, letter of credit acceptances or commitments under such line.

The Company has an additional $5 million credit facility with another bank which is not subject to a loan agreement. At April 30, 1998 standby letters of credit of approximately $200,000 were outstanding under this facility.

In fiscal 1997, the Company entered into agreements to lease buildings being constructed on land owned by the Company in San Jose, California and in Provo, Utah. The lessor has committed to fund up to $272 million for construction of the buildings. The leases are for a period of seven years and can be renewed for two additional five year periods, subject to the approval of the lender and the Company, at the sole discretion of each party. Rent obligations will commence upon the Company's occupation of the buildings in fiscal 1999 and fiscal 2000. If the Company does not purchase the buildings, or arrange for the sale of the buildings, at the end of the lease, the Company will guarantee the lessor no more than 85% of the residual value of the buildings (approximately $272 million) as determined at the inception of the leases. In addition, the agreement calls for the Company to maintain a specific level of restricted cash to serve as collateral for the leases and maintain compliance with certain financial covenants. The value of restricted cash held as collateral at April 30, 1998 was approximately $41 million, and is included in other assets.

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 that the resolution of this legal matter will have a material adverse effect on its financial position, results of operations, or cash flows.

In February 1998, a suit was filed against Novell and certain of its officers and directors, alleging violation of federal securities laws. The lawsuit was brought as a purported class action on behalf of purchasers of Novell common stock from November 1, 1996 through April 22, 1997. The case is in its preliminary stages. Novell believes that the case is without merit, and intends to vigorously defend against the allegations. While there can be no assurance as to the ultimate disposition of the case, Novell does not believe that the resolution of this litigation 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 legal claims arising in the ordinary course of business. The Company believes the ultimate resolution of the claims will not have a material adverse effect on its financial position, results of operations, or cash flows.

F. Put Warrants

In the first six months of fiscal 1997, the Company sold put warrants on 2 million shares of its common stock for $2 million, callable on specific dates in the third quarter of fiscal 1997, giving a third party the right to sell shares of Novell common stock to the Company at contractually specified prices. During the first six months of fiscal 1997, the Company also settled put warrant obligations on 4 million shares for $14 million in cash.

G. International Sales

The Company markets internationally both directly to end users and through distributors who sell to dealers and end users. For the six months of fiscal 1998 and fiscal 1997, sales to international customers were approximately $223 million and $302 million, respectively. In the first six months of fiscal 1998 and fiscal 1997, 67% and 57%, respectively, of international sales were to European countries. No one foreign country accounted for 10% or more of total sales in either period. Except for one multinational distributor, which accounted for 13% of revenue in the first six months of fiscal 1998 and 14% of revenue in the first six months of 1997, no customer accounted for more than 10% of revenue in any period.

H. Net Income (Loss) Per Share

In 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings Per Share. Statement No. 128 replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is what the Company previously reported as earnings per share. Earnings per share amounts for all periods have been presented and where appropriate, restated to conform to the Statement No. 128 requirements.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Introduction

Novell 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.

During the third quarter of fiscal 1997, Novell took measures to reduce and realign its resources and better manage and control its business. The measures were in response to declines in sales of boxed products through indirect distribution channel customers, controlled shifts to multi-product licenses, lower licensing 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. The Company will continue to monitor channel inventory levels to keep them in line with estimated market demand. In addition, the Company reduced its workforce by 17%, or approximately 1,000 employees, 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.

In the first quarter of fiscal 1997, the Company implemented a change to its fiscal year and month ending dates. The Company now recognizes its fiscal year end on the last calendar day of October, as opposed to prior years which ended on the last Saturday in October. Likewise, each fiscal month end now ends on the last calendar day of each month, and each fiscal quarter has a unique number of days as opposed to the consistent 13 weeks in prior years. Implementing this change resulted in an extra five days in the first fiscal quarter of 1997, which the Company believes did not have a material impact on its financial position, results of operations, or cash flows.

Results of Operations

Net Sales

	Q2 1998	Change	Q2 1997	YTD 1998	Change	YTD 1997

Net sales (millions)	$ 262	-4%	$ 273	$ 514	-21%	$ 648

In general, the Company has experienced continued competitive pressures in the marketplace, resulting in the action taken in the third quarter of fiscal 1997 described above. These competitive pressures also resulted in lower overall revenues in the second quarter and the first six months of fiscal 1998 compared to the second quarter and the first six months of fiscal 1997.

Novell's product lines can be categorized into three areas, all within the software industry. They are server operating environments; network services; and other. While revenue decreased from the second quarter of 1997 to the second quarter of 1998, and from the first six months of fiscal 1997 to the first six month of fiscal 1998, analysis of the individual product categories characterizes the changes that have occurred.

Server operating environments revenues decreased by 7% or $18 million in the second quarter of 1998 compared to the second quarter of 1997 and by 29% or $121 million in the first six months of fiscal 1998 compared to the first six months of fiscal 1997. Generally, such decreases occurred due to lower unit sales in both the NetWare 3 and NetWare 4 product lines due to competitive pressures in the marketplace.

Network services revenues increased by 9% or $8 million in the second quarter of 1998 compared to the second quarter of 1997 and decreased by 4% or $5 million in the first six months of fiscal 1998 compared to the first six months of fiscal 1997. The $8 million increase between the second quarter of fiscal 1997 and the second quarter of fiscal 1998 is mainly the result of an increase in unit sales of network management products, and from the newly released Border Manager product. The $5 million decrease in the first six months of fiscal 1998 from the first six months of 1997 is due to decreases in TCP/IP Access products, Host Connectivity products, and GroupWare Applications, somewhat offset by increases in Tuxedo revenue and the newly released Border Manager product.

Other revenue, which is made up of UNIX royalties, education, service, and other, decreased by 2% or $1 million from the second quarter of fiscal 1997 to the second quarter of fiscal 1998 and decreased by 10% or $8 million in the first six months of fiscal 1998 compared to the first six months of fiscal 1997. The decreases relate primarily to lower UNIX royalties in fiscal 1998 compared to fiscal 1997.

International sales represented 43% of total sales in the first six months of 1998 compared to 47% in the first six months of 1997. This change is a result of a 16% decrease in domestic revenues compared to a 26% decrease in international revenues in the first six months of fiscal 1998 compared to the first six months of fiscal 1997.

In the second quarter of fiscal 1998, the Company gave contractual notice to distributors of a change in its channel discount policy effective May 1, 1998. The change reduced its channel discount from 40 percent to 30 percent off published list prices. Published list prices for Novell products have not been affected by this change.

Gross Profit

	Q2 1998	Change	Q2 1997	YTD 1998	Change	YTD 1997

Gross profit (millions) Percentage of net sales	$ 205 78 %	5 %	$ 196 72 %	$ 402 78 %	-19 %	$ 495 76 %

The gross margin percentage increased in the second quarter of fiscal 1998 compared to the second quarter of fiscal 1997 due to lower material costs as licensing revenues grew to a larger percentage of total revenues. Likewise, services and training related costs as well as lower inventory management costs contributed to the increase in gross margin percentage. The gross margin percentage also increased in the first six months of fiscal 1998 compared to the first six months of fiscal 1997 due to a reduction in material costs as licensing revenues grew to a larger percentage of total revenues and inventory management costs were reduced.

Operating Expenses

	Q2 1998	Change	Q2 1997	YTD 1998	Change	YTD 1997

Sales and marketing (millions) Percentage of net sales	$ 98 38 %	-16 %	$ 116 42 %	$ 200 39 %	-18 %	$ 244 38 %

Product development (millions) Percentage of net sales	$ 58 22 %	-15 %	$ 68 25 %	$ 116 23 %	-17 %	$ 140 21 %

General and administrative (millions) Percentage of net sales	$ 35 13 %	-13 %	$ 40 15 %	$ 67 13 %	-13 %	$ 77 12 %


Total operating expenses (millions)) Percentage of net sales	191 73 %	-15 %	224 82 %	383 75 %	-17 %	$ 461 71 %

Sales and marketing expenses decreased as a percentage of net sales in the second quarter of fiscal 1998 compared to the second quarter of fiscal 1997 and increased slightly in the first six months of fiscal 1998 compared to the first six months of fiscal 1997, but decreased in absolute dollars in both comparative periods due to lower marketing expenses. Sales and marketing expenses fluctuate as a percentage of net sales in any given period due to product promotions, advertising or other discretionary expenses.

Product development expenses decreased as a percentage of net sales in the second quarter of fiscal 1998 compared to the second quarter of fiscal 1997 and increased slightly in the first six months of fiscal 1998 compared to the first six months of fiscal 1997, but decreased in absolute dollars in both comparative periods primarily due to work force reductions in fiscal 1997.

General and administrative expenses decreased as a percentage of net sales in the second quarter of fiscal 1998 compared to the second quarter of fiscal 1997, and increased slightly as a percentage of net sales in the first six months of fiscal 1998 compared to the first six months of fiscal 1997, but decreased in absolute dollars in both comparative periods, primarily due to work force reductions in fiscal 1997.

Overall, operating expenses declined more rapidly than revenues in the second quarter of fiscal 1998 compared to the second quarter of fiscal 1997, but less rapidly than revenues in the first six months of fiscal 1998 compared to the first six months of fiscal 1997.

	YTD 1998	Change	YTD 1997

Employees Annualized revenue per employee (000's)	4,570 $ 220	-20 % -1 %	5,746 $ 223

In fiscal 1997, the Company reduced its workforce by approximately 1,000 employees as the Company realigned its resources to better manage and control its business.

Other Income, Net

	Q2 1998	Change	Q2 1997	YTD 1998	Change	YTD 1997

Other income (expense), net (millions) Percentage of net sales	$ 12 5 %	100 %	$ 6 2 %	$ 27 5 %	35 %	$ 20 3 %

The primary component of other income, net is investment income, which was $15 million in the second quarter of fiscal 1998 compared to $10 million in the second quarter of fiscal 1997 and was $30 million in the first six months of fiscal 1998 compared to $27 million in the first six months of fiscal 1997. The increase is the result of higher realized capital gains as well as higher average yields on investments held. In order to achieve potentially higher returns, a limited portion of the Company's investment portfolio is invested in mutual funds which incur some market risk. The Company believes that the market risk has been limited by diversification and by use of a funds management timing service which switches funds out of mutual funds and into money market funds when preset thresholds are reached.

The Company's investment portfolio includes certain equity securities with gross unrealized losses of $56 million as of April 30, 1998. The securities with unrealized losses are Corel Corporation common stock, which was obtained in March 1996 upon the Company's sale of its personal productivity applications product line and Santa Cruz Operation, Inc. common stock, which was obtained in December 1995 upon the sale of the Company's UnixWare product line. It is the Company's intention to dispose of such shares over the coming periods.

Income Tax Expense (Benefit)

	Q2 1998	Change	Q2 1997	YTD 1998	Change	YTD 1997

Income taxes expense (benefit)(millions) Percentage of net sales Effective tax rate	$ 8 3 % 28 %	214 %	$ (7) -3 % 33 %	$ 13 3 % 28 %	-24 %	$ 17 3 % 33 %

At April 30, 1998 the Company had deferred tax assets of $102 million before a valuation allowance of $7 million. A portion of this asset is realizable based on the ability to offset existing deferred tax liabilities. Realization of the remaining asset is dependent on the Company's ability to generate approximately $233 million of taxable income. Of this, approximately $111 million must be earned outside the United States. Management believes that sufficient income will be earned in the future to realize this asset. Management will evaluate the realizability of the deferred tax assets quarterly and assess the need for additional valuation allowances.

The estimated effective tax rate for fiscal 1998 is lower than the effective tax rate for fiscal 1997 as a result of the loss from operations in fiscal 1997.

Net Income (Loss) and Net Income (Loss) Per Share

	Q2 1998	Change	Q2 1997	YTD 1998	Change	YTD 1997

Net income (loss) (millions) Percentage of net sales Net income (loss) per share - basic Net income (loss) per share - diluted	$ 19 7 % $ .05 $ .05	227 %	$ (15) -5 % $ (.04) $ (.04)	$ 33 6 % $ .10 $ .09	-8 % -10 %	$ 36 6 % $ .10 $ .10

	Q2 1998	Change	Q4 1997

Cash and short-term investments (millions) Percentage of total assets	$ 1,085 57 %	5 %	$ 1,033 54 %

Cash and short-term investments increased to $1,085 million at April 30, 1998 from $1,033 million at October 31, 1997. This increase can be attributed to $69 million provided by operating activities and $14 million provided by financing activities, somewhat offset by $17 million of cash used for expenditures on property, plant and equipment, and $14 million used for other investing activities. The investment portfolio is diversified among security types, industry groups, and individual issuers. The Company's principal source of liquidity has been from operations. At April 30, 1998, the Company's principal unused sources of liquidity consisted of cash and short-term investments and available borrowing capacity of approximately $15 million under its credit facilities. The Company's liquidity needs are principally for the Company's financing of accounts receivable, capital assets, strategic investments and flexibility in a dynamic and competitive operating environment.

During the first six months of 1998, the Company has continued to generate cash from operations. The Company anticipates being able to fund its current operations and capital expenditures planned for the foreseeable future with existing cash and short-term investments together with internally generated funds. The Company believes that borrowings under the Company's credit facilities, or public offerings of equity or debt securities are available if the need arises. Investments will continue in product development and in new and existing areas of technology. Cash may also be used to acquire technology through purchases and strategic acquisitions. Capital expenditures in fiscal 1998 are anticipated to be approximately $45 million, but could be reduced if the growth of the Company is less than presently anticipated.

In June 1998, the Company announced its intent to repurchase and retire up to 10 percent, or approximately 35 million shares of Novell common stock over the next twelve months.

Future Results

The Company's future results of operations involve a number of risks and uncertainties. Among the factors that could cause actual results to differ materially from historical results are the following: business conditions and the general economy; competitive factors, such as rival operating systems, acceptance of new products and price pressures; availability of third-party compatible products at reasonable prices; risk of nonpayment of accounts or notes receivable; risks associated with foreign operations; risk of product line or inventory obsolescence due to shifts in technologies or market demand; timing of software product introductions; market fluctuations of investment securities; and litigation.

The Company is addressing the issues associated with the "year 2000." The Company is utilizing resources to identify, correct, reprogram and test both its systems used internally as well as the products it sells for year 2000 compliance. It is anticipated that all reprogramming efforts will be completed during fiscal 1998 with additional testing continuing through fiscal 1999.

Novell believes that it has the product offerings, facilities, personnel, and competitive and financial resources for continued business success, but future revenues, costs, margins, product mix, and profits are all influenced by a number of factors, such as those discussed above, as well as risks described in detail in the Company's fiscal 1997 report on Form 10-K.

Part II. Other Information

Except as listed below, all information required by items in Part II is omitted because the items are inapplicable or the answer is negative.

Item 1. Legal Proceedings.

The information required by this item is incorporated herein by reference to Footnote E of the Company's financial statements contained in Part I, Item 1 of this Form 10-Q.

Item 4. Submission of Matters to a Vote of Security Holders

The Company held its Annual Meeting of Shareholders on April 7, 1998 for the following purposes:

1.	To elect six directors:

2.	To approve and ratify the adoption of an amendment to the Novell, Inc. 1989 Employee Stock Purchase Plan to increase the shares reserved for issuance thereunder from 12,000,000 to 18,000,000.

3.	To ratify the selection of Ernst & Young, LLP as independent auditors for Novell, Inc.

The following tables set forth the outcome of the matters voted upon at the meeting and the number of votes cast for, against or withheld.

Proposal 1	Votes For	Votes Withheld

Election of Directors Eric E. Schmidt John A. Young Elaine R. Bond Hans-Werner Hector Jack L. Messman Larry W. Sonsini	305,236,289 302,773,827 262,576,579 262,801,106 260,610,914 257,957,034	4,840,691 7,303,153 47,500,401 47,275,874 49,466,066 52,119,946

Proposal 2	Votes For	Votes Against	Votes Withheld/Abstained

Approval and ratification of the adoption of an amendment to the Novell, Inc. 1989 Employee Stock Purchase Plan	298,799,558	9,382,798	1,894,624


Proposal 3	Votes For	Votes Against	Votes Withheld/Abstained

Ratify the selection of Ernst & Young, LLP as Independent Auditors	306,561,404	2,451,198	1,064,378

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits

Exhibit
Number
27*

Description
Financial Data Schedule

(b) Reports on Form 8-K.

No reports on Form 8-K were filed by the Registrant during the quarter ended April 30, 1998.

*Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Novell, Inc. (Registrant)
Date: June 10, 1998	/s/ Dr. Eric E. Schmidt Dr. Eric E. Schmidt Chairman of the Board and Chief Executive Officer (Principal Executive Officer)
Date: June 10, 1998	/s/ Dennis R. Raney Dennis R. Raney Senior Vice President and Chief Financial Officer (Principal Financial Officer)

Date: June 10, 1998

/s/ Cliff Simpson
Cliff Simpson
Vice President Finance and
Corporate Controller
(Principal Financial Officer)