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Novell reports first quarter fiscal 2003 results

Novell, Inc. today reported net revenue of $260 million for its first fiscal quarter ended January 31, 2003, compared to $278 million for the first fiscal quarter 2002, a decline of 6 percent. Net loss in the quarter was $12 million, or $0.03 per share, including an impaired investment charge of $11 million, compared to net income of $8 million, or $0.02 per share, for the first fiscal quarter 2002.

PROVO, Utah | February 27, 2003

Novell, Inc. today reported net revenue of $260 million for its first fiscal quarter ended January 31, 2003, compared to $278 million for the first fiscal quarter 2002, a decline of 6 percent. Net loss in the quarter was $12 million, or $0.03 per share, including an impaired investment charge of $11 million, compared to net income of $8 million, or $0.02 per share, for the first fiscal quarter 2002.

Excluding the impact of impairment charges and other special items in each year, net loss in the first fiscal quarter 2003 would have been $1 million, or $0.00 per share, compared to net income of $7 million, or $0.02 per share, in the first fiscal quarter 2002.

Novell chairman, president and chief executive officer Jack Messman said, "We benefited in the quarter from double digit revenue growth in our identity management and secure Web services offerings, and ZENworks® management offerings. This was offset by declines in networking software and IT consulting. First quarter revenue for Novell is typically lower due to seasonal factors, but a further slowing of the IT business in North America resulted in a larger than anticipated year-over-year decline.

"We believe strongly that success in our industry will be driven by new Web-based solutions that combine the delivery of software and IT services to solve business problems," Messman added. "Novell's strategy is to provide these solutions delivering identity management, secure Web services and cross-platform network services. We see it as the right strategy for today's market, and believe it positions us well for a healthier future IT marketplace."

Major new Novell® Nsure™ identity management customers in the quarter included Pfizer Inc., Waste Management, Inc. and the National Tax Board of Sweden. Typical Nsure solution deployments generate revenue for Novell over a succession of quarters as the company helps customers complete assessment and planning that then leads to software licensing and solution deployments.

For the quarter, Novell software license and maintenance revenue declined 5 percent year-over-year to $159 million. Despite this decline, identity management and secure Web services software had strong growth, up 37 percent year-over-year to total $23 million in the first quarter. Novell brings these solutions to market under the Nsure and exteNd™ brands. Cross-platform services software, marketed under the Nterprise™ brand, declined 9 percent year-over-year to $136 million.

A component of cross-platform services that posted year-over-year improvement was ZENworks management software, part of Novell's management and collaboration software offerings. ZENworks was up 10 percent year-over-year to account for 10 percent of total revenue on the strength of competitive wins made possible by the latest version of ZENworks, which deploys on servers running the Microsoft Windows* 2000 operating system.

Revenue from worldwide services, branded as NgageSM, including IT consulting and other customer services, declined 12 percent year-over-year to $72 million. Celerant management consulting revenue declined 2 percent year-over-year to $29 million.

By geography in the first fiscal quarter, revenue from the United States was $124 million, down 16 percent year-over-year. The Europe, Middle East and Africa region contributed $103 million in revenue, up 6 percent from the prior year period. Revenue from Asia Pacific, including Japan, was $18 million, down 6 percent from the prior year period. Canada and Latin America contributed $15 million, up 10 percent from the prior year period.

On the balance sheet, cash and short-term investments were $651 million at the end of the first fiscal quarter, compared with $636 million at the October 2002 fiscal year-end. Cash flow from operations for the quarter was a positive $25 million. Days sales outstanding (DSO) improved to 56 days, from 65 days in the prior quarter, and increased by four days year-over-year. Deferred revenue was $265 million, up 16 percent year-over-year. Deferred revenue is predominately prepaid software maintenance associated with Novell's large network site license business and will be recognized in future periods.

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

Conference call notification and Web access detail
A live Webcast of a Novell conference call to discuss the first fiscal quarter results with financial analysts will be broadcast at 5 PM EST February 27 on the Quarterly Results page at Novell's Investor Relations Web page: http://www.novell.com/company/ir/qresults/.

Through March 6, an audio replay of the call will be available on the Quarterly Results page of Novell's Investor Relations Web page at: http://www.novell.com/company/ir/qresults/. A telephone replay of the conference call will be available after 7:30 PM EST February 27, through March 6 at 888-446-2545.

Forward looking statements
This press release includes statements that are not historical in nature and that may be characterized as "forward-looking statements," including those related to future financial and operating results, benefits and synergies of the company's brands and strategies, future opportunities and the growth of the market for Web based solutions. You should be aware that Novell's actual results could differ materially from those contained in the forward-looking statements, which are based on current expectations of Novell management and are subject to a number of risks and uncertainties, including, but not limited to, Novell's ability to integrate acquired operations and employees, Novell's ability to deliver on its one Net vision of the Internet, Novell's ability to take a competitive position in the Web services industry, business conditions and the general economy, market opportunities, potential new business strategies, competitive factors, sales and marketing execution, shifts in technologies or market demand and the other factors described in Novell 's Annual Report on Form 10 K for the 2002 fiscal year. Novell disclaims any intention or obligation to update any forward looking statements as a result of developments occurring after the date of this press release.

About Novell
Novell, Inc. (Nasdaq: NOVL) is a leading provider of information solutions that deliver secure identity management (Novell Nsure), Web application development (Novell exteNd) and cross-platform networking services (Novell Nterprise), all supported by strategic consulting and professional services (Novell Ngage). Novell's vision of one Net a world without information boundaries helps customers realize the value of their information securely and economically. For more information, call Novell's Customer Response Center at (888) 321-4CRC (4272) or visit http://www.novell.com. Press should visit http://www.novell.com/pressroom.

Novell and ZENworks are registered trademarks; exteNd, Nsure and Nterprise are trademarks; and Ngage is a service mark of Novell, Inc. in the United States and other countries. * All third-party trademarks are the property of their respective owners.


Press Contacts

Bruce Lowry
Novell, Inc.
Telephone: 415-383-8408
Email: blowry@novell.com



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