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Novell Finalizes IBM Investment

  • IBM to purchase $50 million in Novell convertible preferred share

SALT LAKE CITY (BrainShare® 2004)
March 22, 2004

Novell today announced it has signed a definitive agreement with IBM in connection with IBM?s previously announced $50 million investment in Novell. Publicized in conjunction with Novell?s offer to acquire SUSE® LINUX in November 2003, the investment, the primary terms of which were negotiated in November 2003, entails the purchase by IBM of Novell Series B convertible preferred shares that are convertible into 8 million shares of Novell common stock at a price of $6.25 per share. The Series B convertible preferred shares are entitled to a dividend of 2% per annum, payable quarterly in cash.

Due to an increase in Novell?s common stock price since November 2003, Novell expects to record a one-time, non-cash deemed dividend of approximately $26 million attributable to the value of the preferred stock?s conversion feature. This beneficial conversion feature will have no impact on net income, but will reduce earnings available for common shareholders and thus reduce basic and diluted earnings per share by approximately $0.07 in the current quarter.

In conjunction with the investment, Novell and IBM signed commercial agreements that extend the previous agreements between IBM and SUSE LINUX for Linux development and promotional activities.

About Novell

Novell, Inc. (Nasdaq: NOVL) is a leading provider of infrastructure software and services to over 50,000 customers in 43 countries. With more than 20 years of experience in data center, workgroup and desktop solutions, Novell's 6,000 employees, 5,000 partners and support centers around the world are meeting customer requirements for identity-driven computing and Linux solutions. By providing enterprise-class software and support for commercial and open source software, Novell delivers increased operating flexibility and choice at a lower total cost of ownership. More information about Novell can be found at http://www.novell.com.

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