Novell Launches Innovative Channel Distribution Program

New Model Expands Delivery Mechanism and Provides Mutual Benefits To Resellers, Distributors, OEM Partners and Customers

PROVO, Utah -- March 17, 1997 -- Novell, Inc. today announced the limited release of an innovative license delivery program that reinforces the value of the sales channel in the distribution of Novell software today and in the future. As the first offering of Novell's Channel Incentive Program for Sales (CHIPS), Novell's IntranetWare for Small Business will be distributed with the Hewlett-Packard (HP) NetServer E40 starting in April in North America and Europe.

The Novell CHIPS program allows resellers to activate product by obtaining the activation key from their distributor. CHIPS was designed to simplify the product delivery mechanism while concurrently harmonizing the OEM and Distributor/Reseller channels by focusing on the core competencies of each. The only change to the business relationship between the distributor and the reseller will be the physical deliverable.

A key aspect of the Novell CHIPS program is that the relationship between the distributor and the reseller stays as it is today, while the resellers gain the added benefit of having the flexibility to order what they need, when they need it. Resellers will no longer have to wait to receive boxed product from the distributor; rather, they will just need to order activation keys from their distributor.

"Novell pioneered the leveraged distribution model in our industry, and we consider ourselves extremely fortunate to have such a mature and sophisticated group of resellers who have invested in us and our products over the years," said Jim T. Sullivan, Novell's vice president worldwide OEM Sales. "As the software industry evolves toward electronic delivery of licenses and software, we realize that this is a perfect opportunity to reinvent our delivery mechanism in partnership with the channel. For this reason, we have designed the Novell CHIPS program to enhance our relationship with our channel both by simplifying the way they do business with us and by leveraging the growth of the Internet and electronic communications.

"The CHIPS program reaffirms Novell's commitment to and the leadership position of the channel. The distributor's and reseller's role in the software distribution process is reinforced according to the value added by each. The Novell CHIPS program will give our partners an easier, faster and more economical way to service their customers."

Novell's expanded distribution strategy is simple, in keeping with its current move toward electronic distribution of its product licenses. The enabling mechanism for the implementation of the Novell CHIPS program is a repository of "activation keys." In the Novell CHIPS model, the distributor will facilitate the delivery of these keys in place of actual "red box" Novell products. When an "activation key" is paired with the disabled Novell product license CD distributed with the OEM Partner's system, the Novell product will be enabled for use. Ultimately, this matched pair scenario will be replaced by the electronic delivery of licenses "over the wire," giving the distributor the flexibility to retrieve licenses as they need them.

"We are excited about this innovative approach," said Michael McKee, director of product marketing, Intelligent Electronics. "The Novell CHIPS program will give us the opportunity to move into the electronic licensing era. And, of course, we're delighted any time we have the opportunity to increase efficiencies and therefore decrease our costs."

Another fundamental aspect of the Novell CHIPS program focuses on the relationship between Novell and its OEM partners. Under this program, the OEM becomes a partner which shares revenue with Novell for delivering Novell products. In addition, the OEM can more easily deliver Novell products, thus allowing the OEM to focus on the strategic developmental and value-add issues.

The Novell CHIPS program provides other important benefits. Because the content and access of this database will be tightly managed, Novell will have more control over its intellectual properties. The activation key, when issued, will require the input of information that will leave a trail for the discovery of illegal copies of the product, thus minimizing, if not eliminating, piracy. And Novell's partners will realize the revenue instead of the pirates. The registration information created with key activation provides a database of marketing information beneficial to all partners.

About Novell

Founded in 1983, Novell (NASDAQ: NOVL) is the world's leading provider of network software. The company offers a wide range of network solutions for distributed network, Internet, intranet and small- business markets, as well as the network computing industry's most comprehensive education and technical support programs. Information about Novell's complete range of products and services can be accessed on the World Wide Web at http://www.novell.com.

Novell is a registered trademark of Novell, Inc. All other registered trademarks and trademarks are the property of their respective holders.

Press Contact:
Terri Molini
Novell, Inc.
Phone: 408-577-7887
Internet: tmolini@novell.com

Pattie Heisser
Novell, Inc.
Phone: 510-803-0170
Internet: pheisser@ix.netcom.com

Novell Launches Innovative Channel Distribution Program

Q: What is CHIPS?

A: CHIPS stands for CHannel Incentive Program for Sales and is a license delivery program that reinforces the value of the OEM partner, distributor, and reseller channel, and motivates collaboration between all Novell partners. The deliverable for CHIPS is an activation key that is sold separately. In the program's current limited release, the activation keys are available for IntranetWare for Small Business bundled with the HP NetServer E40. A disabled license CD is supplied with the server that can only be activated through the application of the activation key.

Q: How does the CHIPS program expand distribution of Novell products?

A: The CHIPS program will allow Novell's partners to deliver more Novell products on more platforms and provide a mechanism for these products to be easily purchased, installed and configured.

Q: Does the CHIPS program change Novell's relationship with its channel?

A: Yes. The CHIPS program will enhance the relationship with the Novell channel. This is the first step in Novell's effort to automate the buying process through the channel and leverage the electronic commerce infrastructure being developed by Novell and partners. Novell values the channel as an extension of the company and will continue to solidify that relationship by making the channel an integral part of our electronic delivery plans.

Q: Which products are currently being distributed via the CHIPS delivery mechanism?

A: In this limited release phase we are shipping IntranetWare for Small Business bundled with the HP NetServer E40.

Q: What is IntranetWare for Small Business?

A: IntranetWare for Small Business provides the most affordable, reliable solution for networks of 25 users or less. IntranetWare for Small Business enables easy communication, collaboration and management by including:

• Novell Easy Administration Tool™ (NEAT™), which provides a simple interface for network management such as creating, deleting and modifying users, groups, applications and printers on the network
• A single-site directory, integrated with NEAT, to provide customers with all the information management and access capabilities of the industry standard, Novell Directory Services™ (NDS™)
• NetWare Connect™ for remote network access from any location through the Internet, and modem pooling for significant cost savings by sharing modem hardware and phone lines
• Management tools based on Novell ManageWise™ to provide easy remote network management for customers who prefer to outsource network management
• GroupWise™ 5 support so customers can add Novell's client/server messaging system that integrates e-mail, calendaring/scheduling and task management with document management and workflow into a single Universal Mail Box

A: The major benefit to the OEM is that they become revenue-sharing partners with Novell. This frees them to focus on what they do best, which is to build the best systems possible and integrate their value-add components. The distributor will deliver the activation keys as an alternative to shrink-wrapped product, reducing internal costs and facilitating delivery. The reseller will receive software bundled with their servers and then have the flexibility to purchase exactly what they need, when they need it. The customer has the benefit of knowing the software they have purchased has been fully tested and integrated on their hardware of choice.

Q: How do you use the activation key to enable the software?

A: An end-user requests individual licenses from its reseller. The reseller contacts the distributor for an activation key specific to the needs of that customer. Then, the reseller works with the customer to activate the software. By working in this manner, the CHIPS program leverages and strengthens the existing relationships between customers and resellers and between resellers and distributors.

Q: When will the CHIPS program be expanded to include other Novell vendors?

A: Novell's OEM partners will be briefed in-depth about this program during our Global Partners Forum in early April. We anticipate our partners will embrace this model and move quickly to participate beginning in Q3 and Q4 of 1997.

Q: When will the CHIPS program be expanded to include other Novell products?

A: Throughout the second half of 1997 and the first half of 1998, beginning with IntranetWare and moving to other Novell products.

Q: How will the introduction of the activation key database allow Novell to thwart piracy?

A: The content and access of this database will be tightly managed. The activation key is easily controlled. Replication of the software itself without the activation key is of no benefit to pirates.

Q: Where can I get more information on Novell's CHIPS program?

A: If you are a Novell-HP reseller, then you should be talking to your distributor and/or local Novell or HP salesperson. If you are a Novell OEM, then you should plan to attend the Global Partners Forum and contact your Novell Account Manager.