Novell Reports Third Fiscal Quarter 1999 Results:

Revenue of $327 Million and Earnings of $0.14 Per Share

PROVO, Utah — August 19, 1999 — Novell, Inc. (NASDAQ:NOVL) today reported revenue of $327 million for its third fiscal quarter ended July 31, 1999, a 20 percent increase over the $272 million recorded in the third quarter of fiscal 1998. Net income was $49 million for the quarter, up from $27 million in the same period of the prior year. Earnings on a diluted basis were $0.14 per share, double the $0.07 reported in the year-earlier period.

For the first nine months of fiscal 1999, Novell's revenue increased 18 percent year-over-year to $928 million due to strong demand for NetWare® server software that deploys Novell® Directory Services® (NDS®), and other directory-related software and services. Net income for the first nine months of fiscal 1999 increased 95 percent to $117 million or $0.33 per share, up from $60 million or $0.17 per share for the same period the year before.

"We are seeing excellent results across Novell's directory business," said Dr. Eric Schmidt, Novell chairman and chief executive officer. "Our three areas of focus: intelligent servers, directory applications, and service, education and consulting are performing very well." During the third quarter, the pace of new product deliveries from the company increased and will carry into fiscal 2000. One of these, Novell Single Sign-on, is the first of an important series of security management products that provide a way for people to sign-on once for secure access to all the different applications they use on the network. "Novell Single Sign-on indicates where we are headed with important new offerings that manage critical issues of network identity and the way businesses work with each other on the Internet."

By product category, revenue from directory-enabled NetWare server software totaled $175 million in the third quarter, up 27 percent from the third quarter of 1998 on very strong gains in Internet Protocol-based NetWare 5. Directory-enabled applications grew 34 percent to $75 million, led by ZENworks™, the industry's first identity-based remote desktop management solution. New directory-related IT consulting services led the category of service, training and consulting revenue, up 43 percent to $49 million. Older pre-directory products declined 37 percent to $28 million.

Growth in revenue from site-licenses for large network directory deployments was up 42 percent year-over-year to $192 million. Approximately half of this revenue stream was from NetWare directory-enabled platform licenses, with the balance from directory-enabled applications, such as GroupWise®, ZENworks, BorderManager™, and support services and directory solutions consulting.

On a geographic basis, the Europe, Middle East and Africa region increased 39 percent year-over-year to $100 million, on strong gains in Germany, the United Kingdom, France, the Netherlands, Spain and Russia. In the Asia Pacific region, revenue of $24 million grew 27 percent, paced by Australia, Japan and Taiwan. United States revenue was $183 million, up 13 percent year-over-year. In the Americas region outside the United States, revenue increased 4 percent to $20 million.

On the balance sheet, cash and short-term investments were $992 million at the end of the third quarter, compared with $1.007 billion at the October 1998 fiscal year-end. Net cash from operations contributed $87 million in the quarter, offset by expenditures for share repurchase, fixed assets and two small acquisitions: Ukiah Software and Netoria. Days sales outstanding of trade receivables declined to 65 days, down from 75 days at the end of fiscal 1998.

On June 23, the company acquired Ukiah Software, a developer of directory-compatible, policy-based network management software that automates the management of traffic and quality-of-service across networks. On May 18, Novell acquired Netoria, a developer of software that simplifies the use of directory services by network users and administrators. The cost of Novell's acquisitions in the quarter, the company's first since 1994, were not disclosed.

During the quarter, the company spent $57 million to repurchase 4 million shares of Novell common stock. On June 5, 1998, Novell's Board of Directors authorized the company to repurchase up to 10 percent, or approximately 35 million shares, of Novell common stock over 12 months. To date, the company has spent $448 million to purchase and retire 34,550,000 shares of common stock that were authorized for repurchase.

Novell also disclosed today that Novell's Board of Directors increased funding for two Novell programs that participate in venture capital activities. After this action, total authorized funds for venture capital investments reached $170 million. An authorization for the Novell Ventures Fund was increased by $30 million to bring the total allocation since inception to $80 million. Through Novell Ventures, the company makes investments in private firms that complement Novell's directory strategy or have the potential of benefiting from the effects of expanding networks. In addition, the Board increased by $45 million the authorized investment for an internally managed VC Fund that invests in venture pools managed by traditional venture capital firms. Since inception, the VC Fund has received a total allocation of $90 million.

Business Outlook
Novell's business objective, over the longer-term, is to grow its revenue around platform independent directory solutions and products that securely manage and control the digital identities of users and resources on the network. Novell Directory Services (NDS) is available for deployment across mixed network environments of servers that run NT and Solaris operating systems, OS/390 from IBM, and by early in 2000, on servers running Linux. Platform independence is a key differentiator for NDS 8 that scales to support hundreds of millions of objects in one NDS directory tree.

Novell plans to expand the number of directory-enabled applications it offers to manage and control business networks. The company believes directory creates an opportunity for Novell to enter software product categories where it has not historically competed. In addition, the company is actively pursuing areas of the Internet market that are still in an embryonic stage of development. Among others, Novell plans to bring new software products to market between now and the end of fiscal 2000 that address electronic commerce infrastructure, quality of service, policy-based management, personal identity control, caching performance and public key security.

A potentially important new product category for Novell is the caching of Web pages and data on networks to enhance overall network performance. Novell believes caching will be valued as a universal network service that has the potential to be deployed behind every major router segment on networks and in front of every Web storefront. Directory-enabled caching from Novell will enable cache services to be integrated with other applications and services on the network. According to the recently released 1999 Caching Report published by the Internet Research Group, Novell leads the software caching market based on 1998 sales of its BorderManager product.

In July, Compaq and Dell Computer were the first OEMs to begin shipping Novell's Internet Caching System™ (ICS) software as the basis for new cache appliance offerings. Novell's ICS software enables these products to be the price/performance leaders for caches that scale from small network to very large data center requirements. ICS will accelerate the delivery of Web pages from any Web server whether it is based on NT, Solaris, other versions of UNIX, Linux or NetWare operating systems.

About Novell
Novell, Inc. (NASDAQ:NOVL) is the world's leading provider of directory-enabled networking software. Novell solutions give businesses total control of their private networks and the Internet, simplifying the management of user access and identity. Novell's worldwide channel, consulting, developer, education and technical support programs are the most extensive in the network computing industry.

For information on Novell's complete range of products and services, contact Novell's Customer Response Center at (888) 321-4CRC (4272), or visit Novell's Web site at www.novell.com. Investors can obtain financial and corporate information at Novell's investor relations Web site at www.novell.com/ir. Press may access Novell announcements and company information on the World Wide Web at www.novell.com/pressroom.

Forward-looking statements in this release are made under the Safe Harbor Reform Act of 1996. These statements are based on current expectations and actual results may differ materially due to risks, uncertainties and other factors. Additional information covering factors that could cause results to differ materially from projected statements can be found in Novell's 10-K and 10-Q filings, as well as the annual report.

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Novell, NetWare, Novell Directory Services, NDS and GroupWise are registered trademarks, and ZENworks, Novell Internet Caching System and BorderManager are trademarks of Novell, Inc. in the United States and in other countries. All third-party trademarks are the property of their respective owners.

Jonathan Cohen
Novell, Inc.
Phone: (408) 967-7268
Internet: jcohen@novell.com