Novell Reports Fourth Quarter and Full-Year Fiscal 1999 Results

• Revenue of $345 Million and Earnings of $0.21 Per Share in Fourth Quarter
• Fiscal 1999 Results of $1.273 Billion and $0.55 Per Share

PROVO, Utah — Nov. 23, 1999 — Novell, Inc. (NASDAQ:NOVL) today reported revenue of $345 million for its fourth fiscal quarter ended Oct. 31, 1999, a 16-percent increase over the $298 million recorded in the fourth quarter of fiscal 1998. Net income was $74 million for the quarter, up 76 percent from $42 million in the same period of the prior year. Earnings on a diluted basis were $0.21 per share, in part reflecting a tax settlement for prior years. This compares with $0.12 reported in the year-earlier period.

For the full year fiscal 1999, Novell's revenue increased 17 percent year-over-year to $1.273 billion. Overall growth was driven by directory-related revenue from NetWare servers, directory-enabled applications, education and consulting. These product categories were up 30 percent to $1.155 billion compared with fiscal 1998. Net income for fiscal 1999 increased 87 percent to $191 million or $0.55 per share, up from $102 million or $0.29 per share for the same period the year before.

"In fiscal 1999, Novell accomplished what we said we would do," said Dr. Eric Schmidt, Novell chairman and chief executive officer. "We more than doubled our growth rates around the directory products that are fast emerging as the basis for IT solutions to support and manage business growth. We saw stellar performance from the NetWare 5 server platform and new directory applications such as ZENworks. And, we met the aggressive corporate and financial objectives that management established for the company.

"Significantly, the company achieved the broadest market reach for network caching of any vendor through new OEM agreements in the fourth quarter. We are the only vendor with cache software that can truly scale from the branch office to large scale Internet requirements. Cache appliances from OEM partners, based on Novell Internet Caching System (ICS) software, represent a major new revenue opportunity over coming years."

Ten OEM partners have announced intentions to deliver cache products based on ICS appliance software, including Compaq, Dell, IBM, NEC and Toshiba. Compaq and Dell have begun shipping their products and the others are due in early 2000. After quarter-end, Novell announced additional ICS licenses with Hitachi and Legend, China's leading PC manufacturer. In fiscal 1999, between ICS and BorderManager software, Novell generated more than $38 million in cache-related revenue.

By product category, revenue from directory-enabled NetWare server software totaled $176 million in the fourth quarter, up 17 percent from the fourth quarter of 1998 based on strong demand for Internet Protocol based NetWare 5. Directory-enabled applications grew 32 percent to $90 million, led by fast growing ZENworks remote workstation management, BorderManager security and caching suite and NDS for NT. Service, training and consulting revenue increased 37 percent to $50 million on the strength of new directory-based consulting. Older pre-directory products declined 32 percent to $29 million and accounted for less than 9 percent of fourth quarter revenue.

On a geographic basis, United States revenue was $191 million in the fourth quarter, up 7 percent year-over-year. The Europe, Middle East and Africa region increased 29 percent to $104 million, led by Germany, the United Kingdom, Scandinavia, the Netherlands, France and Poland. In the Asia Pacific region, revenue of $28 million grew 31 percent, paced by Japan, Australia and India. Revenue in the Americas region outside the United States increased 31 percent to $22 million.

During October 1999, the company reached settlement with the Internal Revenue Service for tax years 1994 through 1997. This settlement resulted in a $15.2-million reduction in the provision for income taxes during the fourth quarter of fiscal 1999, adding $0.04 per share to reported earnings in the quarter. All years prior to 1994 had been previously settled.

On the balance sheet, cash and short-term investments were $895 million at the end of the fourth quarter, compared with $1.007 billion at the October 1998 fiscal year-end. Net cash from operations contributed $74 million in the quarter. Days sales outstanding of trade receivables was 81 days, up from 75 days at the end of fiscal 1998. The increase was due principally to a significant number of licensing renewals invoiced during the last month of the quarter, and to a $24 million increase in deferred revenue, totaling $173 million at year-end.

During the quarter, the company spent $199 million to repurchase 9.3 million shares of Novell common stock. On Aug. 19, Novell directors authorized up to $500 million for a share repurchase program through Oct. 31, 2000. In fiscal 1999, the company spent $403 million to purchase and retire 23 million shares of common stock.

Business Outlook

Novell's business objective, over the longer-term, is to grow its revenue around directory products and solutions that are deployed across varied computing environments to support e-business. Novell Directory Services (NDS) eDirectory runs on Sun Solaris, Microsoft NT and Novell NetWare operating systems. By early 2000 it will be available for Linux and Compaq Tru64. Scalable e-business applications and services can be built on NDS eDirectory. Novell intends to build a new generation of directory-enabled applications and partnerships for scalable IT solutions that securely extend from business networks into the Internet.

Novell is expanding the number of directory-enabled applications it offers to manage and control business networks. The company is entering new software product categories where it has not historically competed. In addition, Novell 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, personal identity control, quality of service, policy-based management, cache management and public key security.

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.

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 http://www.novell.com. Investors can obtain financial and corporate information at Novell's investor relations Web site at http://www.novell.com/ir. Press may access Novell announcements and company information on the World Wide Web at http://www.novell.com/pressroom. In addition, detailed comparisons between Novell products and competitive offerings from other vendors are available on the Web at http://www.novell.com/advantage. For information on the Year 2000 status of Novell products, please access Novell's Year 2000 Web site at http://www.novell.com/year2000 or contact Novell's Customer Response Center at year2000@novell.com.

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

Press Contacts:
Peter Troop
Novell, Inc.
Phone: (408) 967-8150
Internet: peter_troop@novell.com

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

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