Press Release

Consolidated Unaudited Condensed Statements of Operations Consolidated Unaudited Condensed Balance Sheets Consolidated Unaudited Condensed Statements of Cashflows Statement of Cash Flows Unaudited Non-GAAP Adjusted Earnings Information

Novell reports financial results for third fiscal quarter 2004

• Reports improved earnings performance
• Embraces Linux, a disruptive technology, as the basis for its strategic growth
• Identity management solutions create the first line of defense for information security

WALTHAM, Mass. — Aug. 19, 2004 — Novell, Inc. (NASDAQ:NOVL) today announced financial results for its third fiscal quarter ended July 31, 2004. For the quarter, Novell reported revenues of $305 million, compared to revenues of $283 million for the third fiscal quarter 2003. Net income available to common stockholders in the third fiscal quarter 2004 was $23 million, or $0.06 per diluted common share. This compared to a net loss available to common stockholders of $12 million, or $0.03 loss per common share, for the third fiscal quarter 2003.

Included in Novell’s financial results for the third fiscal quarter 2004 is revenue of $14 million and interest income of $5 million from The Canopy Group, Inc. as a result of a previously announced legal judgment in favor of Novell.

On a non-GAAP basis, adjusted net income available to common stockholders for the third fiscal quarter 2004 was $14 million, or $0.04 per diluted common share, which excludes the effect of the payment from Canopy of $19 million, restructuring charges of $9 million and investment impairments of $1 million. This compares to non-GAAP adjusted net income available to common stockholders for the third fiscal quarter 2003 of $7 million, or $0.02 per diluted common share. Full details on Novell’s reported results, including a reconciliation of the non-GAAP adjusted results, are included in the financial schedules that are a part of this release.

In the third fiscal quarter 2004, foreign currency exchange rates favorably impacted total revenue by approximately $5 million year-over-year. There was no material foreign currency impact to net income.

Also in the third fiscal quarter 2004, Novell recognized revenue of $12 million associated with its SUSE® LINUX business. Sales of subscriptions to SUSE Linux Enterprise Server reached 19,000 units in the quarter, with 12,000 of the units sold to one customer.

For the first nine months of fiscal 2004, Novell reported revenue of $865 million and net income of $44 million. The net income available to common stockholders in this period was $18 million, or $0.05 per diluted common share, after consideration of a $26 million deemed dividend related to the beneficial conversion feature of preferred stock and related preferred stock cash dividends. For the first nine months of fiscal 2003, the company reported revenue of $819 million and a net loss available to common stockholders of $53 million, or $0.14 loss per common share.

“While revenue was not as strong as we would have liked, Novell improved earnings performance for the quarter and nine months period versus the same periods last year,” said Jack Messman, Chairman and CEO of Novell. “Novell’s transition to growth company status is well underway as we strengthen our products and services in both the Linux and identity management categories. Our SUSE Linux business performed well in this quarter and is proving instrumental in positioning Novell as a strategic vendor to large enterprises. Our identity management products and services are creating the first line of defense for corporations seeking to improve the security and effectiveness of their information systems.”

Messman added, “We are witnessing the early impact of Linux, a disruptive technology, as it gives enterprises incomparable choices and flexibility in lowering their costs and reducing their vulnerability to security breaches. The collective innovation of the open source community that supports Linux will significantly disrupt the historical order in the information technology market to the benefit of corporations and consumers.”

On the balance sheet, cash and short-term investments were $1.1 billion at July 31, 2004, compared with $636 million at April 30, 2004. This increase in cash and short-term investments is primarily attributable to the issuance of $600 million of convertible senior debentures during the quarter and positive cash flow from operations of $65 million, offset by the repurchase of $125 million of common stock. Days sales outstanding (DSO) in accounts receivable increased to 77 days at the end of the third fiscal quarter 2004, up from 67 days in the prior quarter. Deferred revenues were $337 million at the end of the third fiscal quarter 2004, up $42 million or 14% year over year. Stockholders’ equity at July 31, 2004 declined $72 million from April 30, 2004 as a result of the repurchase of $125 million of common stock, offset by $23 million in net income available to common stockholders and $25 million from conversion of preferred stock into common stock. Cash flow from operations, including the payment from Canopy, was $65 million for the third fiscal quarter 2004, up $60 million from a year ago.

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 quarter will be broadcast at 5PM EDT August 19, 2004, from Novell’s Investor Relations Web page: http://www.novell.com/company/ir/qresults/. The domestic conference call dial-in number is 888-323-5254, password “Novell”, and the international dial-in number is +1-773-756-4625, password “Novell”.

The call will be archived on the Web site approximately 15 minutes after its conclusion, and will be available for telephone playback through midnight, September 2. The domestic toll-free replay number is 866-360-3305, and the international replay number is +1-203-369-0160.

A copy of this press release is posted on Novell’s Web site at: http://www.novell.com/company/ir/qresults/.

Legal notice regarding 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 open source 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 success in executing its Linux strategies, Novell’s ability to deliver on its one Net vision of the Internet, Novell’s ability to take a competitive position in the Linux 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 Current Report on Form 8-K filed with the Securities and Exchange Commission on July 2, 2004. 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. 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^SM). Active in the open source community with its Ximian® and SUSE Linux brands, Novell provides a full range of Linux products and services for the enterprise from the desktop to the server. 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 Ximian 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. SUSE is a registered trademark of SUSE Linux AG, a Novell company. *All third-party trademarks are the property of their respective owners.

Press Contact:
Bruce Lowry
Novell, Inc.
Phone: 415-298-7693
E-Mail: blowry@novell.com

Investor Relations Contact:
Bill Smith
Novell, Inc.
Phone: 800-317-3195
E-Mail: wsmith@novell.com

Novell, Inc. Consolidated Unaudited Condensed Statements of Operations (In thousands, except per share data)
		Fiscal Quarter Ended				Fiscal Year-to-Date
		Jul 31, 2004		Jul 31, 2003		Jul 31, 2004		Jul 31, 2003
Net revenue
	New software licenses	$        58,693		$        69,255		$     173,768		$      194,758
	Maintenance and services	245,904		213,554		691,492		623,989
Total net revenue		304,597		282,809		865,260		818,747
Cost of revenue
	New software licenses	5,613		5,886		16,621		17,070
	Maintenance and services	98,343		101,591		288,653		296,742
	Intangible asset impairments	-		23,569		-		23,569
Total cost of revenue		103,956		131,046		305,274		337,381
Gross profit		200,641		151,763		559,986		481,366
Operating expenses
	Sales and marketing	90,998		92,470		266,413		292,512
	Product development	49,052		48,178		151,282		139,454
	General and administrative	28,729		28,379		79,201		86,663
	Restructuring	9,250		26,350		13,987		35,025
	Gain on sale of property, plant and equipment	-		(24,934)		(1,977)		(24,934)
Total operating expenses		178,029		170,443		508,906		528,720
Income (loss) from operations		22,612		(18,680)		51,080		(47,354)
Other income (expense), net		6,182		(5,082)		9,034		(23,746)
Income (loss) before taxes		28,794		(23,762)		60,114		(71,100)
Income tax expense (benefit)		5,389		(11,362)		16,191		(18,200)
Net income (loss)		23,405		(12,400)		43,923		(52,900)
Deemed dividend related to beneficial conversion feature of preferred stock		-		-		(25,680)		-
Preferred stock dividends		(189)		-		(291)		-
Net income (loss) available to common stockholders		$     23,216		$     (12,400)		$       17,952		$      (52,900)
Net income (loss) per common share:
	Basic	$          0.06		$         (0.03)		$         0.05		$           (0.14)
	Diluted	$       0.06		$      (0.03)		$      0.05		$        (0.14)
Weighted average shares:
	Basic	383,400		371,484		382,678		369,435
	Diluted	397,776		371,484		396,943		369,435
Certain reclassifications, none of which affected net income, were made to the prior period amounts in order to conform to the current period's presentation.

Novell, Inc. Consolidated Unaudited Condensed Balance Sheets (In thousands)
ASSETS			Jul 31, 2004		Oct 31, 2003
Current assets
	Cash, cash equivalents and short-term investments		$        1,149,387		$        751,852
	Receivables, net		245,373		232,492
	Prepaid expenses		30,458		23,005
	Other current assets		25,389		23,204
Total current assets			1,450,607		1,030,553
Property, plant and equipment, net			246,242		255,526
Long-term investments			56,122		50,948
Goodwill			405,448		213,300
Intangible assets, net			51,313		10,800
Other assets			20,911		6,526
Total assets			$     2,230,643		$     1,567,653
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities
	Accounts payable		$           52,781		$          50,258
	Accrued compensation		115,430		101,164
	Other accrued liabilities		103,670		117,073
	Income taxes payable		40,504		35,493
	Deferred revenue		337,461		322,470
Total current liabilities			649,846		626,458
Deferred income taxes			16,959		-
Long-term debt			600,000		-
Total liabilities			1,266,805		626,458
Minority interests			6,798		6,725
Preferred stock			25,000		-
Stockholders' equity			932,040		934,470
Total liabilities and stockholders' equity			$     2,230,643		$    1,567,653
Certain reclassifications, none of which affected net income, were made to the prior period amounts in order to conform to the current period's presentation.

Novell, Inc. Consolidated Unaudited Condensed Statements of Cash Flows (In thousands)
		Fiscal Quarter Ended				Fiscal Year-to-Date
		Jul 31, 2004		Jul 31, 2003		Jul 31, 2004		Jul 31, 2003
Cash flows from operating activities:
	Net income (loss)	$  23,405		$   (12,400)		$  43,923		$   (52,900)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Gain (loss) on sale of property, plant and equipment	10		(24,934)		(1,967)		(25,299)
	Depreciation and amortization	11,854		14,190		38,946		49,174
	Non-cash restructuring charges	4,454		14,551		9,191		23,226
	Intangible asset impairments, net of tax	-		13,935		-		13,935
	Long-term investment impairments	552		8,040		2,448		32,563
	Changes in assets and liabilities	24,582		(7,885)		(24,947)		(38,689)
	Net cash provided by operating activities	64,857		5,497		67,594		2,010
Cash flows from financing activities:
	Issuance of common stock, net	1,364		807		47,984		7,854
	Issuance of preferred stock	-		-		50,000		-
	Issuance of long-term debt	600,000		-		600,000		-
	Payment of issuance costs on long-term debt	(14,850)		-		(14,850)		-
	Payment of preferred stock dividend	(190)		-		(292)		-
	Repurchase of common stock - held in treasury	(125,000)		-		(125,000)		-
	Net cash provided by financing activities	461,324		807		557,842		7,854
Cash flows from investing activities:
	Expenditures for property, plant and equipment	(7,511)		(8,828)		(19,524)		(30,605)
	Proceeds from the sale of property, plant and equipment	163		124,215		2,140		125,000
	Short-term investment activity	(193,567)		(44,438)		(193,514)		(117,240)
	Cash paid for SUSE Linux	-		-		(211,468)		-
	Cash received from SUSE Linux	-		-		11,170		-
	Cash paid for Salmon	(8,470)		-		(8,470)		-
	Cash received from Salmon	3,148		-		3,148		-
	Other	222		(1,100)		(2,212)		(329)
	Net cash (used) provided by investing activities	(206,015)		69,849		(418,730)		(23,174)
(Decrease) in cash and cash equivalents		320,166		76,153		206,706		(13,310)
Cash and cash equivalents — beginning of period		253,472		374,524		366,932		463,987
Cash and cash equivalents — end of period		573,638		450,677		573,638		450,677
Short-term investments- end of period		575,749		288,100		575,749		288,100
Cash and short-term investments — end of period		$   1,149,387		$   738,777		$   1,149,387		$   738,777
Certain reclassifications, none of which affected net income, were made to the prior period amounts in order to conform to the current period's presentation.

Novell, Inc. Unaudited Non-GAAP Adjusted Earnings Information (In thousands, except per share data)
	GAAP As Reported	Adjustments	Non-GAAP Adjusted
Fiscal quarter ended July 31, 2004
Net revenue	$     304,597	$  (13,500) (a)	$  291,097
Gross profit	200,641	(13,500) (a)	187,141
Income (loss) from operations	22,612	(4,070) (b)	18,542
Income (loss) before taxes	28,794	(8,561) (c)	20,233
Net income (loss)	23,405	(9,453) (d)	13,952
Net income (loss) available to common stockholders	23,216	(9,453) (d)	13,763
Diluted net income (loss) per common share	$            0.06	$      (0.02) (d)	$         0.04
Fiscal quarter ended April 30, 2004
Net revenue	$     293,556	$           -	$  293,556
Gross profit	187,114	-	187,114
Income (loss) from operations	14,462	2,929 (e)	17,391
Income (loss) before taxes	14,837	3,679 (f)	18,516
Net income (loss)	10,383	3,408 (g)	13,791
Net income (loss) available to common stockholders	(15,399)	29,088 (h)	13,689
Diluted net income (loss) per common share	$          (0.04)	$         0.07 (h)	$         0.03
Fiscal quarter ended July 31, 2003
Net revenue	$      282,809	$           -	$  282,809
Gross profit	151,763	23,569 (i)	175,332
Income (loss) from operations	(18,680)	25,485 (j)	6,805
Income (loss) before taxes	(23,762)	33,485 (k)	9,723
Net income (loss)	(12,400)	19,235 (l)	6,835
Net income (loss) available to common stockholders	(12,400)	19,235 (l)	6,835
Diluted net income (loss) per common share	$          (0.03)	$         0.05 (l)	$         0.02
Footnotes related to adjustments: Reflects satisfaction of judgment against The Canopy Group, Inc. recorded as revenue of $13.5 million. Reflects the item in footnote (a), restructuring charges of $9.3 million and integration costs related to SUSE of $0.2 million. Reflects the items in footnotes (a) and (b), satisfaction of judgment against The Canopy Group, Inc. recorded as interest income of $5 million and long-term investment impairments of $0.6 million. Reflects the items in footnotes (a), (b) and (c), and the necessary related tax adjustments. Reflects restructuring charges of $4.7 million, a gain on the sale of property, plant and equipment of $2.0 million and integration costs related to SUSE of $0.2 million. Reflects the items in footnote (e) and long-term investment impairments of $0.8 million. Reflects the items in footnotes (e) and (f), and the necessary related tax adjustments. Reflects the items in footnotes (e), (f) and (g), and a beneficial conversion feature of $25.7 million. Reflects intangible asset impairments of $23.6 million. Reflects the item in footnote (i), restructuring reserves of $26.4 million, a gain on sale of facilities in San Jose, CA of $24.9 million and an adjustment to prior merger reserves of $0.5 million. Reflects the items in footnotes (i) and (j), and long-term investment impairments of $8.0 million. Reflects the items in footnotes (i), (j) and (k), and the necessary related tax adjustments. Certain reclassifications, none of which affected net income, were made to the prior period amounts in order to conform to the current period's presentation.