Novell Reports Financial Results for Fourth Fiscal Quarter and Full Fiscal Year 2007

WALTHAM, Mass., Dec. 13 /PRNewswire-FirstCall/ -- Novell, Inc. (NASDAQ: NOVL) today announced financial results for its fourth fiscal quarter and full fiscal year ended Oct. 31, 2007. For the quarter, Novell reported net revenue of $245 million, which excludes $6 million of revenue from its Swiss-based business consulting unit, which Novell agreed to sell during the quarter. This compares to net revenue of $234 million for the fourth fiscal quarter 2006. The loss from operations for the fourth fiscal quarter 2007 was $13 million, compared to income from operations of $4 million for the fourth fiscal quarter 2006. The loss available to common stockholders from continuing operations in the fourth fiscal quarter 2007 was $9 million, or $0.03 loss per common share. This compares to income available to common stockholders from continuing operations of $21 million, or $0.05 per diluted common share, for the fourth fiscal quarter 2006. Foreign currency exchange rates favorably impacted total revenue by approximately $6 million and did not materially impact the loss from operations year-over-year.

On a non-GAAP basis, adjusted income from operations for the fourth fiscal quarter 2007 was $20 million. This compares to non-GAAP adjusted income from operations of $18 million in the year-ago quarter. Non-GAAP adjusted income available to common stockholders from continuing operations for the fourth fiscal quarter 2007 was $20 million, or $0.06 per adjusted diluted common share. This compares to non-GAAP adjusted income available to common stockholders from continuing operations of $20 million, or $0.05 per adjusted diluted common share, for the fourth fiscal quarter 2006.

In the fourth fiscal quarter 2007, Novell entered into an agreement to sell its Swiss-based business consulting unit. Accordingly, all financial results for this unit were excluded from Novell's continuing operations for income statement reporting purposes and are reported as discontinued operations.

For the full fiscal year 2007, Novell reported net revenue of $932 million and a loss available to common stockholders from continuing operations of $26 million, or $0.08 loss per common share. Comparatively, net revenue for the full fiscal year 2006 was $919 million and income available to common stockholders from continuing operations was $4 million, or $0.01 per diluted common share. Foreign currency exchange rates favorably impacted total revenue by approximately $15 million and negatively impacted the loss from operations by $5 million year-over-year.

For the fourth fiscal quarter 2007, Novell reported $23 million of revenue from Open Platform Solutions, of which $22 million was from Linux(*) Platform Products, up 69 percent year-over-year. Linux Platform Products invoicing was $46 million during the quarter, up 108 percent year-over-year. Revenue from Identity and Security Management was $33 million, of which Identity and Access Management was $30 million, up 27 percent year-over-year. Revenue from Systems and Resource Management was $36 million, up 5 percent year-over-year. Workgroup revenue of $88 million was up 1 percent year-over-year.

"We are pleased with our overall results for 2007. While undergoing transformational change, we grew revenue and exceeded our operating targets. We are on the right path to long-term, sustainable profitability," said Ron Hovsepian, president and CEO of Novell.

Cash, cash equivalents and short-term investments were $1.9 billion at Oct. 31, 2007, up from $1.5 billion last year. Days sales outstanding in accounts receivable was 77 days at the end of the fourth fiscal quarter 2007, down from 86 days at the end of the year-ago quarter. Total deferred revenue was $768 million at the end of the fourth fiscal quarter 2007, up $341 million, or 80 percent, from Oct. 31, 2006. Cash flow from operations was $77 million for the fourth fiscal quarter 2007, compared to $62 million in the fourth fiscal quarter 2006.

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.

    Financial Outlook
    Novell management issues the following financial guidance:

    For the full fiscal year 2008:
    -- Net revenue is expected to be between $920 million and $945 million.
    -- Non-GAAP adjusted operating margin is expected to be between 7 and
       9 percent.

Non-GAAP Financial Measures

We supplement our consolidated unaudited condensed financial statements presented in accordance with GAAP with certain non-GAAP financial measures. These non-GAAP measures include adjusted income from operations, adjusted operating margin, adjusted diluted income available to common stockholders from continuing operations, and adjusted diluted income per common share from continuing operations based on an adjusted number of diluted weighted average shares. We provide non-GAAP financial measures to (i) enhance an overall understanding of our current financial performance and prospects for the future and (ii) enable investors to evaluate our performance in the same way that management does. Management uses these non-GAAP adjusted financial measures to evaluate performance, allocate resources, and determine commissions and bonuses. The non-GAAP adjusted financial measures do not replace the presentation of our GAAP financial results, but they eliminate expenses and gains that are unusual, that are excluded from analysts' consensus estimates, and/or that arise outside of the ordinary course of business, such as, but not limited to, stock-based compensation expenses, restructuring expenses, asset impairments, litigation judgments and settlements, the write-off of acquired in-process research and development, and gains (losses) on the sale of business operations, long-term investments, and property, plant and equipment.

A summary of Novell's vision, mission and strategy can be accessed on the Novell(R) Web site at: http://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 and the year will be broadcast at 5:00 PM ET Dec. 13, 2007, from Novell's Investor Relations Web page: http://www.novell.com/company/ir/qresults/. The domestic conference call dial-in number is 866-335-5255, password "Novell", and the international dial-in number is +1-706-679-2263, password "Novell".

The call will be archived on the Novell Web site approximately two hours after its conclusion and will remain on the Web site until Dec. 28, 2007. The call will also be available for telephone playback through midnight ET, Dec. 28, 2007. The domestic toll-free replay number is 800-642-1687, and the international replay number is +1-706-645-9291. Replay listeners must enter conference ID number 28171181.

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" within the meaning of the Private Securities Litigation Reform Act, 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 Identity and Access Management and Linux Platform Products. 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 transform its business through the implementation of its strategic plan, Novell's ability to realize the benefits anticipated from the Microsoft transaction and Novell's restructuring plan, and the expected charges to be incurred and payments to be made under the restructuring plan, Novell's ability to achieve its expense targets, Novell's success in executing its Linux Platform Products, Identity and Access Management, and Systems and Resource Management strategies, Novell's ability to take a competitive position in the Linux Platform Products, Identity and Access Management, and Systems and Resource Management industries, business conditions and the general economy, market opportunities, potential new business strategies, competitive factors, sales and marketing execution, shifts in technologies or market demand, Novell's ability to integrate acquired operations and employees, and the other factors described in Novell's Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 25, 2007. 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 except as required by the securities laws.

About Novell

Novell, Inc. (NASDAQ: NOVL) delivers infrastructure software for the Open Enterprise. Novell is a leader in desktop to data center operating systems based on Linux and the software required to secure and manage mixed IT environments. Novell helps customers around the world minimize cost, complexity and risk, allowing them to focus on innovation and growth. For more information, visit http://www.novell.com.

Novell is a registered trademark of Novell, Inc. in the United States and other countries. *Linux is a registered trademark of Linus Torvalds. All other third-party trademarks are the property of their respective owners.

                                 Novell, Inc.
          Consolidated Unaudited Condensed Statements of Operations
                    (In thousands, except per share data)

                                 Fiscal Quarter Ended      Fiscal Year Ended
                                   Oct 31,   Oct 31,       Oct 31,   Oct 31,
                                     2007     2006           2007      2006
    Net revenue:
      Software licenses             $51,055  $46,078      $175,877  $173,678
      Maintenance and subscriptions 128,272  117,384       494,675   479,283
      Services (1)                   65,609   70,320       261,947   266,370
    Total net revenue               244,936  233,782       932,499   919,331

    Cost of revenue:
      Software licenses               5,705    4,591        19,478    18,161
      Maintenance and subscriptions  12,849   11,886        48,272    49,680
      Services                       46,160   50,715       192,504   213,171
    Total cost of revenue            64,714   67,192       260,254   281,012

    Gross profit                    180,222  166,590       672,245   638,319

    Operating expenses:
      Sales and marketing            84,327   87,769       346,777   353,750
      Product development            55,134   43,544       208,370   180,380
      General and administrative     29,527   23,088       111,006   102,259
    Total operating expenses
     before other                   168,988  154,401       666,153   636,389

    Income from operations before
    other operating expenses         11,234   12,189         6,092     1,930

    Other operating expenses (2)     24,525    8,525        61,860    44,124

    Income (loss) from operations   (13,291)   3,664       (55,768)  (42,194)

    Other income, net                16,937   32,792        64,183    69,374

    Income from continuing
     operations,
    before income taxes               3,646   36,456         8,415    27,180

    Income tax expense               12,809   17,115        34,691    22,642

    Income (loss) from continuing
     operations                      (9,163)  19,341       (26,276)    4,538

    Income (loss) from
     discontinued operations,
    before income taxes              (8,785)    (371)      (18,253)   16,576
    Income tax expense (benefit)
     on discontinued operations           -     (900)          (69)    1,561
    Income (loss) from
     discontinued operations         (8,785)     529       (18,184)   15,015

    Income (loss) before
     cumulative effect of a
    change in accounting principle  (17,948)  19,870       (44,460)   19,553

    Cumulative effect of a change
     in accounting principle              -        -             -      (897)

    Net income (loss)              $(17,948) $19,870      $(44,460)  $18,656

    Income (loss) available to
     common stockholders:
      Continuing operations         $(9,163) $20,703      $(26,276)   $4,332
      Net income (loss)            $(17,948) $21,229      $(44,460)  $18,220

    Income (loss) per share
     available to common
     stockholders:
      Continuing operations          $(0.03)   $0.05        $(0.08)    $0.01
      Net income (loss)              $(0.05)   $0.05        $(0.13)    $0.05

    Weighted average shares         350,017  395,456 (3)   347,552   365,659

    (1) Services includes consulting, technical support and training services

    (2) See Page 8 of 13 for a detail of other operating expenses.

    (3) Weighted average shares includes 52 million potential shares related
        to convertible debt.

        Reclassifications, none of which affected net income (loss), were made
        to prior period amounts in order to conform to the current period's
        presentation.


    Stock-based compensation expense recorded in above amounts:

                                        Fiscal Quarter     Fiscal Year
                                            Ended             Ended
                                        Oct 31, Oct 31,  Oct 31,  Oct 31,
                                         2007    2006     2007     2006

    Cost of revenue                     $1,184  $1,077   $4,425   $4,096
      Sales and marketing                2,631   2,138    9,722   11,533
      Product development                2,595   1,885    9,965    8,226
      General and administrative         1,942   1,053    7,729   11,147
    Total operating expenses             7,168   5,076   27,416   30,906

    Continuing operations                8,352   6,153   31,841   35,002

    Discontinued operations                  -       -        -      263

      Total stock-based compensation
       expense                          $8,352  $6,153  $31,841  $35,265