novell q2 fy2010 investor presentation

Novell® Investor RelationsQ2 2010 Update

Revised March 10, 2010APPROVED FOR EXTERNAL USE

© Novell, Inc. All rights reserved.2

Forward Looking InformationThis presentation 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 projections; objectives; strategy; market growth rates; future relevance of physical, virtual and cloud environments; the capabilities of Intelligent Workload Management; current and future product development; timing of availability of planned releases; margin improvement; trends in revenue growth; ability to compete; financial position; growth and increases in share price; future opportunities; customer priorities; timing of realization of projections; functionality, characteristics, quality and performance capabilities of Novell's products and technology; and results achievable and benefits attainable through deployment of Novell's products and provision of services. Forward-looking statements forecasting growth in financial metrics are predicated on assumptions regarding improvements in the overall economy and the markets served by the Company and in which the Company operates, the timing of which are impossible to accurately predict. Actual results may differ materially from the results discussed in or implied by such forward-looking statements, which are based upon information that is currently available to us and/or management’s current expectations, speak only as of the date hereof, and are subject to a number of factors, including, but not limited to: indirect sales, growth rates of our business units, renewal of SUSE Linux Enterprise ServerTM subscriptions with customers who have received certificates from Microsoft, decline rates of Open Enterprise Server and NetWare® revenue, development of products and services, the Intelligent Workload Management market, software vulnerabilities, delays in product releases, reliance on open source software, adequacy of renewal rates, uncertain economic conditions, competition, rapid technological changes, failure to expand brand awareness, adequacy of technical support, pricing pressures, system failures, integration of acquisitions, industry consolidation, challenges resulting from a global business, foreign research and development operations, loss of key employees, intellectual property infringement, litigation matters, unpredictable financial results, impairments, the timing of revenue recognition, our investments, and effective use of our cash..

A detailed discussion of these and other factors that could affect our results is included in our SEC filings, including, but not limited to, our Annual Report on Form 10-K for the Fiscal Year Ended October 31, 2009 filed with the SEC on December 22, 2009, which may be obtained by calling (800) 317- 3195, or at our Investor Relations web page at:www.novell.com/company/ir.

We expressly disclaim any obligation, except as required by law, or undertaking to update or revise any forward-looking statements contained in this presentation to reflect any change of expectations with regard thereto or to reflect any change in events, conditions, or circumstances on which any such forward-looking statement is based, in whole or in part. We also provide information regarding Novell's general product direction and roadmap. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for Novell's products remains at the sole discretion of Novell.

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GAAP Financial MeasuresWe supplement our consolidated, unaudited, condensed financial statements presented in accordance with GAAP with certain non-GAAP financial measures. A reconciliation of non-GAAP financial measures to corresponding GAAP financial measures is included on slide 25 of this presentation. These non-GAAP measures include gross margin, sales and marketing expense margin, product development expense margin, general and administrative expense margin and operating margin. Below are the GAAP measures that correspond with the non-GAAP measures presented on pages 21-23. We provide non-GAAP financial measures to enhance an overall understanding of our current financial performance and prospects for the future and to enable you to evaluate our performance in the same way that management does. Management uses these non-GAAP financial measures to evaluate performance, allocate resources, and determine compensation. The non-GAAP financial measures do not replace the presentation of our GAAP financial results, but they eliminate expenses and gains that are excluded from most analysts' consensus estimates, that are unusual, and/or that arise outside of the ordinary course of business, such as, but not limited to, those related to stock-based compensation, acquisition-related intangible asset amortization, restructuring, asset impairments, litigation judgements and settlements, purchased in-process research and development, and the sale of business operations, long-term investments, and property, plant and equipment.

2006 2009Gross Margin 69% 78%

Expense MarginsSales and Marketing 38% 34%Product Development 20% 21%General and Administrative 11% 12%Other Operating Expenses 5% 35%

Operating Margin -5% -24%

GAAP Operating Model We also present a projection of our non-GAAP gross margin, sales and marketing expense margin, product development expense margin, general and administrative expense margin and operating margin. These projections are forward-looking, non-GAAP financial measures. The corresponding GAAP financial measures are not available and cannot be provided without undue effort because we are unable to accurately forecast information regarding expenses or gains such as, but not limited to, those listed above. We believe that the corresponding GAAP financial measures are not likely to be significant to an understanding of our business because there is likely to be substantial variability between projected and actual realization of the expenses and gains described above and/or that such expenses or gains are likely to arise outside of the ordinary course of business.


Agenda

Corporate Strategy

Today's Customer Challenges

Intelligent Workload Management

Financial Highlights

Corporate Strategy


Novell® VisionMaking IT Work As OneThrough our infrastructure software and ecosystem of partnerships, Novell harmoniously integrates mixed IT environments, allowing people and technology to work as one.

Novell MissionTo help our clients reduce cost, complexity and risk on virtually any platform

Novell StrategyTo be the industry leader in the new category of intelligent workload management


Data Center End-UserComputing

Novell® Offers 10 Infrastructure Software Solutions

Identity and Security

Virtualization and Workload Management

Enterprise Linux Servers

Business Service Management

OEM

Endpoint Management

Collaboration

Security Management

Compliance Management

Identity and Access Management

Software Appliances

Preloaded Linux Desktops


2010 IDC Projected Market Growth Rates for Our Markets

5%Business ServiceManagement

17%EnterpriseLinux Servers

23%Virtualization andWorkload Management

4%Collaboration

11%EndpointManagement

7%Identity and AccessManagement

12%ComplianceManagement

23%SecurityManagement

17%Preloaded LinuxDesktops

118%SoftwareAppliances

Data Center End-UserComputing

Identity and Security

OEM


Novell® Go-to-Market Ecosystem

Novell

Dell

SAP

AccentureAtos Origin

InfosysACS

EMC(VMware)

Cisco

MSFTIBMHP

Oracle

Consulting, Systems Integration Vendors

Application Vendors

Systems Software Vendors

Hardware Vendors

ENTE

RPR

ISE

MA

RK

ET

ECO

SYS

TEM

TARGET CUSTOMERS

RO

UTE

S T

O M

ARK

ET

Large(500 – 4999 employees)

Very Large(5000+ employees)

Emerging

Cloud

Ecosy

stem

Solution

Provid

ers an

d

Distrib

utors

Direct

and

TeleWeb


2010 Corporate Objectives

1 Become the Leader in Intelligent Workload Management

2 Grow Invoicing andExpand Margin

3 Retain and Acquire Customersby Leveraging Partners

Novell® Addresses Today's Customer Challenges


Physical, Virtual and Cloud Are AllRelevant for the Next Decade

Percent of enterprise workloads thatwill run in physical, virtual and cloud environments

Source: IDC & Gartner estimates


Security Remains the Primary Concern for Cloud Computing

Security

Performance

Availability

Hard to integrate with in-house IT

Not enough ability to customize

Worried cloud will cost more

Bringing back in-house may be difficult

Not enough major suppliers yet

Percent Responding 3, 4 or 5

Source: Frank Gens and IDC Enterprise Panel, 2009

Question: Rate the challenges/issues of the cloud/on-demand model(1=not significant, 5=very significant)


CIOs Need a Consistent IT ProcessA secure, pragmatic approach to managing multiple platforms and evolving business models

Software asa Service

Platform asa Service

Infrastructureas a Service

GOVERNANCE AND COMPLIANCE

BusinessServiceManagement

IT ServiceManagement

ExistingInternalCapacity



VirtualizedInternalCapacity



NewExternalCapacity

Firewall

External CloudOn-Premise Computing



Intelligent workload management enables IT organizations to manage and optimize computing resources in a policy-driven, secure and compliant manner across physical, virtual and cloud environments to deliver business services for end customers.

IntelligentWORKLOADManagement


The Intelligent WorkloadManagement Lifecycle

ResourceManagement

CustomizedOperatingSystem

ServiceManagement

Security andComplianceManagement

Build

Measure

Secure

Manage

Both Intelligent and Standard Workloads Across Physical, Virtual, and Cloud Environments


ResourceManagement

GeneralPurposeOperatingSystem

ServiceManagement


Isolated Identity Awareness

ResourceManagement

CustomizedOperating

System

ServiceManagement


Identity-Managed

Novell Differentiation:Integrating Identity into Management


Novell® Identity Manager

Novell® Access Manager™

Novell® Identity Manager Roles Based Provisioning Module

Novell® Access Governance Suite

Novell Privileged User Manager

Novell® SecureLogin®

Novell® Cloud Security Service

How Novell Delivers Intelligent Workload Management

Build Secure Manage MeasureSUSE® Linux Enterprise Server

SUSE® Studio

SUSE® Linux Enterprise JeOS

Novell® ZENworks® Configuration Management

SUSE® Appliance Toolkit

Novell® “Workshop”

Novell® Business Service Manager

Novell® Business Service Level Manager™

Novell® Business Experience Manager™

Novell® myCMDB™

Novell® Sentinel™

Novell® Sentinel™ Log Manager

Novell Compliance Automation

* Planned Availabilty by end of 2010

PlateSpin® Migrate

PlateSpin® Orchestrate

Novell® ZENworks® Configuration Management

PlateSpin® Recon

PlateSpin® Protect

Novell Cloud Manager

PlateSpin® “BlueStar”

Novell® ZENworks®

“Workbench”

Financial Highlights


2006 2009 TargetGross Margin 71% 80% 80%

Expense MarginsSales and Marketing 37% 33% 30-32%Product Development 18% 20% 16-18%General and Administrative 10% 11% 9-10%

5% 16% 20%Non-GAAPOperating Margin

Consistent Margin Improvementover the Past Three Years


Novell® Total Revenue

As of October 31, 2009


Product Revenue Growth

54% 42%


Novell® Summary

• Competing in growth markets

• Strong balance sheet and financial position

• Consistent margin improvement• Differentiated corporate strategy

• Addressing today's critical customer challenges with continued product innovation

• Company will drive growth and raise share price through organic and inorganic moves

© Novell, Inc. All rights reserved.25 Revisions were made to prior period amounts in order to conform to the current period's presentation

Reconciliation of GAAP to Non-GAAP Operating Margin

Oct 31, 2006 Oct 31, 2009

GAAP income (loss) from operations (42,194)$ (206,492)$ Operating m argin % -4.6% -23.9%

Adjustments:Stock-based compensation expense:

Cost of revenue 4,096 2,649 Sales and marketing 11,533 7,015 Product development 8,226 9,332 General and administrative 11,147 6,885

Sub-total 35,002 25,881

Acquisition-related intangible asset amortization:Cost of revenue 4,603 9,984 Sales and marketing 1,087 7,296 Product development 5,911 -

Sub-total 11,601 17,280

Other operating expenses (income):Restructuring expenses 4,405 25,200 Purchased in-process research and development 2,110 - Net gain on sale of property, plant and equipment (5,968) (2,199) Litigation-related expense (income) 22,775 - IT outsourcing transition costs - 173 Executive termination benefits 9,409 - (Gain) loss on sale of subsidiaries 8,273 (16) Impairment of intangible assets 1,230 279,135 Stock-based compensation review expenses 1,890 -

Sub-total 44,124 302,293

Total operating adjustments 90,727 345,454

Non-GAAP income from operations 48,533$ 138,962$ Operating m argin % 5.3% 16.1%

Fiscal Year Ended

Unpublished Work of Novell, Inc. All Rights Reserved.This work is an unpublished work and contains confidential, proprietary, and trade secret information of Novell, Inc. Access to this work is restricted to Novell employees who have a need to know to perform tasks within the scope of their assignments. No part of this work may be practiced, performed, copied, distributed, revised, modified, translated, abridged, condensed, expanded, collected, or adapted without the prior written consent of Novell, Inc. Any use or exploitation of this work without authorization could subject the perpetrator to criminal and civil liability.

General DisclaimerThis document is not to be construed as a promise by any participating company to develop, deliver, or market a product. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. Novell, Inc. makes no representations or warranties with respect to the contents of this document, and specifically disclaims any express or implied warranties of merchantability or fitness for any particular purpose. The development, release, and timing of features or functionality described for Novell products remains at the sole discretion of Novell. Further, Novell, Inc. reserves the right to revise this document and to make changes to its content, at any time, without obligation to notify any person or entity of such revisions or changes. All Novell marks referenced in this presentation are trademarks or registered trademarks of Novell, Inc. in the United States and other countries. All third-party trademarks are the property of their respective owners.