10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended April 30, 2010

or

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                  to                 

Commission File Number: 0-13351

NOVELL, INC.

(Exact name of registrant as specified in its charter)

Delaware	87-0393339
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

404 Wyman Street, Waltham, MA 02451

(Address of principal executive offices and zip code)

(781) 464-8000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  þ	Accelerated file	¨
Non-accelerated filer    ¨ (Do not check if smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þ

As of May 28, 2010, there were 349,868,167 shares of the registrant’s common stock outstanding.

NOVELL, INC.

TABLE OF CONTENTS

Part I — Financial Information:	3
Item 1: Financial Statements	3
Consolidated Balance Sheets at April 30, 2010 (unaudited) and October 31, 2009	3
Consolidated Statements of Operations for the three and six months ended April  30, 2010 and 2009 (unaudited)	4
Consolidated Statements of Cash Flows for the six months ended April  30, 2010 and 2009 (unaudited)	6
Notes to Unaudited Consolidated Financial Statements	7
Item  2: Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3: Quantitative and Qualitative Disclosures about Market Risk	33
Item 4: Controls and Procedures	33
Part II — Other Information:	34
Item 1: Legal Proceedings	34
Item 1A: Risk Factors	34
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 6: Exhibits	44

2

Part I. – Financial Information

Item 1. Financial Statements

NOVELL, INC.

FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share data)

	April 30, 2010			October 31, 2009
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	581,425		$	591,656
Short-term investments		398,161			391,809
Restricted cash		53,052			53,033
Receivables (net of allowances of $3,524 and $4,085 at April 30, 2010 and October 31, 2009, respectively)		131,864			177,898
Prepaid expenses		20,300			17,708
Current deferred tax assets		4,624			5,521
Other current assets		22,648			26,747
Total current assets		1,212,074			1,264,372
Property, plant and equipment, net		163,420			170,459
Long-term investments		—			10,303
Goodwill		353,734			356,033
Intangible assets, net		32,488			36,621
Deferred income taxes		19,009			26,717
Other assets		34,033			38,403
Total assets	$	1,814,758		$	1,902,908
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	31,682		$	37,628
Accrued compensation		58,628			87,928
Other accrued liabilities		79,308			97,154
Income taxes payable		1,059			—
Deferred revenue		441,866			495,245
Total current liabilities		612,543			717,955
Deferred income taxes		8,314			8,403
Long-term deferred revenue		173,170			193,526
Other long-term liabilities		46,943			48,502
Total liabilities		840,970			968,386
Stockholders’ equity:
Common stock, par value $0.10 per share, Authorized — 600,000,000 shares;
Issued — 364,950,122 and 362,175,921 shares at April 30, 2010 and October 31, 2009, respectively;
Outstanding — 349,846,963 and 347,072,762 shares at April 30, 2010 and October 31, 2009, respectively		36,495			36,218
Additional paid-in capital		459,072			441,798
Treasury stock, at cost — 15,103,159 shares at April 30, 2010 and October 31, 2009		(124,299	)		(124,299	)
Retained earnings		599,924			559,823
Accumulated other comprehensive income		2,596			20,982
Total stockholders’ equity		973,788			934,522
Total liabilities and stockholders’ equity	$	1,814,758		$	1,902,908

See notes to consolidated financial statements.

3

NOVELL, INC.

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share data)

	Three months ended
	April 30, 2010			April 30, 2009
	(unaudited)
Net revenue:
Software licenses	$	27,691		$	30,250
Maintenance and subscriptions		153,855			158,329
Services		22,468			27,016
Total net revenue		204,014			215,595
Cost of revenue:
Software licenses		1,925			1,856
Maintenance and subscriptions		20,825			21,958
Services		18,562			21,468
Total cost of revenue		41,312			45,282
Gross profit		162,702			170,313
Operating expenses:
Sales and marketing		74,853			75,697
Product development		39,368			44,552
General and administrative		28,578			25,032
Restructuring expenses		—			7,224
Loss on sale of subsidiaries		—			184
Total operating expenses		142,799			152,689
Income from operations		19,903			17,624
Other income (expense):
Investment income		3,262			5,390
Gain on sale of previously impaired investments, net		1,967			—
Impairment of long-term investments		—			(1,419	)
Interest expense and other, net		(43	)		(3,767	)
Total other income, net		5,186			204
Income from continuing operations before taxes		25,089			17,828
Income tax expense		5,177			2,777
Income from continuing operations		19,912			15,051
Income from discontinued operations		—			566
Net income	$	19,912		$	15,617
Basic earnings per share:
Income from continuing operations	$	0.06		$	0.04
Net income per share	$	0.06		$	0.05
Diluted earnings per share:
Income from continuing operations	$	0.06		$	0.04
Net income per share	$	0.06		$	0.05
Weighted-average shares outstanding — basic		349,204			344,881
Weighted-average shares outstanding — diluted		352,008			345,839

See notes to consolidated financial statements.

4

NOVELL, INC.

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share data)

	Six months ended
	April 30, 2010			April 30, 2009
	(unaudited)
Net revenue:
Software licenses	$	48,884		$	58,517
Maintenance and subscriptions		312,806			317,144
Services		44,690			54,805
Total net revenue		406,380			430,466
Cost of revenue:
Software licenses		3,613			3,892
Maintenance and subscriptions		43,397			44,660
Services		38,020			43,627
Total cost of revenue		85,030			92,179
Gross profit		321,350			338,287
Operating expenses:
Sales and marketing		143,769			152,591
Product development		79,070			89,944
General and administrative		54,405			49,227
Restructuring expenses		2,774			15,273
Gain on sale of subsidiaries		—			(16	)
Total operating expenses		280,018			307,019
Income from operations		41,332			31,268
Other income (expense):
Investment income		6,530			12,566
Gain on sale of previously impaired investments, net		7,195			—
Impairment of long-term investments		—			(3,096	)
Interest expense and other, net		(1,873	)		(6,902	)
Total other income, net		11,852			2,568
Income from continuing operations before taxes		53,184			33,836
Income tax expense		13,083			9,144
Income from continuing operations		40,101			24,692
Income from discontinued operations		—			1,602
Net income	$	40,101		$	26,294
Basic earnings per share:
Income from continuing operations	$	0.12		$	0.07
Net income per share	$	0.12		$	0.08
Diluted earnings per share:
Income from continuing operations	$	0.11		$	0.07
Net income per share	$	0.11		$	0.08
Weighted-average shares outstanding — basic		348,447			344,429
Weighted-average shares outstanding — diluted		350,136			345,543

See notes to consolidated financial statements.

5

NOVELL, INC.

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

	Six months ended
	April 30, 2010			April 30, 2009
	(unaudited)
Cash flows from operating activities
Net income	$	40,101		$	26,294
Adjustments to reconcile net income to net cash used in operating activities:
Stock-based compensation expense		14,742			13,722
Depreciation and amortization		14,655			21,473
Change in accounts receivable allowances		(571	)		336
Income from discontinued operations		—			(1,602	)
Gain on sale of subsidiaries		—			(16	)
Impairment of long-term investments		—			3,096
Gain on sale of previously impaired investments		(8,009	)		—
Loss on sale of previously impaired investments		814			—
Gain on debenture repurchases		—			(68	)
Changes in assets and liabilities, excluding acquisitions and dispositions:
Receivables		46,872			63,214
Prepaid expenses		(3,451	)		2,575
Other current assets		3,413			7,377
Deferred income taxes		7,406			9,303
Accounts payable		71			(11,552	)
Accrued liabilities		(43,260	)		(73,501	)
Deferred revenue		(74,981	)		(73,748	)
Net cash used in operating activities		(2,198	)		(13,097	)
Cash flows from investing activities
Purchases of property, plant and equipment		(13,432	)		(6,582	)
Purchases of short-term investments		(131,552	)		(147,849	)
Maturities of short-term investments		27,981			25,507
Sales of short-term investments		100,688			132,762
Proceeds from sales of and distributions from long-term investments		8,629			1,736
Net cash paid for acquisitions		—			(48,472	)
Cash proceeds from sale of discontinued operations		471			1,036
Change in restricted cash		(19	)		(260	)
Other		527			1,473
Net cash used in investing activities		(6,707	)		(40,649	)
Cash flows from financing activities
Issuances of common stock		5,536			1,152
Debenture repurchases		—			(3,869	)
Debt repayment		—			(378	)
Excess tax benefits from stock-based compensation		1			(2,788	)
Net cash provided by (used in) financing activities		5,537			(5,883	)
Effect of exchange rate changes on cash		(6,863	)		(457	)
Decrease in cash and cash equivalents		(10,231	)		(60,086	)
Cash and cash equivalents — beginning of period		591,656			680,034
Cash and cash equivalents — end of period	$	581,425		$	619,948

See notes to consolidated financial statements.

6

NOVELL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

A. Quarterly Financial Statements

The interim consolidated financial statements as of April 30, 2010 and for the three and six months ended April 30, 2010 and 2009 were prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q but do not include all of the information and notes required by accounting principles generally accepted in the United States and should, therefore, be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended October 31, 2009. The accompanying financial statements are unaudited and include all normal recurring adjustments that we believe are necessary for a fair statement of our financial condition and results of operations as of and for the interim periods presented. The interim operating results are not necessarily indicative of the results for a full year.

Reclassifications

As more fully described in Note M, “Segment Information,” during the first quarter of fiscal 2010, we reorganized our business unit segment structure and management resulting in a change to our reportable business unit segments. In connection with this reorganization, we evaluated our internal cost structure to ensure the resulting business unit segment gross profit and operating income were reflective of our business unit segment management structure. As a result of this evaluation, we determined the allocation and assignment of costs between maintenance and subscriptions and services within cost of revenue should be adjusted to be reflective of the new business unit segment management structure for the second quarter and first six months of fiscal 2010 and 2009. For the second quarter and first six months of fiscal 2009, in our consolidated statements of operations, $9.1 million and $18.4 million of costs, respectively, were moved from the services cost of revenue line item to the maintenance and subscriptions cost of revenue line item. This change impacted only the components of cost of revenue and had no impact on revenue, total cost of revenue or total gross profit.

Certain other amounts reported in prior periods have been reclassified from what was previously reported to conform to the current year’s presentation. These reclassifications did not have any impact on the statements of operations.

B. Cash, Cash Equivalents, and Short-Term Investments

The following is a summary of our short-term available-for-sale investments at April 30, 2010 and October 31, 2009:

(In thousands)	Cost at April 30, 2010		Gross Unrealized Gains		Gross Unrealized Losses			Fair Market Value at April 30, 2010
Short-term investments:
U.S. government and agency securities	$	180,963	$	2,211	$	(32	)	$	183,142
Corporate notes and bonds		181,676		3,485		(20	)		185,141
Asset-backed securities		21,573		240		(27	)		21,786
Equity securities		8,331		—		(239	)		8,092
Total short-term investments	$	392,543	$	5,936	$	(318	)	$	398,161
(In thousands)	Cost at October 31, 2009		Gross Unrealized Gains		Gross Unrealized Losses			Fair Market Value at October 31, 2009
Short-term investments:
U.S. government and agency securities	$	183,062	$	2,633	$	—		$	185,695
Corporate notes and bonds		169,685		4,269		(12	)		173,942
Asset-backed securities		24,828		439		—			25,267
Equity securities		7,923		—		(1,018	)		6,905
Total short-term investments	$	385,498	$	7,341	$	(1,030	)	$	391,809

7

NOVELL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

B. Cash, Cash Equivalents, and Short-Term Investments (Continued)

As of April 30, 2010, $8.1 million market value of our equity securities are designated for deferred compensation payments, which are paid out as requested by participants of the plan upon termination.

As of April 30, 2010, contractual maturities of our short-term investments were:

(In thousands)	Cost		Fair Value
Less than one year	$	69,522	$	70,312
Due in one to two years		144,061		146,505
Due in two to three years		121,385		122,927
Due in more than three years		49,244		50,325
No contractual maturity		8,331		8,092
Total short-term investments	$	392,543	$	398,161

We had net unrealized gains related to short-term investments of $5.6 million and $6.3 million at April 30, 2010 and October 31, 2009, respectively.

Realized gains and losses related to our short-term investments were as follows:

	Three months ended				Six months ended
(In thousands)	April 30, 2010		April 30, 2009		April 30, 2010		April 30, 2009
Realized gains	$	3,228	$	1,039	$	3,609	$	2,081
Realized losses	$	47	$	264	$	108	$	1,277

With the exception of our short-term auction-rate securities (“ARSs”), the realized gains and losses on our short-term investments are included in the “Investment income” line item in the consolidated statements of operations.

During the second quarter of fiscal 2010, ARSs classified as short-term investments, with a book value of $1.8 million, were sold for $4.2 million, resulting in a gain of $2.4 million. This gain is a component of the line item “Gain on sale of previously impaired investments, net” in our consolidated statements of operations. We reversed $2.4 million in unrealized gains associated with these securities that were recorded in the “Accumulated other comprehensive income” line item in our consolidated balance sheets in prior periods.

We did not record any impairment losses on short-term investments during the second quarters or first six months of fiscal 2010 and 2009, as we considered the unrealized losses to be temporary. With respect to our debt securities that are in an unrealized loss position, we expect to recover the entire cost basis of these securities before we sell them, therefore they are not considered to be other-than-temporarily impaired. We do not consider our equity securities that are in an unrealized loss position to be impaired as we have the ability and intent to hold these investments until a recovery of fair value.

During the first six months of fiscal 2010 and 2009, the U.S. dollar value of our foreign-denominated cash and cash equivalent holdings decreased by a net $6.9 million and $0.5 million, respectively. The decrease in fiscal 2010 resulted from the strengthening of the U.S. dollar against certain foreign currencies, primarily the Euro. As foreign currency exchange rates continue to fluctuate, especially the Euro, we may see further changes in the U.S. dollar value of our foreign-denominated cash and cash equivalent holdings.

C. Long-Term Investments

As of April 30, 2010, we do not have any investments classified as long-term. At October 31, 2009, $10.3 million of our ARSs were classified as long-term investments in our consolidated balance sheets, and were our only long-term investments. At April 30, 2010, we no longer hold any ARSs.

8

NOVELL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

C. Long-Term Investments (Continued)

During the first quarter of fiscal 2010, ARSs with an estimated fair value of $4.2 million were reclassified from long-term investments to short-term investments in our consolidated balance sheet. These securities were sold during the second quarter of fiscal 2010 (See Note B “Cash, Cash Equivalents, and Short-Term Investments”).

During the second quarter of fiscal 2010, ARSs classified as long-term investments, with a book value of $1.7 million, were sold for $0.9 million, resulting in a loss on sale of $0.8 million. This loss is a component of the line item “Gain on sale of previously impaired investments, net” in our consolidated statements of operations. We reversed $0.3 million in unrealized gains associated with these securities that were recorded in the “Accumulated other comprehensive income” line item in our consolidated balance sheets in prior periods.

During the first six months of fiscal 2010, ARSs classified as long-term investments, with a book value of $3.8 million, were sold for $8.0 million, resulting in a net gain on sale of $4.2 million. This net gain is a component of the line item “Gain on sale of previously impaired investments, net” in our consolidated statements of operations. We reversed $3.0 million in unrealized gains associated with these securities that were recorded in the “Accumulated other comprehensive income” line item in our consolidated balance sheets in prior periods.

During the second quarter and first six months of fiscal 2010, we also recognized a gain of $0.4 million and $0.6 million, respectively, related to the sales of direct investments that we had previously fully impaired. These gains are shown as a component of the line item “Gain on sale of previously impaired investments, net” in our consolidated statements of operations.

D. Fair Value Measurements

The following table summarizes the composition and fair value hierarchy of our financial assets as of April 30, 2010. Our level 1 financial instruments are valued using quoted prices in active markets for identical instruments. We did not have any level 2 or level 3 financial instruments at April 30, 2010.

(In thousands)	Fair Value of Level 1 Financial Instruments as of April 30, 2010
Short-term investments:
U.S. government and agency securities	$	183,142
Corporate notes and bonds		185,141
Asset-backed securities		21,786
Equity securities		8,092
Total	$	398,161

9

NOVELL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

D. Fair Value Measurements (Continued)

The following table summarizes the composition and fair value hierarchy of our financial assets as of October 31, 2009. We did not have any level 2 financial instruments at October 31, 2009. Our ARSs were our only level 3 financial assets at October 31, 2009 and were valued using unobservable inputs that were supported by little or no market activity and that were significant to the fair value of the investments.

			Fair Value Measurements Using
(In thousands)	Total as of October 31, 2009		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Unobservable Inputs (Level 3)
Short-term investments:
U.S. government and agency securities	$	185,695	$	185,695	$	—
Corporate notes and bonds		173,942		173,942		—
Asset-backed securities		25,267		25,267		—
Equity securities		6,905		6,905		—
Total short-term investments		391,809		391,809		—
Long-term investments		10,303		—		10,303
Total	$	402,112	$	391,809	$	10,303

The following table summarizes the change in composition and fair value hierarchy of our level 3 financial assets, which were comprised entirely of our ARSs, for the second quarters of fiscal 2010 and 2009:

	Fair Value Measurements Using  Significant Unobservable Inputs (Level 3) for the three months ended
(In thousands)	April 30, 2010			April 30, 2009
Beginning balance	$	6,232		$	9,617
Total gains or (losses):
Impairment included in earnings		—			(1,419	)
Book value of assets sold		(3,521	)		—
Removed from accumulated other comprehensive income		(2,711	)		(231	)
Ending balance	$	—		$	7,967

The following table summarizes the change in composition and fair value hierarchy of our level 3 financial assets, which were comprised entirely of our ARSs, for the first six months of fiscal 2010 and 2009:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3) for the six months ended
(In thousands)	April 30, 2010			April 30, 2009
Beginning balance	$	10,303		$	11,063
Total gains or (losses):
Impairment included in earnings		—			(3,096	)
Book value of assets sold		(5,597	)		—
Removed from accumulated other comprehensive income		(4,706	)		—
Ending balance	$	—		$	7,967

See Note B, “Cash, Cash Equivalents, and Short-Term Investments” for more information on the sale of the $1.8 million book value of ARSs classified as short-term investments that occurred in the second quarter of fiscal 2010. See Note C, “Long-Term Investments” for more information on the sales of the $1.7 million and $3.8 million book value of ARSs classified as long-term investments that occurred during the second quarter and first six months of fiscal 2010, respectively.

10

NOVELL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

E. Derivative Instruments and Hedging Activities

The net notional amount of foreign currency exchange contracts hedging foreign currency transactions was $11.3 million and $27.0 million at April 30, 2010 and October 31, 2009, respectively. The fair value of these contracts was immaterial at both April 30, 2010 and October 31, 2009.

During the second quarters of fiscal 2010 and 2009, we recognized gains of $0.8 million and $2.4 million, respectively, on our foreign currency exchange contracts. During the first six months of fiscal 2010 and fiscal 2009, we recognized a gain of $0.6 million and a loss of $1.9 million, respectively, on our foreign currency exchange contracts. These gains and losses are shown as a component of the line item “Interest expense and other, net” in our consolidated statements of operations.

F. Goodwill and Intangible Assets

Goodwill

During the first quarter of fiscal 2010, our former Open Platform Solutions, Identity and Security Management and Systems and Resource Management business unit segments were consolidated to form the new Security, Management and Operating Platforms business unit segment (“SMOP”) (See Note M, “Segment Information,” for more information on our business unit segment structural and management reorganization). The three components of SMOP will continue to be considered reporting units for goodwill impairment testing purposes. As there were no changes to the reporting units, no interim goodwill impairment tests were required. Our former Workgroup business unit segment was renamed Collaboration Solutions (“CS”).

Goodwill allocated to our business unit segments as of April 30, 2010 is as follows:

(In thousands)	SMOP			CS			Total
Balance as of October 31, 2009:
Goodwill	$	477,048		$	149,029		$	626,077
Accumulated impairment		(270,044	)		—			(270,044	)
Net goodwill		207,004			149,029			356,033
Activity during the six months ended April 30, 2010:
Release of merger liability		(1,782	)		(1,413	)		(3,195	)
Impact of foreign currency exchange translation		896			—			896
Balance as of April 30, 2010:
Goodwill		476,162			147,616			623,778
Accumulated impairment		(270,044	)		—			(270,044	)
Net goodwill	$	206,118		$	147,616		$	353,734

During the second quarter of fiscal 2010, we assigned to a subtenant a facility lease related to our April 2005 acquisition of Tally Systems Corp. At the time of the acquisition, this lease had a nine-year term and therefore a merger liability was established as part of the acquisition purchase price allocation. Because the cost of exiting this lease was less than the estimated merger liability, we released this excess, reducing the cost of the acquired company. This adjustment to the purchase price resulted in a $3.2 million reduction to total goodwill, comprised of goodwill reductions in our SMOP and CS business unit segments of $1.8 million and $1.4 million, respectively.

Also, a $0.9 million increase in goodwill during the first six months of fiscal 2010 was due to the impact of foreign currency exchange translation related to the portion of our goodwill that is denominated in Canadian dollars.

11

NOVELL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

F. Goodwill and Intangible Assets (Continued)

Intangible Assets

The following is a summary of intangible assets:

	April 30, 2010							October 31, 2009
(In thousands)	Gross Amount		Accumulated Amortization			Net Book Value		Gross Amount		Accumulated Amortization			Net Book Value		Asset Lives
Developed technology	$	30,765	$	(25,319	)	$	5,446	$	30,765	$	(22,546	)	$	8,219	3 or 4 years
Trademarks/trade names		25,511		(1,015	)		24,496		25,511		(865	)		24,646	3 years or Indefinite
Customer relationships		15,701		(13,155	)		2,546		15,701		(11,945	)		3,756	3 years
Total intangible assets	$	71,977	$	(39,489	)	$	32,488	$	71,977	$	(35,356	)	$	36,621

Amortization of intangible assets for the second quarters of fiscal 2010 and 2009 was $2.0 million and $4.3 million, respectively. Amortization of intangible assets for the first six months of fiscal 2010 and 2009 was $4.1 million and $8.6 million, respectively. Amortization of existing intangibles is estimated to be approximately $3.8 million for the remainder of fiscal 2010, $4.0 million in fiscal 2011, and $0.5 million in fiscal 2012, with nothing thereafter.

We evaluate the recoverability of goodwill and indefinite-lived intangible assets annually as of August 1. In addition, we evaluate the recoverability of our goodwill and all our intangible assets if events or changes in circumstances warrant, such as a material adverse change in the business.

G. Income Taxes

We are subject to income taxes in numerous jurisdictions and the use of estimates is required in determining our provision for income taxes. For the second quarter and first six months of fiscal 2010, we provided $5.2 million and $13.1 million for income tax expense, respectively. Income tax expense was recorded based on the estimated annual effective tax rate for the year applied to “ordinary” income (pre-tax income excluding unusual or infrequently occurring discrete items).

Income Tax Expense

The effective tax rate for the second quarter of fiscal 2010 was 21%, compared to an effective tax rate of 16% for the prior year period primarily due to a benefit from discrete tax items in the prior year period and a shift in jurisdictional earnings. The effective tax rate for the first six months of fiscal 2010 was 25%, compared to an effective tax rate of 27% for the prior year period primarily due to a shift in jurisdictional earnings.

The effective tax rates for the second quarter and first six months of fiscal 2010 differ from the federal statutory rate of 35% primarily due to the effects of stock-based compensation, differences between the book and tax treatment of certain income items on which a valuation allowance has been recorded, and the jurisdictional mix of earnings.

Valuation Allowance

We continue to believe, based on all available evidence, that it is more likely than not that most of our net deferred tax assets will not be realized. As a result, we have provided a valuation allowance on our U.S. and selected international net deferred tax assets. In reaching this determination, we evaluated our three-year cumulative results, pre-tax losses in recent quarters, as well as the impacts that economic conditions may have on our future results. As deferred tax assets or liabilities increase or decrease in the future, or if a portion or all of the valuation allowance is no longer deemed to be necessary, the adjustments to the valuation allowance will increase or decrease future income tax provisions or additional paid-in capital. It is reasonably possible that we could reduce a significant portion of our valuation allowance in the near-term. The amount of this potential reduction is not reasonably determinable at this time.

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G. Income Taxes (Continued)

Income Tax Reserves

As of April 30, 2010, we had unrecognized tax benefits totaling $36.2 million, excluding interest, of which $25.0 million would favorably impact the effective tax rate if recognized. As of October 31, 2009, we had unrecognized tax benefits totaling $37.3 million, excluding interest. The $1.1 million decrease in unrecognized tax benefits relates primarily to benefits recognized as a result of the lapse of statutes of limitations.

During the second quarter of fiscal 2010, we accrued $0.3 million in interest related to unrecognized tax benefits. During the first six months of fiscal 2010, we accrued $0.5 million in interest related to unrecognized tax benefits. We had $9.8 million and $9.3 million accrued for the payment of interest related to unrecognized tax benefits as of April 30, 2010 and October 31, 2009, respectively.

As of April 30, 2010, we have recorded a $34.8 million liability for unrecognized tax benefits and related interest in the line item “Other long-term liabilities” in our consolidated balance sheet.

As of April 30, 2010, we believe it is reasonably possible that $23.5 million of unrecognized tax benefits and accrued interest will decrease within the next 12 months as the result of statutes of limitations expiring in various jurisdictions. We believe that this favorable decrease in unrecognized tax benefits may significantly impact the effective tax rate.

We conduct business globally. As a result, we file income tax returns and are subject to examination by taxing authorities in various jurisdictions throughout the world. In the U.S. we are currently in appeals with the Internal Revenue Service regarding two issues related to its examination of tax years 2005 and 2006. We do not anticipate that the settlement of the two outstanding issues will have a material impact on our financial position or results of operations. In addition, we are at various stages in examinations in some state and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local income tax examinations for years prior to fiscal 2002 or non-U.S. income tax examinations for years prior to fiscal 2005.

H. Restructuring and Merger Liabilities

Restructuring Liabilities

During the first quarter of fiscal 2010, we recorded net restructuring expenses of $2.8 million. This was comprised of $2.9 million primarily for termination benefits for five employees as part of our business unit segment structural and management reorganization, partially offset by $0.1 million in reductions to accruals for changes in estimates related to prior period restructuring activities. During the second quarter of fiscal 2010, there were no restructuring expenses.

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H. Restructuring and Merger Liabilities (Continued)

Our restructuring activities in prior periods are disclosed in detail in our Annual Report on Form 10-K for fiscal 2009. The following table summarizes the restructuring reserve balance as of April 30, 2010 and activity during the first six months of fiscal 2010:

	Restructuring Action Taken In:
(In thousands)	Fiscal 2010			Fiscal 2009			Fiscal 2008			Prior to Fiscal 2008			Total
Balance as of October 31, 2009:
Workforce reductions	$	—		$	6,606		$	622		$	—		$	7,228
Excess facilities, property and equipment		—			3,450			835			1,330			5,615
Total restructuring reserve balance		—			10,056			1,457			1,330			12,843
Original charge/adjustments:
Workforce reductions		2,876			(84	)		104			—			2,896
Excess facilities, property and equipment		—			(163	)		63			(22	)		(122	)
Total original charge/adjustments		2,876			(247	)		167			(22	)		2,774
Payments:
Workforce reductions		(428	)		(6,097	)		(173	)		—			(6,698	)
Excess facilities, property and equipment		—			(927	)		(358	)		(638	)		(1,923	)
Total payments		(428	)		(7,024	)		(531	)		(638	)		(8,621	)
Balance as of April 30, 2010:
Workforce reductions		2,448			425			553			—			3,426
Excess facilities, property and equipment		—			2,360			540			670			3,570
Total restructuring reserve balance	$	2,448		$	2,785		$	1,093		$	670		$	6,996

The net adjustments decreasing the restructuring reserves during the first six months of fiscal 2010 by $0.1 million resulted from changes in prior fiscal year estimates for various severance-related benefits and facility reserves. These adjustments are reflected in the table above for the respective fiscal year.

As of April 30, 2010, the remaining unpaid restructuring balances include accrued liabilities related to severance and other benefits, the majority of which we expect to be paid by February 2011, and lease costs for redundant facilities, which we expect to be paid over the respective remaining contract terms, the longest of which extends to 2018. These liabilities are partially reduced by sublease income for several of the redundant facilities.

Merger Liabilities

The following table summarizes the merger liabilities balance as of April 30, 2010, and activity associated with our acquisitions, including transaction costs, during the first six months of fiscal 2010:

(In thousands)	Balance at October 31, 2009		Payments/ Adjustments			Balance at April 30, 2010
Facilities related	$	9,971	$	(4,008	)	$	5,963
Other		127		(127	)		—
Total merger liabilities	$	10,098	$	(4,135	)	$	5,963

During the second quarter of fiscal 2010, we assigned a facility lease to a subtenant, and as a result released $3.2 million of merger liabilities (See Note F, “Goodwill and Intangible Assets”).

As of April 30, 2010, the remaining unpaid merger liabilities balance relates to lease costs for redundant facilities, which we expect to be paid over the respective remaining contract terms, the longest of which extends to 2025.

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I. Legal Proceedings

SilverStream, which we acquired in July 2002, and several of its former officers and directors, as well as the underwriters who handled SilverStream’s two public offerings, were named as defendants in several class action complaints that were filed on behalf of certain former stockholders of SilverStream who purchased shares of SilverStream common stock between August 16, 1999 and December 6, 2000. These complaints are closely related to several hundred other complaints that the same plaintiffs have brought against other issuers and underwriters. These complaints all allege violations of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. In particular, they allege, among other things, that there was undisclosed compensation received by the underwriters of the public offerings of all of the issuers, including SilverStream. A Consolidated Amended Complaint with respect to all of these complaints was filed in the U.S. District Court, Southern District of New York, on April 19, 2002. While we believe that SilverStream and its former officers and directors have meritorious defenses to the claims, various parties participated in settlement discussions and reached a proposed settlement agreement. After notice to the plaintiff class, the settlement agreement received final approval from the Court on September 10, 2009. Certain parties have filed Notices of Appeal from the Court’s decision. We believe it is probable that any settlement payment will be covered by our insurance carrier. Thus, we do not believe that resolution of this litigation will have a material adverse effect on our financial position, results of operations or cash flows.

On July 12, 2002, Amer Jneid and other related plaintiffs filed a complaint in the Superior Court of California, Orange County, alleging claims for breach of contract, fraud in the inducement, misrepresentation, infliction of emotional distress, rescission, slander and other claims against us in connection with our purchase of so-called “DeFrame” technology from the plaintiffs and two affiliated corporations (TriPole Corporation and Novetrix), and employment agreements that we entered into with the plaintiffs in connection with the purchase. The complaint sought unspecified damages, including punitive damages. The dispute (resulting in these claims) arises out of the plaintiffs’ assertion that we failed to properly account for license distributions which the plaintiffs claim would have entitled them to certain bonus payouts under the purchase and employment agreements. After a lengthy jury trial, the jury returned a verdict in favor of the various plaintiffs on certain contract claims and in favor of us on various remaining claims. We then pursued an appeal of the judgment and the related orders to the California Court of Appeals. We accrued $27.0 million in prior fiscal periods for this matter. As part of the appeal process and during the first quarter of fiscal 2008, we posted a $51.5 million bond in conjunction with our appeal of this judgment. On December 17, 2009, the California Court of Appeals reversed the judgment against us and remanded the case for a new trial. The Court of Appeals also awarded attorneys’ fees and costs to the plaintiffs and such amount will be determined by the trial court. In May 2010, $35.3 million of the bond amount was returned to us and we anticipate that the remaining amount of the bond will be released by the trial court. We are evaluating all of our options with respect to settling this case or taking the matter back to trial. While there can be no assurance as to the ultimate disposition of the litigation, we do not believe that its resolution will have a material adverse effect on our financial position or results of operations.

On January 20, 2004, the SCO Group, Inc. (“SCO”) filed suit against us in the Third Judicial District Court of Salt Lake County, State of Utah. Upon our motion, the action was removed to the U.S. District Court, District of Utah. SCO’s original complaint alleged that our public statements and filings regarding the ownership of the copyrights in UNIX and UnixWare harmed SCO’s business reputation and affected its efforts to protect its ownership interest in UNIX and UnixWare. Our answer set forth numerous affirmative defenses and counterclaims alleging slander of title and breach of contract, and seeking declaratory actions and actual, special and punitive damages in an amount to be proven at trial. On February 3, 2006, SCO filed a Second Amended Complaint alleging that we had violated supposed non-competition provisions of the agreement under which we sold certain UNIX-related assets to SCO, that we infringed SCO’s copyrights, and that we are engaging in unfair competition by attempting to deprive SCO of the value of the UNIX technology. SCO sought to require us to assign all copyrights that we have registered in UNIX and UnixWare to SCO, to prevent us from representing that we have any ownership interest in the UNIX and UnixWare copyrights, to require us to withdraw all representations we have made regarding our ownership of the UNIX and UnixWare copyrights, and to cause us to pay actual, special and punitive damages in an amount to be proven at trial. As a result of SCO’s Second Amended Complaint, our wholly-owned subsidiary, SUSE Linux AG (“SUSE”), filed a demand for arbitration before the International Court of Arbitration in Zurich, Switzerland, pursuant to a “UnitedLinux Agreement” in which SCO and SUSE were parties. On August 10, 2007, the U.S. District Court Judge issued a Memorandum Decision and Order that granted us summary judgment against SCO on significant issues in the litigation. The District Court determined that we own the UNIX copyrights and dismissed certain of SCO’s claims against us. On September 14, 2007, SCO filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code. On July 16, 2008, the U.S. District Court issued Findings of Fact and Conclusions of Law wherein the Court determined that SCO did not have authority to enter into the 2003 Sun Microsystems, Inc. agreement and owed us $2.5 million plus prejudgment interest. The Court further concluded that SCO’s licenses to Microsoft and other “SCOsource licensees” included an “incidental” license to Unix SVRX code and therefore we were not entitled to any proceeds from such licenses. On November 20, 2008, the U.S. District Court entered Final Judgment dismissing SCO’s remaining claims against us and awarded us $3.5 million. On November 25, 2008, SCO filed a Notice of Appeal from that decision to the Tenth Circuit Court of Appeals. On August 24, 2009, a three Judge Panel from the Tenth Circuit Court of Appeals issued an

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

I. Legal Proceedings (Continued)

opinion that reversed in part and affirmed in part the District Court’s decision. The Circuit Court affirmed the award to us of $3.5 million but remanded the remainder of the case back to the District Court for trial on the issue of whether the UNIX copyrights had been or should be transferred to SCO. On August 25, 2009, the U.S. Bankruptcy Court entered an Order appointing an independent Chapter 11 Trustee to manage the SCO bankruptcy estate. On March 30, 2010, the U.S. District Court jury returned a verdict in our favor and determined that under the asset purchase agreement as amended, we retained the UNIX and UnixWare copyrights. The District Court has yet to rule on certain remaining claims by SCO, including whether SCO is entitled to an immediate transfer of certain UNIX copyrights. While there can be no assurance as to the ultimate disposition of the litigation, we do not believe that its resolution will have a material adverse effect on our financial position, results of operations or cash flows.

On November 12, 2004, we filed suit against Microsoft in the U.S. District Court, District of Utah. We are seeking treble and other damages under the Clayton Act, based on claims that Microsoft eliminated competition in the office productivity software market during the time that we owned the WordPerfect word-processing application and the Quattro Pro spreadsheet application. Among other claims, we allege that Microsoft withheld certain critical technical information about the Windows operating system (“Windows”) from us, thereby impairing our ability to develop new versions of WordPerfect and other office productivity applications, and that Microsoft integrated certain technologies into Windows designed to exclude WordPerfect and other applications owned by us from relevant markets. In addition, we allege that Microsoft used its monopoly power to prevent original equipment manufacturers from offering WordPerfect and other applications to customers. On June 10, 2005, Microsoft’s motion to dismiss the complaint was granted in part and denied in part. On October 15, 2007, the U.S. Fourth Circuit Court of Appeals affirmed the District Court’s ruling. On March 18, 2008, the United States Supreme Court rejected Microsoft’s Petition for a Writ of Certiorari seeking to appeal the Fourth Circuit’s Decision. As a result of these rulings, we elected to proceed with the remaining claims against Microsoft. On March 29, 2010, the Federal District Court ruled that our underlying claims against Microsoft had been assigned to Caldera, Inc., in connection with the transfer of the DR DOS business by us in approximately 1996. Accordingly, the court dismissed our complaint against Microsoft. We have filed a notice of appeal to the U.S. Fourth Circuit Court of Appeals and intend to seek review of the District Court’s decision dismissing the complaint.

On June 15, 2009, our Board of Directors received a letter from four stockholders who had previously filed lawsuits against us for alleged options backdating, demanding that the Board of Directors investigate certain issues relating to our historical stock option grant practices, as well as our Audit Committee’s findings concerning those practices announced in our May 23, 2007 press release. The Board of Directors constituted a Special Litigation Committee to investigate the allegations in the demand letter. On August 28, 2009, these stockholders filed a complaint in the Massachusetts Middlesex County Superior Court against many of our current and former officers and directors asserting various claims related to alleged option backdating. We were also named as a nominal defendant in this complaint, although the action is derivative in nature and purportedly asserted on our behalf. On May 17, 2010, the Board responded to the demand letter, notifying the plaintiffs’ counsel that the demanded lawsuit would not serve the best interests of the Company and further demanding that the plaintiffs dismiss the derivative complaints previously filed. While there can be no assurance as to the ultimate disposition of this stockholder complaint, we do not believe that its resolution will have a material adverse effect on our financial position, results of operations or cash flows.

In November 2007, we were served with a complaint by IP Innovations (a patent litigation company), alleging that the distribution of Linux-based products by both Red Hat, Inc. (a co-defendant in the case) and us violates certain U.S. Patents. In prior periods, we accrued $1.3 million for this matter. On April 30, 2010, a U.S. District Court jury returned a verdict in our favor ruling that we did not infringe the patents in suit and, in addition, concluding that the patents were invalid on multiple grounds. As a result of this ruling, we released our accrual related to this matter during the second quarter of fiscal 2010. Although the plaintiffs have filed post-trial motions seeking to set aside the jury verdict, we do not believe that the resolution of this matter will have a material adverse effect on our financial position, results of operations or cash flows.

We are aware of two purported class action lawsuits, captioned Waldon v. Hovsepian and Fitzgerald v. Hovsepian, filed on or about March 5, 2010 in Massachusetts Superior Court, Middlesex County. The complaints name our Board of Directors as defendants, and allege breaches of fiduciary duties in connection with the unsolicited, conditional proposal from Elliott Associates, L.P. (“Elliott”) to acquire us for $5.75 per share in cash. The complaints do not define a putative class period. The plaintiffs seek to enjoin further alleged breaches of fiduciary duty and costs and attorneys’ fees. While there can be no assurance as to the ultimate disposition of these two lawsuits, we do not believe that the resolution of these claims will have a material adverse effect, individually or in the aggregate, on our financial position, results of operations or cash flows.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

I. Legal Proceedings (Continued)

In addition to the matters discussed above, we are currently party to various legal proceedings and claims involving former employees, either asserted or unasserted, which arise in the ordinary course of business. While the outcome of these matters cannot be predicted with certainty, we do not believe that the outcome of any of these claims will have a material adverse effect, individually or in the aggregate, on our consolidated financial position, results of operations or cash flows.

We accrue for losses that we believe are probable and can be reasonably estimated. We evaluate the adequacy of our legal reserves based on our assessment of many factors, including our interpretations of the law and our assumptions about the future outcome of each case based on current information. It is reasonably possible that our legal reserves could be increased or decreased in the near term based on our assessment of these factors.

J. Income Per Share From Continuing Operations

The following tables reconcile the numerators and denominators of the income per share from continuing operations calculation for the second quarters and first six months of fiscal 2010 and 2009:

	Three months ended
(In thousands, except per share data)	April 30, 2010		April 30, 2009
Basic income per share from continuing operations computation:
Income from continuing operations	$	19,912	$	15,051
Weighted-average common shares outstanding, excluding unvested restricted stock		349,204		344,881
Basic income per share from continuing operations	$	0.06	$	0.04
Diluted income per share from continuing operations computation:
Income from continuing operations	$	19,912	$	15,051
Weighted-average common shares outstanding, excluding unvested restricted stock		349,204		344,881
Incremental shares attributable to the assumed exercise of outstanding options, unvested restricted stock, and other stock plans		2,804		958
Total adjusted weighted-average common shares		352,008		345,839
Diluted income per share from continuing operations	$	0.06	$	0.04

Incremental shares attributable to options with exercise prices that were at or greater than the average market price for the respective period (“out-of-the-money”) were excluded from the calculation of diluted income per share for the second quarters of fiscal 2010 and 2009 as their effect would have been anti-dilutive. Out-of-the-money options for the second quarters of fiscal 2010 and 2009 totaled 16.3 million shares and 24.1 million shares, respectively.

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J. Income Per Share From Continuing Operations (Continued)

	Six months ended
(In thousands, except per share data)	April 30, 2010		April 30, 2009
Basic income per share from continuing operations computation:
Income from continuing operations	$	40,101	$	24,692
Weighted-average common shares outstanding, excluding unvested restricted stock		348,447		344,429
Basic income per share from continuing operations	$	0.12	$	0.07
Diluted income per share from continuing operations computation:
Income from continuing operations	$	40,101	$	24,692
Weighted-average common shares outstanding, excluding unvested restricted stock		348,447		344,429
Incremental shares attributable to the assumed exercise of outstanding options, unvested restricted stock, and other stock plans		1,689		1,114
Total adjusted weighted-average common shares		350,136		345,543
Diluted income per share from continuing operations	$	0.11	$	0.07

Incremental shares attributable to options with exercise prices that were at or greater than the average market price for the respective period (“out-of-the-money”) were excluded from the calculation of diluted income per share for the first six months of fiscal 2010 and 2009 as their effect would have been anti-dilutive. Out-of-the-money options for the first six months of fiscal 2010 and 2009 totaled 20.2 million shares and 23.3 million shares, respectively.

K. Comprehensive Income

The components of comprehensive income are as follows:

	Three months ended					Six months ended
(In thousands)	April 30, 2010			April 30, 2009		April 30, 2010			April 30, 2009
Net income	$	19,912		$	15,617	$	40,101		$	26,294
Change in net unrealized gain on investments		(962	)		1,130		(37	)		7,425
Adjustment for previously recorded unrealized gains related to sale of ARSs (1)		(2,711	)		—		(5,363	)		—
Change in cumulative translation adjustments		(7,187	)		2,011		(12,500	)		(5,383	)
Change in unrecognized pension costs		(269	)		110		(486	)		180
Comprehensive income	$	8,783		$	18,868	$	21,715		$	28,516

(1) We reversed the unrealized gains associated with the sale of our ARSs that were recorded in the prior period in the “Accumulated other comprehensive income” line item in our consolidated balance sheet. These reversals are part of the $2.0 million and $7.2 million gain in the “Gain on sale of previously impaired investments, net” line item in our consolidated statements of operations for the second quarter and first six months of fiscal 2010, respectively.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

K. Comprehensive Income (Continued)

Our accumulated other comprehensive income is comprised of the following:

(In thousands)	April 30, 2010			October  31, 2009
Net unrealized gain on investments	$	5,618		$	11,018
Unrecognized pension actuarial gain and transition obligation, net		3,912			4,398
Cumulative translation adjustment		(6,934	)		5,566
Total accumulated other comprehensive income	$	2,596		$	20,982

L. Stock-Based Compensation

Equity-Based Awards

We made stock option and restricted stock unit grants for the following number of shares during the first six months of fiscal 2010 and 2009:

	Six months ended
(In thousands of shares)	April 30, 2010	April 30, 2009
Stock options:
Performance-based	—	1,882
Time-based	5,110	2,118
Total stock options	5,110	4,000
Restricted stock units:
Market-based	1,230	—
Performance-based	—	827
Time-based	3,075	1,716
Total restricted stock units	4,305	2,543

Stock Options

Performance-based: During the first six months of fiscal 2009, we granted stock options to executives that will vest based on the achievement of certain revenue targets set in each applicable fiscal year beginning in the year of grant. If the targets are not met, the stock options will expire unvested.

Time-based: During the first six months of fiscal 2010 and 2009, we granted time-based stock options to executive and non-executive employees. The weighted-average grant-date fair value of time-based stock options granted during the first six months of fiscal 2010 was $1.70. Vesting of the options occurs over four years in accordance with the following schedule: either 1) 25% of the grant vests on the first anniversary of the grant date and the remaining 75% of the grant vests monthly thereafter; or 2) 25% of the grant vests on each grant date anniversary. The options expire eight years after the grant date.

Restricted Stock Units

Market-based: During the first quarter of fiscal 2010, we granted restricted stock units to executives that will vest based on the achievement of certain stock price targets. The stock-based compensation cost and derived service periods for these restricted stock units were estimated using the Monte Carlo simulation method utilizing a volatility of 46.4% and a risk-free rate of 2.9%. The weighted-average fair value of these awards is $3.25 and the derived service periods range from approximately one year to approximately two and one-third years. During the second quarter of fiscal 2010, one-third of the market award vested due to the achievement of the target applicable to that portion of the award. This resulted in the recognition of $1.4 million in stock-based compensation during the first six months of fiscal 2010 related to that portion of the award. If the remaining targets are not met, the restricted stock units will expire on the seventh anniversary of the grant date and will not convert into shares of common stock.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

L. Stock-Based Compensation (Continued)

Performance-based: During the first six months of fiscal 2009, we granted restricted stock units to executives that will vest based on the achievement of certain profit targets set in each applicable fiscal year beginning in the year of grant. If the targets are not met, the restricted stock units will expire and will not convert into shares of common stock.

Time-based: During the first six months of fiscal 2010, we granted time-based restricted stock units to non-executive employees primarily as part of our annual grant program. The weighted-average grant-date fair value of time-based restricted stock units granted during the first six months of fiscal 2010 was $4.60. During the first six months of fiscal 2009, we granted time-based restricted stock units to executive and non-executive employees. Units vest proportionally on each grant date anniversary over either three or four years.

Stock-Based Compensation Expense

Our consolidated statements of operations include the following amounts of stock-based compensation expense in the respective captions:

	Three months ended				Six months ended
(In thousands)	April 30, 2010		April 30, 2009		April 30, 2010		April 30, 2009
Cost of revenue	$	772	$	671	$	1,331	$	1,583
Sales and marketing		2,349		1,550		4,189		4,113
Product development		2,075		2,289		4,139		4,794
General and administrative		3,096		1,181		5,083		3,232
Operating expenses		7,520		5,020		13,411		12,139
Total stock-based compensation expense	$	8,292	$	5,691	$	14,742	$	13,722

Total unrecognized stock-based compensation expense expected to be recognized over an estimated weighted-average amortization period of 2.1 years was $43.0 million at April 30, 2010.

M. Segment Information

In December 2009, we announced our business unit segment structural and management reorganization to better align our business with our strategic objective of becoming an industry leader in the emerging Intelligent Workload Management market, while continuing to develop collaboration solutions. As part of this reorganization, we consolidated our reportable business unit segments from four to two. Our former Open Platform Solutions, Identity and Security Management and Systems and Resource Management business unit segments were consolidated to form the new Security, Management and Operating Platforms business unit segment (“SMOP”). Our former Workgroup business unit segment was renamed Collaboration Solutions (“CS”) to promote and highlight our recent areas of innovation.

Our performance is evaluated by our chief executive officer and our other chief decision makers based on reviewing revenue and operating income information for each business unit segment. Our software and services are sold both directly by our business unit segments and indirectly through original equipment manufacturers, resellers, and distributors who sell to end users.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

M. Segment Information (Continued)

Operating results by business unit segment are as follows:

	Three months ended
	April 30, 2010								April 30, 2009
(In thousands)	Net revenue		Gross profit			Operating income  (loss)			Net revenue		Gross profit			Operating income  (loss)
SMOP	$	125,546	$	97,924		$	(5,870	)	$	128,312	$	99,837		$	(5,707	)
CS		78,468		66,914			36,344			87,283		73,882			40,727
Common unallocated operating costs		—		(2,136	)		(10,571	)		—		(3,406	)		(17,396	)
Total per statements of operations	$	204,014	$	162,702		$	19,903		$	215,595	$	170,313		$	17,624
	Six months ended
	April 30, 2010								April 30, 2009
(In thousands)	Net revenue		Gross profit			Operating income (loss)			Net revenue		Gross profit			Operating income (loss)
SMOP	$	250,200	$	192,750		$	(9,795	)	$	253,163	$	196,265		$	(14,112	)
CS		156,180		132,385			73,020			177,303		149,093			82,959
Common unallocated operating costs		—		(3,785	)		(21,893	)		—		(7,071	)		(37,579	)
Total per statements of operations	$	406,380	$	321,350		$	41,332		$	430,466	$	338,287		$	31,268

Segment operating income (loss) is comprised of business unit segment gross profit, less operating expenses attributable to each business unit segment. Beginning in fiscal 2010, operating expenses, including sales and marketing, product development, and general and administrative expenses, have been allocated to the business unit segments. All prior period amounts have been reclassified to conform to the current year’s presentation. Common unallocated operating costs include items such as stock-based compensation, acquisition-related intangible asset amortization, restructuring, certain litigation related activity and other unusual items that are not considered part of our ongoing, ordinary business.

Geographic Information

The table below shows our net revenue from the U.S. and from international locations:

	Three months ended				Six months ended
(In thousands)	April 30, 2010		April 30, 2009		April 30, 2010		April 30, 2009
Net revenue:
U.S.	$	97,693	$	108,144	$	195,675	$	213,251
International		106,321		107,451		210,705		217,215
Total net revenue	$	204,014	$	215,595	$	406,380	$	430,466

During the second quarters and first six months of fiscal 2010 and 2009, revenue in Germany accounted for 10% of our net revenue. No other country outside of the U.S. accounted for 10% or more of our net revenue for the second quarters or first six months of fiscal 2010 or 2009. No single customer accounted for 10% or more of our total revenue for any period presented.

For the second quarters of fiscal 2010 and 2009, 68% and 70%, respectively, of our revenue outside the U.S. was in the Europe, Middle East and Africa region. For the first six months of fiscal 2010 and 2009, 69% and 70%, respectively, of our revenue outside the U.S. was in the Europe, Middle East and Africa region.

N. Share Repurchase Program

During fiscal 2008, our Board of Directors authorized the repurchase of up to $100 million of our outstanding common stock. There is no fixed termination date for the repurchase program. There were no repurchases under the program during the second quarters or first six months of fiscal 2010 or 2009. As of April 30, 2010, $33.2 million remains available to be used for repurchasing common stock under the current Board authorization.

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NOVELL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

O. Recent Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) issued new guidance to replace the quantitative-based risks and rewards calculation for initially determining which enterprise, if any, has a controlling financial interest in, and will be required to consolidate, a variable interest entity. A variable interest entity is defined as an entity that will need additional funding to operate. Companies are now required to follow a more qualitative approach, focused on identifying which enterprise has the power to direct the activities of the variable interest entity that most significantly impacts the variable interest entity’s economic performance. Companies are also required to perform ongoing assessments of which enterprise, if any, will have to consolidate the variable interest entity. Additional disclosures are also required. This guidance is effective for fiscal years beginning after November 15, 2009 (our fiscal 2011). Currently, the impact of this pronouncement on our financial position and results of operations is anticipated to be immaterial.

In January 2010, the FASB issued updated guidance to improve disclosures regarding fair value measurements. This update requires entities to 1) disclose separately the amounts of significant transfers in and out of level 1 and level 2 fair value measurements and describe the reasons for the transfers and 2) present separately (i.e. on a gross basis rather than as a net amount), information about purchases, sales, issuances, and settlements in the roll forward of changes in level 3 fair value measurements. The update requires fair value disclosures by class of assets and liabilities rather than by major category or line item in the statement of financial position. Disclosures regarding the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements for assets and liabilities in both level 2 and level 3 are also required. For all portions of the update except the gross presentation of activity in the level 3 roll forward, this standard is effective for interim and annual reporting periods beginning after December 15, 2009 (the second quarter of our fiscal 2010, which is when we implemented this standard). For the gross presentation of activity in the level 3 roll forward, this guidance is effective for fiscal years beginning after December 15, 2010 (our fiscal 2012). As this guidance is only disclosure-related, and we currently do not have any level 3 fair value measurements, it is presently anticipated that this guidance will not have an impact on our financial position and results of operations.

In January 2009, the SEC issued its final rules requiring public companies to provide their financial statements and financial statement schedules to the SEC and on their corporate websites in interactive data format using eXtensible Business Reporting Language (“XBRL”). XBRL is a standardized, machine-readable language designed to enhance the electronic communication of business information and should make business information more accessible. These rules will not change the SEC’s existing requirement to provide financial statements in the traditional format. Under these rules, we will be required to file our financial statements for the third quarter of fiscal 2010 using XBRL, in addition to our traditional filing format.

P. Recent Company Developments

On March 2, 2010, we announced the receipt of an unsolicited, conditional proposal from Elliott to acquire us for $5.75 per share in cash. On March 20, 2010, we announced that our Board of Directors concluded, after careful consideration, including a review of the proposal with our independent financial and legal advisors, that the Elliott proposal was inadequate and that it undervalued our franchise and growth prospects. We also announced that our Board authorized a thorough review of various alternatives to enhance stockholder value that include, but are not limited to, a return of capital to stockholders through a stock repurchase or cash dividend, strategic partnerships and alliances, joint ventures, a recapitalization and a sale of the company.

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NOVELL, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other parts of this Quarterly Report on Form 10-Q contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, regarding our strategy; future operations; financial position and results; liquidity; future opportunities; growth of business unit segments; the macroeconomic environment; market evolution and opportunities; company trends; market outlook; customer priorities; timing of realization of projections; functionality, characteristics, quality and performance capabilities of our products and technology; results achievable and benefits attainable through deployment of our products and provision of services; expanded opportunities for our products; release of funds in the Amer Jneid legal matter; funding of liquidity needs; foreign currency exchange rate fluctuations and impact on the value of our foreign-denominated cash and cash equivalent holdings; reduction of our valuation allowance on net deferred tax assets; decrease of unrecognized tax benefits and accrued interest; opportunities; beliefs; and objectives constitute “forward-looking statements.” The words “may,” “will,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “potential,” or “continue” and similar types of expressions identify such statements, although not all forward-looking statements contain these identifying words. These statements 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 risks and uncertainties. We expressly disclaim any obligation, except as required by federal securities laws, or undertaking to update or revise any forward-looking statements contained herein 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. Our actual results may differ materially from the results discussed in or implied by such forward-looking statements. We are subject to a number of risks, including, among others, risks relating to: uncertainty introduced by the review of various alternatives to enhance stockholder value authorized by our Board; indirect sales, growth rates of our business units, renewal of SUSE^® Linux Enterprise Server (“SLES™”) subscriptions with customers who have received certificates from Microsoft, decline rates of Open Enterprise Server (“OES”) 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. Risks that may affect our operating results include, but are not limited to, those discussed in the “Risk Factors” section in Part II Item 1A, titled “Risk Factors”. Readers should carefully review the risk factors described in this document and in other documents that we file from time to time with the Securities and Exchange Commission.

Overview

In December 2009, we announced our business unit segment structural and management reorganization to better align our business with our strategic objective of becoming an industry leader in the emerging Intelligent Workload Management market, while continuing to develop collaboration solutions. As part of this reorganization, we consolidated our reportable business unit segments from four to two. Our former Open Platform Solutions, Identity and Security Management and Systems and Resource Management business unit segments were consolidated to form the new Security, Management and Operating Platforms business unit segment (“SMOP”). Our former Workgroup business unit segment was renamed Collaboration Solutions (“CS”) to promote and highlight our recent areas of innovation.

On March 2, 2010, we announced the receipt of an unsolicited, conditional proposal from Elliott Associates, L.P. (“Elliott”) to acquire us for $5.75 per share in cash. On March 20, 2010, we announced that our Board of Directors concluded, after careful consideration, including a review of the proposal with our independent financial and legal advisors, that the Elliott proposal was inadequate and that it undervalued our franchise and growth prospects. We also announced that our Board authorized a thorough review of various alternatives to enhance stockholder value that include, but are not limited to, a return of capital to stockholders through a stock repurchase or cash dividend, strategic partnerships and alliances, joint ventures, a recapitalization and a sale of the company. We believe that the uncertainty associated with recent company developments has negatively impacted revenue during the second quarter of fiscal 2010, particularly in our Identity and Security Management business.

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NOVELL, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (Continued)

Overview (Continued)

In the second quarter of fiscal 2010, total revenue decreased 5% compared to the prior year period. Product and services revenues were lower by 4% and 17%, respectively, in the second quarter of fiscal 2010 compared to the prior year period. We believe that the lower product revenue primarily resulted from the uncertainty associated with recent company developments as well as weakness in our legacy products. The lower services revenue was due primarily to lower discretionary spending availability from our consulting services customers and lower renewals on technical support contracts. Foreign currency exchange rate fluctuations, as measured using the prior year period foreign currency exchange rates on non-U.S. dollar denominated revenue and expenses, favorably impacted revenue by $2.0 million, or 1%, in the second quarter of fiscal 2010, compared to the prior year period.

In the first six months of fiscal 2010, total revenue decreased 6% compared to the prior year period. Product and services revenues were lower by 4% and 18%, respectively, in the first six months of fiscal 2010 compared to the prior year period. We believe that the lower product revenue primarily resulted from the uncertainty associated with recent company developments as well as weakness in our legacy products. The lower services revenue was due primarily to lower discretionary spending availability from our consulting services customers and lower renewals on technical support contracts. Foreign currency exchange rate fluctuations, as measured using the prior year period foreign currency exchange rates on non-U.S. dollar denominated revenue and expenses, favorably impacted revenue by $2.9 million, or 1%, in the first six months of fiscal 2010, compared to the prior year period.

Below is a brief summary of the revenue results for our two business unit segments:

• Total revenue from SMOP for the second quarter of fiscal 2010 decreased $2.8 million, or 2%, compared to the prior year period. Total revenue from SMOP for the first six months of fiscal 2010 decreased $3.0 million, or 1%, compared to the prior year period.

• Total revenue from CS for the second quarter of fiscal 2010 decreased $8.8 million, or 10%, compared to the prior year period. Total revenue from CS for the first six months of fiscal 2010 decreased $21.1 million, or 12%, compared to the prior year period.

Because much of the revenue we invoice is deferred and recognized over time, we consider invoicing, or bookings, to be a key indicator of current sales performance and future revenue performance. Total invoicing was lower for the second quarter of fiscal 2010 compared to the prior year period due primarily to lower SMOP and CS product invoicing.

Total invoicing was flat for the first six months of fiscal 2010 compared to the prior year period largely as a result of higher SMOP product invoicing that was offset by lower CS product invoicing and lower services invoicing. We believe that the current customer focus on reducing cost, complexity and risk is aligned with our overall value proposition.

Total gross profit was 80% and 79% for the second quarter and first six months of fiscal 2010, respectively, compared to 79% for both of the prior year periods.

Despite lower revenue, our operating margins continue to improve, reflecting the positive impacts of recent restructuring and other cost-cutting initiatives. For the second quarter of fiscal 2010, we reported operating margins of 10%, which compares to 8% for the prior year period. Foreign currency exchange rate fluctuations, as measured using the prior year period foreign currency exchange rates on non-U.S. dollar denominated revenue and expenses, unfavorably impacted income from operations by $3.6 million, or 15%, in the second quarter of fiscal 2010 compared to the prior year period.

For the first six months of fiscal 2010, we reported operating margins of 10%, which compares to 7% for the prior year period. The first six months of fiscal 2010 included a $4.6 million change in accounting estimate related to fiscal 2009 sales compensation expense that increased profitability in the period. Foreign currency exchange rate fluctuations, as measured using the prior year period foreign currency exchange rates on non-U.S. dollar denominated revenue and expenses, unfavorably impacted income from operations by $9.4 million, or 19%, in the first six months of fiscal 2010 compared to the prior year period.

In the first quarter of fiscal 2010, we recorded net restructuring expenses of $2.8 million related primarily to termination benefits for certain executive employees as part of our business unit segment structural and management reorganization discussed above. We did not record any restructuring charges in the second quarter of fiscal 2010.

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NOVELL, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (Continued)

Critical Accounting Policies

An accounting policy is deemed to be critical if it requires us to make an accounting estimate based on assumptions about matters that are uncertain at the time an accounting estimate is made, and if different estimates that reasonably could have been used or changes in the accounting estimate that are reasonably likely to occur periodically could materially change the financial statements. We consider accounting policies related to revenue recognition and related reserves, impairment of long-term assets, valuation of deferred tax assets, loss contingency accruals and share-based payments to be critical accounting policies due to the judgments and estimation processes involved in each. For a more detailed explanation of the judgments included in these areas, refer to our Annual Report on Form 10-K for fiscal 2009.

Results of Operations

Reclassifications

As more fully described in Note M, “Segment Information,” during the first quarter of fiscal 2010, we reorganized our business unit segment structure and management resulting in a change to our reportable business unit segments. In connection with this reorganization, we evaluated our internal cost structure to ensure the resulting business unit segment gross profit and operating income were reflective of our business unit segment management structure. As a result of this evaluation, we determined the allocation and assignment of costs between maintenance and subscriptions and services within cost of revenue should be adjusted to be reflective of the new business unit segment management structure for the second quarter and first six months of fiscal 2010 and 2009. For the second quarter and first six months of fiscal 2009, in our consolidated statements of operations, $9.1 million and $18.4 million of costs, respectively, were moved from the services cost of revenue line item to the maintenance and subscriptions cost of revenue line item. This change impacted only the components of cost of revenue and had no impact on revenue, total cost of revenue or total gross profit.

Certain other amounts reported in prior periods have been reclassified from what was previously reported to conform to the current year’s presentation. These reclassifications did not have any impact on the statements of operations.

Revenue

We sell our software and services primarily to businesses, government entities, educational institutions, independent hardware and software vendors, resellers, and distributors both domestically and internationally. In our consolidated statements of operations, we categorize revenue as software licenses, maintenance and subscriptions, and services. Software licenses revenue includes sales of proprietary licenses and certain royalties. Maintenance and subscriptions revenue includes product maintenance agreements and Linux subscriptions. Services revenue includes professional services, stand-alone technical support, and training.

Total net revenue was as follows:

	Three months ended					Six months ended
(Dollars in thousands)	April 30, 2010		April 30, 2009		Change	April 30, 2010		April 30, 2009		Change
Software licenses	$	27,691	$	30,250	(8)%	$	48,884	$	58,517	(16)%
Maintenance and subscriptions		153,855		158,329	(3)%		312,806		317,144	(1)%
Services		22,468		27,016	(17)%		44,690		54,805	(18)%
Total net revenue	$	204,014	$	215,595	(5)%	$	406,380	$	430,466	(6)%

Revenue in our software licenses category decreased during the second quarter and first six months of fiscal 2010 compared to the prior year periods as software licenses revenue declined across both business unit segments. The lower software licenses revenue reflected the continued weakness in our legacy products.

Revenue from maintenance and subscriptions decreased in the second quarter and first six months of fiscal 2010 compared to the prior year periods. Maintenance and subscriptions revenue from SMOP was relatively flat in the second quarter of fiscal 2010 compared to the prior year period, and increased $4.8 million, or 3%, in the first six months of fiscal 2010, compared to the prior year period. Maintenance and subscriptions revenue from CS declined $4.7 million, or 7%, in the second quarter of fiscal 2010, and $9.2 million, or 7%, in the first six months of fiscal 2010, compared to the prior year periods.

25

NOVELL, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (Continued)

Results of Operations (Continued)

The lower services revenue in the second quarter and first six months of fiscal 2010 compared to the prior year periods is due primarily to lower discretionary spending availability from our consulting services customers and lower renewals on technical support contracts.

Foreign currency exchange rate fluctuations, as measured using prior period foreign currency exchange rates on non-U.S. dollar denominated revenue, favorably impacted total net revenue by $2.0 million, or 1%, and $2.9 million, or 1%, during the second quarter and first six months of fiscal 2010, respectively.

Net revenue in SMOP was as follows:

	Three months ended					Six months ended
(Dollars in thousands)	April 30, 2010		April 30, 2009		Change	April 30, 2010		April 30, 2009		Change
Software licenses	$	17,388	$	17,742	(2)%	$	30,848	$	32,845	(6)%
Maintenance and subscriptions		91,666		91,486	—%		186,871		182,032	3%
Services		16,492		19,084	(14)%		32,481		38,286	(15)%
Total net revenue	$	125,546	$	128,312	(2)%	$	250,200	$	253,163	(1)%

Revenue from SMOP decreased in the second quarter of fiscal 2010 compared to the prior year period. Revenue associated with our Linux Platform Products decreased by $1.5 million, or 4%, and SMOP services revenue declined $2.6 million, or 14%, compared to the prior year period. These revenue decreases were offset by higher revenue from Identity, Access and Compliance Management products, which increased by $2.5 million, or 9%, compared to the prior year period. Revenue from Systems and Resource Management products was relatively flat compared to the prior year period. Overall, product invoicing for SMOP decreased 3% compared to the prior year period, due primarily to a decrease in invoicing for our Identity, Access and Compliance Management products, partially offset by stronger invoicing for our Systems and Resource Management products. Identity, Access and Compliance Management invoicing decreased due in part to a reduction in contract length compared to the prior year period reflecting, we believe, the uncertainty associated with recent company developments.

Renewals of Microsoft SLES certificates began in early fiscal 2010, and as anticipated, the renewals have been invoiced at much lower amounts than under the original agreement. The lower invoicing associated with the Microsoft SLES certificates was partially offset by significant growth in our non-Microsoft invoicing of Linux Platform Products. (See the subsection entitled, “Microsoft Agreements–Related Revenue” of Note B, “Summary of Significant Accounting Policies” in our fiscal 2009 Annual Report on Form 10-K for more details on the Microsoft SLES certificates and related agreements.)

Revenue from SMOP decreased in the first six months of fiscal 2010 compared to the prior year period. Revenue associated with our Systems and Resource Management products decreased by $2.0 million, or 2%, and SMOP services revenue declined $5.8 million, or 15%, compared to the prior year period. These revenue decreases were offset by higher revenue from Identity, Access and Compliance Management products, which increased by $5.9 million, or 11%, and Linux Platform Products, which increased by $0.7 million, or 1%, compared to the prior year period. Overall, product invoicing for SMOP increased 10% compared to the prior year period, due primarily to stronger invoicing for our Linux Platform Products and Identity, Access and Compliance Management products, partially offset by a decline in invoicing for our Systems and Resource Management products. The higher invoicing for our Linux Platform Products resulted from significant growth in our non-Microsoft invoicing, partially offset by lower invoicing associated with the Microsoft SLES certificates. Identity, Access and Compliance Management revenue and invoicing increased due in part to several large deals in the first quarter of fiscal 2010. However, we believe this positive momentum was negatively impacted in the second quarter of fiscal 2010, by the uncertainty associated with recent company developments. The revenue and invoicing declines for Systems and Resource Management products were primarily due to challenges gaining traction in this market segment.

26

NOVELL, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (Continued)

Results of Operations (Continued)

Net revenue in CS was as follows:

	Three months ended					Six months ended
(Dollars in thousands)	April 30,     2010		April 30,     2009		Change	April 30,     2010		April 30,     2009		Change
Software licenses	$	10,303	$	12,508	(18)%	$	18,036	$	25,672	(30)%
Maintenance and subscriptions		62,189		66,843	(7)%		125,935		135,112	(7)%
Services		5,976		7,932	(25)%		12,209		16,519	(26)%
Total net revenue	$	78,468	$	87,283	(10)%	$	156,180	$	177,303	(12)%

Revenue from CS decreased in the second quarter of fiscal 2010 compared to the prior year period primarily from lower combined OES and NetWare-related product revenue of $2.9 million, or 6%, lower Collaboration product revenue of $2.2 million, or 9%, and lower services revenue of $2.0 million, or 25%. Overall, product invoicing for CS decreased 8% in the second quarter of fiscal 2010 compared to the prior year period. Invoicing for Collaboration products and combined OES and NetWare-related products decreased 12% and 2%, respectively, in the second quarter of fiscal 2010 compared to the prior year period. These declines were primarily due to the mature lifecycle stage of our CS products.

Revenue from CS decreased in the first six months of fiscal 2010 compared to the prior year period primarily from lower Collaboration product revenue of $5.6 million, or 11%, lower combined OES and NetWare-related product revenue of $5.4 million, or 6%, and lower services revenue of $4.3 million, or 26%. Overall, product invoicing for CS decreased 12% in the first six months of fiscal 2010 compared to the prior year period. Invoicing for Collaboration products and combined OES and NetWare-related products decreased 9% and 5%, respectively, in the first six months of fiscal 2010 compared to the prior year period. These declines were primarily due to the mature lifecycle stage of our CS products.

Deferred Revenue

We had total deferred revenue of $615.0 million as of April 30, 2010 compared to $659.4 million and $688.8 million at April 30, 2009 and October 31, 2009, respectively. Deferred revenue represents revenue that is expected to be recognized in future periods primarily under maintenance contracts and subscriptions that are recognized ratably over the related contract periods, typically one to three years. Deferred revenue related to our agreements with Microsoft is recognized ratably over various related service periods, which can extend up to five years. The decrease in total deferred revenue of $73.8 million compared to October 31, 2009 is primarily attributable to seasonably lower invoicing in the first six months of the fiscal year and from the recognition of deferred revenue related to our agreement with Microsoft to purchase SLES certificates.

Gross Profit

	Three months ended							Six months ended
(Dollars in thousands)	April 30,     2010			April 30,     2009			Change	April 30,     2010			April 30,     2009			Change
Software licenses	$	25,766		$	28,394		(9)%	$	45,271		$	54,625		(17)%
percentage of related revenue		93	%		94	%			93	%		93	%
Maintenance and subscriptions	$	133,030		$	136,371		(2)%	$	269,409		$	272,484		(1)%
percentage of related revenue		86	%		86	%			86	%		86	%
Services	$	3,906		$	5,548		(30)%	$	6,670		$	11,178		(40)%
percentage of related revenue		17	%		21	%			15	%		20	%
Total gross profit	$	162,702		$	170,313		(4)%	$	321,350		$	338,287		(5)%
percentage of revenue		80	%		79	%			79	%		79	%

Software licenses, maintenance and subscriptions, and services gross profit all decreased in the second quarter and first six months of fiscal 2010 compared to the respective prior year periods primarily from lower revenue. Services gross margins decreased as a percentage of sales as we entered into several low margin service engagements that drove product sales during the second quarter and first six months of fiscal 2010. Our services offerings are focused on supporting product sales, not generating stand-alone revenue or profits, in line with our strategic initiatives.

27

NOVELL, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (Continued)

Results of Operations (Continued)

Total gross profit was lower for the second quarter of fiscal 2010 compared to the prior year period primarily due to the 5% decrease in total net revenue. Foreign currency exchange rate fluctuations, as measured using the prior year period foreign currency exchange rates on non-U.S. dollar denominated revenue and expenses, positively impacted gross profit $0.9 million in the second quarter of fiscal 2010 compared to the prior year period.

Total gross profit was lower for the first six months of fiscal 2010 compared to the prior year period primarily due to the 6% decrease in total net revenue. Foreign currency exchange rate fluctuations, as measured using the prior year period foreign currency exchange rates on non-U.S. dollar denominated revenue and expenses, positively impacted gross profit $0.3 million in the first six months of fiscal 2010 compared to the prior year period.

Gross profit by business unit segment was as follows:

	Three months ended							Six months ended
(Dollars in thousands)	April 30,     2010			April 30,     2009			Change	April 30,     2010			April 30,     2009			Change
SMOP	$	97,924		$	99,837		(2)%	$	192,750		$	196,265		(2)%
percentage of related revenue		78	%		78	%			77	%		78	%
CS	$	66,914		$	73,882		(9)%	$	132,385		$	149,093		(11)%
percentage of related revenue		85	%		85	%			85	%		84	%
Common unallocated operating costs	$	(2,136	)	$	(3,406	)	37%	$	(3,785	)	$	(7,071	)	46%
Total gross profit	$	162,702		$	170,313		(4)%	$	321,350		$	338,287		(5)%
percentage of revenue		80	%		79	%			79	%		79	%

Gross profit was lower in both SMOP and CS for the second quarter and first six months of fiscal 2010 compared to the prior year periods primarily due to lower revenues. Gross profit as a percentage of revenue was essentially flat for both business unit segments for the second quarter and first six months of fiscal 2010 compared to the respective prior year periods.

Operating Expenses

	Three months ended							Six months ended
(Dollars in thousands)	April 30,     2010			April 30,     2009			Change	April 30,     2010			April 30,     2009			Change
Sales and marketing	$	74,853		$	75,697		(1)%	$	143,769		$	152,591		(6)%
percentage of revenue		37	%		35	%			35	%		35	%
Product development	$	39,368		$	44,552		(12)%	$	79,070		$	89,944		(12)%
percentage of revenue		19	%		21	%			19	%		21	%
General and administrative	$	28,578		$	25,032		14%	$	54,405		$	49,227		11%
percentage of revenue		14	%		12	%			13	%		11	%
Restructuring expenses	$	—		$	7,224		—%	$	2,774		$	15,273		(82)%
percentage of revenue		—	%		3	%			1	%		4	%
Loss (gain) on sale of subsidiaries	$	—		$	184		—%	$	—		$	(16	)	—%
percentage of revenue		—	%		—	%			—	%		—	%
Total operating expenses	$	142,799		$	152,689		(6)%	$	280,018		$	307,019		(9)%
percentage of revenue		70	%		71	%			69	%		71	%

Sales and marketing expenses decreased slightly in the second quarter of fiscal 2010 compared to the prior year period primarily from the benefits of our prior cost reduction initiatives, including our prior restructuring actions, partially offset by unfavorable foreign currency exchange rate fluctuations of $2.7 million. Sales and marketing headcount was lower by 20 employees, or 2%, at the end of the second quarter of fiscal 2010 compared to the prior year period.

Sales and marketing expenses decreased in the first six months of fiscal 2010 compared to the prior year period primarily from a $4.6 million change in accounting estimate related to fiscal 2009 sales compensation expense that reduced expenses in the first quarter of fiscal 2010 and the cost reduction initiatives described above, partially offset by unfavorable foreign currency exchange rate fluctuations of $5.8 million.

28

NOVELL, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (Continued)

Results of Operations (Continued)

Product development expenses in the second quarter of fiscal 2010 decreased compared to the prior year period primarily from cost reduction initiatives, including our prior restructuring actions, partially offset by unfavorable foreign currency exchange rate fluctuations of $1.0 million. Product development headcount decreased by 130 employees, or 10%, at the end of the second quarter of fiscal 2010 compared to the prior year period.

Product development expenses in the first six months of fiscal 2010 decreased compared to the prior year period primarily from cost reduction initiatives, including our prior restructuring actions, partially offset by unfavorable foreign currency exchange rate fluctuations of $2.1 million.

General and administrative expenses increased in the second quarter of fiscal 2010 compared to the prior year period primarily from higher legal and outside consulting service costs as well as unfavorable foreign currency exchange rate fluctuations of $0.8 million, partially offset by cost reduction initiatives, including our prior restructuring actions. General and administrative headcount was lower by 160 employees, or 28%, at the end of the second quarter of fiscal 2010 compared to the prior year period, reflecting the outsourcing of the majority of our IT support functions to Affiliated Computer Services, Inc. in the third quarter of fiscal 2009. This decrease in headcount-related expenses was offset by an increase in outside service costs as a result of the IT outsourcing.

General and administrative expenses increased in the first six months of fiscal 2010 compared to the prior year period primarily from higher legal and outside consulting service costs as well as unfavorable foreign currency exchange rate fluctuations of $1.8 million, partially offset by cost reduction initiatives, including our prior restructuring actions.

During the first quarter of fiscal 2010, we recorded net restructuring expenses of $2.8 million. This was comprised of $2.9 million primarily for termination benefits for certain executive employees as part of our business unit segment structural and management reorganization, partially offset by $0.1 million in reductions to accruals for changes in estimates related to prior period restructuring activities. During the second quarter of fiscal 2010, there were no restructuring expenses.

Foreign currency exchange rate fluctuations during the second quarter of fiscal 2010, compared to the prior year period, as measured using the prior year period foreign currency exchange rates on non-U.S. dollar denominated revenue and expenses, favorably impacted revenue by $2.0 million, unfavorably impacted operating expenses by $5.6 million and unfavorably impacted income from operations by $3.6 million. Foreign currency exchange rate fluctuations during the first six months of fiscal 2010, compared to the prior year period, favorably impacted revenue by $2.9 million, unfavorably impacted operating expenses by $12.3 million and unfavorably impacted income from operations by $9.4 million. Since a large portion of our recognized revenue is deferred revenue that was recorded at different foreign currency exchange rates, the impact to revenue of changes in foreign currency exchange rates is recognized over time, whereas the impact to expenses is more immediate, as expenses are recognized at the current foreign currency exchange rate in effect at the time the expense is incurred.

Other Income (Expense)

	Three months ended							Six months ended
(Dollars in thousands)	April 30,     2010			April 30,     2009			Change	April 30,     2010			April 30,     2009			Change
Investment income	$	3,262		$	5,390		(39)%	$	6,530		$	12,566		(48)%
percentage of revenue		2	%		3	%			2	%		3	%
Gain on sale of previously impaired investments, net	$	1,967		$	—		—%	$	7,195		$	—		—%
percentage of revenue		1	%		—	%			2	%		—	%
Impairment of long-term investments	$	—		$	(1,419	)	—%	$	—		$	(3,096	)	—%
percentage of revenue		—	%		(1	)%			—	%		(1	)%
Interest expense and other, net	$	(43	)	$	(3,767	)	99%	$	(1,873	)	$	(6,902	)	73%
percentage of revenue		—	%		(2	)%			—	%		(2	)%
Total other income, net	$	5,186		$	204		—%	$	11,852		$	2,568		362%
percentage of revenue		3	%		—	%			3	%		1	%

Investment income includes income from short-term and long-term investments. Investment income for the second quarter and first six months of fiscal 2010 decreased compared to the prior year periods due primarily to lower interest rates and to a decrease in cash,

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (Continued)

Results of Operations (Continued)

cash equivalents and short-term investments resulting primarily from cash expended for repurchasing the remainder of our 0.5% senior convertible debentures due 2024 (“Debentures”) in fiscal 2009.

During the second quarter of fiscal 2010, auction-rate securities (“ARSs”) classified as short-term investments, with a book value of $1.8 million, were sold for $4.2 million, resulting in a gain of $2.4 million. During the second quarter of fiscal 2010, we sold our remaining ARS that was classified as long-term, with a book value of $1.7 million for $0.9 million, resulting in a loss on sale of $0.8 million. The net gain recognized during the second quarter of fiscal 2010 from the sale of our remaining short-term and long-term ARSs was $1.6 million. During the second quarter of fiscal 2010, we also recognized a gain of $0.4 million related to the sale of a direct investment that was previously fully impaired.

During the first six months of fiscal 2010, we sold our remaining ARSs with a book value of $5.6 million for $12.2 million, resulting in a gain of $6.6 million. During the first six months of fiscal 2010, we also recognized a gain of $0.6 million related to the sales of direct investments that were previously fully impaired.

During the second quarter and first six months of fiscal 2009, we recorded other-than-temporary impairment charges of $1.4 million and $3.1 million, respectively, related to our ARSs.

Interest expense and other, net for the second quarter and first six months of fiscal 2010 decreased compared to the respective prior year periods due primarily to the Debenture repurchase in fiscal 2009, which resulted in lower interest expense. In the first six months of fiscal 2010, interest expense and other, net was comprised primarily of losses associated with our equity investment in Open Invention Network, LLC (“OIN”).

Income Tax Expense

	Three months ended							Six months ended
(Dollars in thousands)	April 30,     2010			April 30,     2009			Change	April 30,     2010			April 30,     2009			Change
Income tax expense	$	5,177		$	2,777		86%	$	13,083		$	9,144		43%
Effective tax rate		21	%		16	%			25	%		27	%

The effective tax rate for the second quarter of fiscal 2010 was 21%, compared to an effective tax rate of 16% for the prior year period primarily due to a benefit from discrete tax items in the prior year period and a shift in jurisdictional earnings. The effective tax rate for the first six months of fiscal 2010 was 25%, compared to an effective tax rate of 27% for the prior year period primarily due to a shift in jurisdictional earnings.

The effective tax rates for the second quarter and first six months of fiscal 2010 differ from the federal statutory rate of 35% primarily due to the effects of stock-based compensation, differences between the book and tax treatment of certain income items on which a valuation allowance has been recorded, and the jurisdictional mix of earnings.

Net Income Components

	Three months  ended				Six months  ended
(In thousands)	April 30,     2010		April 30,     2009		April 30,     2010		April 30,     2009
Income from continuing operations	$	19,912	$	15,051	$	40,101	$	24,692
Income from discontinued operations		—		566		—		1,602
Net income	$	19,912	$	15,617	$	40,101	$	26,294

Discontinued operations for the second quarter and first six months of fiscal 2009 relates to the gains from the sale in March 2007 of our Salmon Ltd. subsidiary as they met certain cumulative revenue targets. No further gains are anticipated from this sale.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (Continued)

Liquidity and Capital Resources

The balance in cash, cash equivalents, and short-term investments and the balance as a percent of total assets are as follows:

(Dollars in thousands)	April 30,     2010			October 31,     2009			Change
Cash, cash equivalents, and short-term investments	$	979,586		$	983,465		—%
Percent of total assets		54	%		52	%

An overview of the significant cash flow activities for the first six months of fiscal 2010 and 2009 is as follows:

	Six months  ended
(In thousands)	April 30, 2010			April 30, 2009
Net cash used in operating activities	$	(2,198	)	$	(13,097	)
Purchases of property, plant and equipment		(13,432	)		(6,582	)
Proceeds from sales of and distributions from long-term investments		8,629			1,736
Net cash paid for acquisitions		—			(48,472	)

Cash used in operating activities during the first six months of fiscal 2010 was $2.2 million. Cash used in operating activities during the first six months of fiscal 2009 was $13.1 million and included the receipt of $25.0 million from Microsoft for the first payment under the August 2008 agreement to purchase additional SLES certificates.

As of April 30, 2010, we had cash, cash equivalents, and short-term investments of $445.7 million held in accounts outside the United States, which would largely be subject to taxation if repatriated. Our short-term investment portfolio is diversified among security types, industry groups, and individual issuers. As of April 30, 2010, our short-term investment portfolio includes gross unrealized gains and losses of $5.9 million and $0.3 million, respectively.

During the first six months of fiscal 2010 and 2009, the U.S. dollar value of our foreign-denominated cash and cash equivalent holdings decreased by a net $6.9 million and $0.5 million, respectively. The decrease in fiscal 2010 resulted from the strengthening of the U.S. dollar against certain foreign currencies, primarily the Euro. As foreign currency exchange rates continue to fluctuate, especially the Euro, we may see further changes in the U.S. dollar value of our foreign-denominated cash and cash equivalent holdings.

Purchases of property, plant and equipment increased in the first six months of fiscal 2010 compared to the prior year period primarily as a result of our SAP customer relationship management software implementation, which was completed in the second quarter of fiscal 2010. This software implementation is for internal use only.

During the first six months of fiscal 2010, we sold our remaining ARSs with a book value of $5.6 million for $12.2 million, resulting in a gain of $6.6 million. During the first six months of fiscal 2010, we also recognized a gain of $0.6 million related to the sales of direct investments that were previously fully impaired. These gains are shown as a component of the line item “Gain on sale of previously impaired investments, net” in our consolidated statements of operations.

In relation to the appeal we filed in the Amer Jneid legal matter, we were required by the court to post a $51.5 million bond during fiscal 2008 (See Note I, “Legal Proceedings”). The amount of the bond was determined by statutory regulations and has no connection to the amount we believe may ultimately be paid in this matter. The bond is held in an interest-bearing account in our name, but is restricted and classified as such in our consolidated balance sheets. As of April 30, 2010, our restricted cash balance was $53.1 million. In May 2010, $35.3 million of the bond amount was returned to us and we anticipate that the remaining amount of the bond will be released by the trial court.

According to the terms of the agreement under which we have a $20.0 million or 17% interest in OIN, we could be required to make future cash contributions, which we would fund with cash from operating activities and cash on hand.

During fiscal 2008, our Board of Directors authorized the repurchase of up to $100 million of our outstanding common stock. There is no fixed termination date for the repurchase program. There were no repurchases under the program during the second quarters or first six months of fiscal 2010 or 2009. As of April 30, 2010, $33.2 million remains available to be used for repurchasing common stock under the current Board authorization.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS – (Continued)

Liquidity and Capital Resources (Continued)

There have been no significant changes to our contractual obligations as disclosed in our fiscal 2009 Annual Report on Form 10-K.

Our principal sources of liquidity continue to be from operating activities, cash on hand, and short-term investments. Our liquidity needs for the next twelve months and beyond are principally for the financing of fixed assets, repurchases of common stock under our share repurchase plan, payments under prior restructuring plans, product development investments, and maintaining flexibility in a dynamic and competitive operating environment.

Barring unforeseen circumstances, we anticipate being able to fund these liquidity needs for the next twelve months with existing cash, cash equivalents, and short-term investments together with cash generated from operating activities and investment income.

Off-Balance Sheet Arrangements

At April 30, 2010, we had no off-balance sheet arrangements as defined by applicable SEC rules.

Recent Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) issued new guidance to replace the quantitative-based risks and rewards calculation for initially determining which enterprise, if any, has a controlling financial interest in, and will be required to consolidate, a variable interest entity. A variable interest entity is defined as an entity that will need additional funding to operate. Companies are now required to follow a more qualitative approach, focused on identifying which enterprise has the power to direct the activities of the variable interest entity that most significantly impacts the variable interest entity’s economic performance. Companies are also required to perform ongoing assessments of which enterprise, if any, will have to consolidate the variable interest entity. Additional disclosures are also required. This guidance is effective for fiscal years beginning after November 15, 2009 (our fiscal 2011). Currently, the impact of this pronouncement on our financial position and results of operations is anticipated to be immaterial.

In January 2010, the FASB issued updated guidance to improve disclosures regarding fair value measurements. This update requires entities to 1) disclose separately the amounts of significant transfers in and out of level 1 and level 2 fair value measurements and describe the reasons for the transfers and 2) present separately (i.e. on a gross basis rather than as a net amount), information about purchases, sales, issuances, and settlements in the roll forward of changes in level 3 fair value measurements. The update requires fair value disclosures by class of assets and liabilities rather than by major category or line item in the statement of financial position. Disclosures regarding the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements for assets and liabilities in both level 2 and level 3 are also required. For all portions of the update except the gross presentation of activity in the level 3 roll forward, this standard is effective for interim and annual reporting periods beginning after December 15, 2009 (the second quarter of our fiscal 2010, which is when we implemented this standard). For the gross presentation of activity in the level 3 roll forward, this guidance is effective for fiscal years beginning after December 15, 2010 (our fiscal 2012). As this guidance is only disclosure-related, and we currently do not have any level 3 fair value measurements, it is presently anticipated that this guidance will not have an impact on our financial position and results of operations.

In January 2009, the SEC issued its final rules requiring public companies to provide their financial statements and financial statement schedules to the SEC and on their corporate websites in interactive data format using eXtensible Business Reporting Language (“XBRL”). XBRL is a standardized, machine-readable language designed to enhance the electronic communication of business information and should make business information more accessible. These rules will not change the SEC’s existing requirement to provide financial statements in the traditional format. Under these rules, we will be required to file our financial statements for the third quarter of fiscal 2010 using XBRL, in addition to our traditional filing format.

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Foreign currency exchange rate fluctuations, as measured using prior period foreign currency exchange rates on non-U.S. dollar denominated revenue, favorably impacted revenue by $2.0 million, unfavorably impacted operating expenses by $5.6 million and unfavorably impacted income from operations by $3.6 million during the second quarter of fiscal 2010. Foreign currency exchange rate fluctuations favorably impacted revenue by $2.9 million, unfavorably impacted operating expenses by $12.3 million and unfavorably impacted income from operations by $9.4 million during the first six months of fiscal 2010.

During the first six months of fiscal 2010 and 2009, the U.S. dollar value of our foreign-denominated cash and cash equivalent holdings decreased by a net $6.9 million and $0.5 million, respectively. The decrease in fiscal 2010 resulted from the strengthening of the U.S. dollar against certain foreign currencies, primarily the Euro. As foreign currency exchange rates continue to fluctuate, especially the Euro, we may see further changes in the U.S. dollar value of our foreign-denominated cash and cash equivalent holdings.

Since a large portion of our recognized revenue is deferred revenue that was recorded at different foreign currency exchange rates, the impact to revenue of changes in foreign currency exchange rates is recognized over time, whereas the impact to expenses is more immediate, as expenses are recognized at the current foreign currency exchange rate in effect at the time the expense is incurred.

Apart from the above, there have been no significant changes in our interest rate risk and market risk exposures and procedures or in our foreign currency hedging procedures during the second quarter or first six months of fiscal 2010 as compared to the respective risk exposures and procedures disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations, set forth in Part II Item 7A, in our Annual Report on Form 10-K for the fiscal year ended October 31, 2009.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, as of the end of the period covered by this report, (i) were appropriately designed to provide reasonable assurance of achieving their objectives and (ii) were effective and provided reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934, as amended, is (a) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (b) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Change in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during our second quarter of fiscal 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Part II. — Other Information

Except as listed below, other items in Part II are omitted because the items are inapplicable or require no response.

Item 1. Legal Proceedings

The information required by this item is incorporated herein by reference from Note I of our financial statements contained in Part I, Item 1 of this Form 10-Q.

Item 1A. Risk Factors

Our Board of Directors has authorized a thorough review of various alternatives to enhance stockholder value. As a result of the uncertainty associated with these recent company developments, our business may be negatively impacted.

On March 2, 2010, we announced the receipt of an unsolicited, conditional proposal from Elliott Associates, L.P. (“Elliott”) to acquire us for $5.75 per share in cash. On March 20, 2010, we announced that our Board of Directors concluded, after careful consideration, including a review of the proposal with our independent financial and legal advisors, that the Elliott proposal was inadequate and that it undervalued our franchise and growth prospects. We also announced that our Board authorized a thorough review of various alternatives to enhance stockholder value that include, but are not limited to, a return of capital to stockholders through a stock repurchase or cash dividend, strategic partnerships and alliances, joint ventures, a recapitalization and a sale of the company.

There can be no assurances as to the outcome of the review undertaken by our Board. In the event that the Board determines to engage in a particular course of action, the result and success of that course of action cannot be assured and could negatively affect our stock price. Our stock price may also fluctuate as a result of actual or speculated developments with respect to the review process. The review process may become a distraction for our management and employees and may require the expenditure of significant time and financial resources. The resulting uncertainty may adversely affect our ability to hire new talent, retain key employees, and grow and enhance our business. We believe that the uncertainty associated with these recent company developments negatively affected operating results in the second quarter of fiscal 2010 and may continue to adversely affect operating results. These consequences, alone or in combination, may harm our business and have a material adverse effect on our financial condition and the results of our operations.

We may not be able to attract and retain new customers through indirect sales, which may result in decreased or fluctuating revenue. In addition, our reliance on an indirect sales channel for the distribution of our products could adversely affect the sales of our products.

Our ability to attract and retain new customers and achieve significant revenue growth in the future will depend in large part on our ability to continue to establish and maintain strategic distribution and other collaborative relationships with industry-leading hardware manufacturers, distributors, software vendors and enterprise solutions providers such as Microsoft, SAP, ACS, Dell, HP, IBM, Cap Gemini, Atos Origin, Accenture, Verizon Business and other third parties that are willing to recommend, design and implement solutions that include our products. These relationships create the potential to distribute our products to a much larger customer base than we would otherwise be able to reach through our direct sales and marketing efforts. We are currently investing, and plan to continue to invest, significant resources to maintain and further develop these distribution relationships.

The reliance and the distribution of our products through indirect channel partners presents a number of special risks, including but not limited to:

• our ability to retain or attract a sufficient number of existing or future distribution partners;

• our lack of control over the delivery of our products to end-users;

• the ability of resellers and distributors to terminate their relationships with us on short notice;

• the failure of our indirect channel partners to recommend, or continue to recommend, or support our products effectively or to release their products in which our products are embedded in a timely manner;

• our inability to effectively manage conflicts between our indirect channel partners and the end-users of our products;

• the impact of economic conditions or industry demand on our indirect channel partners; and

• the failure of indirect channel partners to devote sufficient resources to marketing and supporting our products.

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RISK FACTORS (Continued)

Our inability to establish or maintain successful relationships with distribution partners could have a material adverse effect on our business, financial condition, and operating results. In addition, revenues derived from indirect channel partners may fluctuate significantly, which could have a material adverse effect on our business, financial condition, and operating results.

If our Security, Management and Operating Platforms business unit segment does not grow at the rate we anticipate, or if the growth rate declines, our financial results, including cash flow, will be negatively impacted.

Our near-term growth strategy focuses on our Security, Management and Operating Platforms business unit segment, which serves the Intelligent Workload Management (“IWM”) market. We have focused on this business because we believe that it represents the best current opportunity for us to profitably grow our revenue. Our ability to achieve success with this strategy is dependent on a number of factors including, but not limited to, the following:

• the growth of this market;

• our development of key products and upgrades;

• delivery of product milestones in a timely manner;

• the acceptance of our products particularly by enterprise companies, large industry partners and major accounts;

• the decisions by customers to upgrade from older versions of our products to newer versions; and

• the attractiveness of our products to current and future distribution partners.

If this business unit segment does not grow at the rates we anticipate or declines, our business, financial condition, and operating results could be adversely affected.

Our inability to renew SLES subscriptions with those customers who have received SLES certificates from Microsoft, or renewals of such subscriptions at deeply discounted rates, or failure to maintain our channel partnership with Microsoft at historical levels, could adversely affect our future sales and profitability.

The Microsoft Agreements have been a significant contributor to our product revenue and the increase in our gross and operating margins over the past few years. Most of the Microsoft SLES certificate sales have been three-year arrangements that began to expire in the first quarter of fiscal 2010. Accordingly, the ongoing financial benefit of the Microsoft Agreements will depend on our ability to renew SLES subscriptions with those customers who received SLES certificates from Microsoft and the pricing we are able to obtain in connection with such renewals. If we are unable to renew the SLES subscriptions as they expire, or if renewed subscriptions are at a lower price than Microsoft paid us for the SLES certificates, our financial results could be adversely affected. In addition, if Microsoft does not acquire additional SLES certificates, ceases to distribute SLES certificates, diminishes its marketing efforts in relation to SLES certificates, or significantly discounts SLES certificates upon distribution, our financial results could be adversely affected. There can be no assurance that Microsoft will continue to operate as a distribution partner for us after our agreement with Microsoft expires or terminates, or that the channel partnership will be maintained at historical levels.

Microsoft also provides funding for development to enable interoperability between our respective platforms. There can be no assurance that Microsoft will continue to fund development efforts after our agreement with Microsoft expires or terminates. If funding were reduced or terminated, the rate of interoperability development could be affected, which could adversely affect SLES revenues and our financial results.

Our OES and NetWare-related revenue stream may decline at accelerated rates which would adversely affect our business, operating results and cash flow.

Sales of our OES and NetWare-related products have been declining for many years and declines at accelerated rates could offset or out-pace any growth in sales of our other products. We terminated general support of our NetWare products beginning in March 2010. While customers are eligible to receive extended support for NetWare, some NetWare customers may migrate to a competing platform which would negatively impact our revenue. Our strategy is to stabilize these sales declines to the extent practicable with new product releases and other efforts; however, combined OES and NetWare-related product revenue declined by $5.4 million, or 6%, in the first six months of fiscal 2010, compared to the prior year period. If our strategy is unsuccessful, our combined OES and NetWare-related revenue stream may decline more rapidly than any growth of other revenue streams from our other products, which could have a material adverse effect on our business, financial condition, and operating results.

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RISK FACTORS (Continued)

If we are unable to develop new and enhanced products and services that achieve widespread market acceptance, or if we are unable to continually improve the performance, features, and reliability of our existing products and services or adapt our business model to keep pace with industry trends, our business and operating results would be adversely affected.

Our success depends on our ability to respond to the rapidly changing needs of our customers by developing or introducing new products, product upgrades, and services on a timely basis. We have in the past incurred, and will continue to incur, significant research and development expenses as we strive to remain competitive. New product development and introduction involves a significant commitment of time and resources and is subject to a number of risks and challenges including:

• managing the length of the development cycle for new products and product enhancements, which has frequently been longer than we originally estimated;

• adapting to emerging and evolving industry standards and to technological developments by our competitors and customers;

• entering into new or unproven markets with which we have limited experience;

• shifting our skill set to new strategic areas;

• managing new product and service strategies;

• incorporating acquired products and technologies; and

• developing or expanding efficient sales channels.

If we are not successful in managing these risks and challenges, or if our new products, product upgrades, and services are not technologically competitive or do not achieve market acceptance, our business and operating results would be adversely affected.

The success of our Intelligent Workload Management strategy is contingent upon the realization and development of the IWM market.

Our IWM strategy is intended to enable computing resources to be managed and optimized in a policy-driven, secure, and compliant manner across physical, virtual, and cloud environments. Although we have encountered interest in IWM-oriented products, the IWM market is nascent and developing. It is difficult to accurately predict the scale of the IWM market, the timing of development of the IWM market, and our ability to penetrate the IWM market. While we anticipate differentiable solutions that will be attractive to many customers within the IWM market, we are investing at an early stage and success in the IWM market, if achieved, would require time and resources. It is uncertain whether or when the IWM market will realize its potential, as well as the extent and timing of our impact within the IWM market. We also expect other enterprise software vendors to enter the IWM market with solutions that will directly compete with our offerings. Our ability to capture market share will depend on the relative timing of product offerings; capabilities, design and functionality of our products relative to products of our competitors; and strategic fit of our products within the IWM market.

Our software may have vulnerabilities, defects and errors, which may lead to a loss of revenue or product liability claims.

Software products are internally complex and occasionally contain defects or errors, especially when first introduced or when new versions or enhancements are released. Despite extensive testing, we may not detect defects or errors in our new products, platforms or product enhancements until after we have commenced commercial shipments. If defects or errors, including security flaws or incompatibilities, are discovered in our existing or acquired products, platforms or product enhancements, then potential customers may delay or forego purchases; our reputation in the marketplace may be damaged; we may incur additional service and warranty costs; and we may have to divert additional development resources to correct the defects or errors. If any or all of the foregoing occur, we may lose revenues or incur higher operating expenses and lose market share, any of which could severely harm our financial condition and operating results.

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RISK FACTORS (Continued)

We have experienced, and may continue to experience, delays in the introduction of new products due to various factors, which result in lost revenue.

In the past, we have experienced delays in the introduction of new products due to a number of factors including: the complexity of software products, the need for extensive testing of software to ensure compatibility of new releases with a wide variety of application software and hardware devices, the need to ensure quality of products prior to extensive distribution, and with regard to our open source products, our continuing reliance on the work of third parties not employed by us. Our open source offerings depend to a large extent on the efforts of developers not employed by us for the creation and modification of open source technologies. For example, Linus Torvalds, the original developer of the Linux kernel, and a small group of engineers, many of whom are not employed by us, are primarily responsible for the development and evolution of the Linux kernel that is a key component of our OES and SUSE Linux Enterprise offerings. The timing and nature of new releases of the Linux kernel are controlled by these third parties. Delays in developing, completing, or shipping new or enhanced products could continue to result in delayed or reduced revenue for those products and could adversely impact customer acceptance of those offerings.

Our inability to rely on software licensed from third parties, including open source contributions of third-party programmers and corporations, would adversely affect our business and operating results.

We use various types of software licensed from unaffiliated third parties. Our open source offerings, for example, are primarily comprised of open source components developed by independent third parties over whom we exercise no control. The collective licenses to third-party technologies are critical to our business. If we are unable to maintain licenses to third-party materials, our distribution of relevant offerings may be delayed until we are able to develop, license, or acquire replacement technologies. Such a delay could have a material adverse impact on our business.

If key developers or a significant percentage of developers or corporations decide to cease development of the Linux kernel or other open source software, or if we are unable to maintain licenses to proprietary software or such software is no longer available to us on commercially reasonable terms, we would have to either rely on another party (or parties) to develop these technologies, develop them ourselves, or adapt our product strategy accordingly. This could increase our development expenses, delay our product releases and upgrades, and adversely impact customer acceptance of our relevant offerings.

In addition, we may be unable to predict the future course of open source technology development, which could impact the market appeal of our products as well as our reputation.

Because of the characteristics of open source software, there are few technology barriers to entry in the open source market by new competitors and it may be relatively easy for new competitors with greater resources than we have to enter our markets and compete with us.

One of the characteristics of open source software is that any open source licensee can modify the existing software or develop new software that competes with existing open source software. Such competition can develop without the degree of overhead and lead time required by traditional proprietary software companies. It is possible for new competitors with greater resources than ours to develop their own open source solutions, potentially reducing the demand for, and putting price pressure on, our solutions. In addition, some competitors make their open source software available for free download and use, or may position their open source software as a loss leader. We cannot guarantee that we will be able to compete successfully against current and future competitors or that competitive pressure and/or the availability of open source software will not result in price reductions, reduced operating margins and loss of market share, any one of which could seriously harm our business.

If our customers do not renew their maintenance and subscription agreements with us, our operating results may be adversely impacted.

Our customers may elect not to renew their maintenance and subscriptions for our service after expiration of their agreements. In addition, our customers may opt for a lower priced service option. Our customers’ renewal rates may decline or fluctuate as a result of a number of factors, including their level of satisfaction with our services and their ability to continue their operations and spending levels. Renewal rates may also decline as a result of elections by customers to use our products on an unsupported basis. If we experience a decline in the renewal rates for our customers or they opt for a lower priced service option or fewer subscriptions, our operating results may be adversely impacted.

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NOVELL, INC.

RISK FACTORS (Continued)

Uncertain economic conditions and reductions in IT spending could adversely affect our business, financial condition, and operating results.

In the past, unfavorable or uncertain economic conditions have resulted in reduced global IT spending rates that have adversely affected the markets in which we do business. While the economy has shown signs of improvement, there has been renewed concern about the strength and sustainability of a recovery, particularly given recent events in Europe, which has been impacted by the risk of sovereign debt defaults in certain European Union countries. Accordingly, current and/or future weakness in the United States economy and/or in the economies of the other geographic regions in which we operate could have a negative impact on our revenues and operating results. For example, in fiscal 2009, as a result of company trends and economic uncertainty, management reduced its long-range revenue growth plans, resulting in the impairment of $270.0 million of goodwill related to our Systems and Resource Management reporting unit. While we are unable to accurately predict changes in general economic conditions and how the current global financial and market conditions will affect global IT spending rates, we believe that there is always the potential for a slowdown in global IT spending. This could result in reductions in sales of our products, longer sales cycles, slower adoption of new technologies, and increased price competition. Any of these events would likely harm our business, financial condition, and operating results.

We may not be able to successfully compete in a challenging market for infrastructure software services.

The industries in which we compete are highly competitive, and customer requirements evolve rapidly. We expect competition to continue to increase both from existing competitors and from new market entrants. Our competitors of the Security, Management and Operating Platforms business unit segment include, but are not limited to, Microsoft, IBM, Oracle, Sun, HP, Symantec, BMC Software, Inc., VMware, Inc., Computer Associates, Arcsight, Citrix, and Red Hat. Our primary competitors for the Collaboration Solutions business unit segment include, but are not limited to, Microsoft, IBM, and Google. Many of our competitors have greater financial, technical and marketing resources than we have. We believe that competitive factors common to both of our segments include:

• the pricing of products and services as well as pricing strategies;

• the availability of open source or free-ware alternatives;

• the timing and market acceptance of new products;

• brand and product awareness;

• the performance, reliability and security of products;

• the ability to preserve an existing customer base;

• the impact of current macroeconomic conditions;

• the ability to establish and maintain key strategic relationships with distributors, resellers, and other partners; and

• the ability to attract and retain highly qualified development, services, and managerial personnel.

Our inability to maintain a strong brand could impact our future success.

We believe that the future success of our business depends on our ability to maintain and enhance our brand, and expand brand awareness into emerging strategic markets. If we fail to promote and maintain our brand, we may not be able to expand our customer base or attract talented employees, and our business, financial condition, and operating results could be materially and adversely affected.

Our inability to meet customer demand for technical support services could adversely affect our customer relationships.

We offer technical support services with many of our products. There may be situations where we are unable to respond adequately to accommodate short-term increases in customer demand for support services. We also may be unable to modify the format of our support services to compete with changes in support services provided by our competitors. Any failure to maintain adequate customer support could cause customer dissatisfaction, result in reduced sales of products and reductions in the renewals of software maintenance and support agreements, and, accordingly, have a material adverse affect on our business, financial condition, and operating results.

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NOVELL, INC.

RISK FACTORS (Continued)

Our professional services clients may cancel or reduce the scope of their engagements with us on short notice.

If our clients cancel or reduce the scope of a professional services engagement, we may be unable to reassign our professionals to new engagements without delay. Because these expenses are relatively fixed, and because we establish the levels of these expenses well in advance of any particular quarter, cancellations or reductions in the scope of client engagements could result in the under-utilization of our professional services employees, leading to reduced profitability.

We are vulnerable to system failures, which could harm our reputation and business.

Although we have outsourced much of our internal IT services, we are still vulnerable to system failures. We rely on our technology infrastructure and outsourcing partner, among other functions, to sell our products and services, support our partners, fulfill orders and bill, collect and make payments. Our systems are vulnerable to damage or interruption from natural disasters, power loss, telecommunication failures, terrorist attacks, computer intrusions and viruses, computer denial-of-service attacks and other events. A significant number of our systems are not redundant, and our disaster recovery planning is not sufficient to address every eventuality. Our systems are also subject to break-ins, sabotage and intentional acts of vandalism by internal employees, contractors and third-parties. Despite any precautions we may take, such problems could result in, among other consequences, interruptions in our services, which could harm our reputation, business and financial condition. We do not carry business interruption insurance sufficient to protect us from all losses that may result from interruptions in our services as a result of system failures or to cover all contingencies.

The success of our acquisitions is dependent on our ability to integrate personnel, operations, and technology, and if we are not successful, our financial and operating results may be adversely affected.

Achieving the benefits of acquisitions depends on the successful integration of personnel, operations and technology. The integration of acquisitions is subject to risks and requires significant expenditure of time and resources. During fiscal 2009, we made two acquisitions. The most recent acquisition was completed in February 2009. The challenges involved in integrating acquisitions include the following:

• obtaining synergies from the companies’ organizations and service and product offerings effectively and quickly;

• bringing together marketing efforts so that the market receives useful information about the combined companies and their products;

• coordinating sales efforts so that customers can do business easily with the combined companies;

• integrating product offerings, technology, back office, human resources, and accounting and financial systems;

• assimilating employees with diverse corporate cultural backgrounds into a common business culture revolving around our corporate strategy; and

• retaining key officers and employees who possess the necessary skills and experience to quickly and effectively transition and integrate the businesses.

Failure to effectively and timely complete the integration of acquisitions could materially harm the business and operating results of the combined companies. Furthermore, we may assume significant liabilities in connection with acquisitions and/or incur substantial accounting charges for restructuring and related expenses, the write-off of purchased in-process research and development, impairment of goodwill and intangible assets, and stock-based compensation expense. Using our cash for acquisitions may prevent us from pursuing other business opportunities. For example, during fiscal 2009 it was determined that $270.0 million of our goodwill, and $5.7 million of PlateSpin’s and $3.4 million of Managed Objects’ developed technology and customer relationship intangible assets were impaired.

The consolidation of our industry may adversely affect our acquisition program.

We believe that the software industry will continue to undergo considerable consolidation and changes during the next several years. This consolidation could increase the competition we face to acquire businesses and increase the prices we must pay for the businesses that we acquire. In response to this consolidation, we consider from time to time additional strategies to enhance stockholder value. In considering various strategies, we evaluate the consequences, including, among other things, the implications to our liquidity and capital structure, tax effects and accounting consequences, any of which could have a material adverse impact on our financial condition.

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NOVELL, INC.

RISK FACTORS (Continued)

The risks associated with conducting a global business could adversely affect our results.

We are a global corporation with subsidiaries, offices and employees around the world and, as such, we face certain risks in doing business abroad that we do not face domestically. Risks inherent in transacting business internationally could negatively impact our operating results, including:

• costs and difficulties in staffing and managing international operations;

• unexpected changes in regulatory requirements;

• tariffs and other trade barriers;

• difficulties in enforcing contractual and intellectual property rights;

• longer payment cycles;

• local political and economic conditions;

• potentially adverse tax consequences, including restrictions on repatriating earnings and the threat of “double taxation”; and

• fluctuations in foreign currency exchange rates, which can affect demand, increase our costs and affect our net income.

Increasing our foreign research and development operations exposes us to risks that are beyond our control and could affect our ability to operate successfully.

In order to enhance the cost-effectiveness of our operations, we have shifted portions of our research and development operations to jurisdictions outside of the United States. The transition of even a portion of our research and development operations to a foreign country involves a number of logistical and technical challenges that could result in product development delays and operational interruptions, which could reduce our revenues and adversely affect our business. We may encounter complications associated with the set-up, migration and operation of business systems and equipment in expanded or new facilities. This could result in delays in our research and development efforts and otherwise disrupt our operations. If such delays or disruptions occur, they could damage our reputation and otherwise adversely affect our business, financial condition, and operating results.

We cannot be certain that any shifts in our operations to offshore jurisdictions will ultimately produce sustained cost savings. We cannot predict the extent of government support, availability of qualified workers, future labor rates, or monetary and economic conditions in any offshore location where we may operate.

The relocation of labor resources may have a negative impact on our existing employees, which could negatively impact our operations. In addition, we will likely be faced with competition in these offshore markets for qualified personnel, including skilled design and technical personnel, and we expect this competition to increase as other companies expand their operations offshore. If the supply of qualified personnel becomes limited due to increased competition or otherwise, it could increase our costs and employee turnover rates.

We may not be able to attract and retain qualified personnel because of the intense competition for qualified personnel in the software industry. Furthermore, the loss of certain key individuals could adversely affect our performance and could have a material adverse affect on our business, financial condition, and operating results.

Our ability to maintain and enhance our competitive technological position depends, in large part, on our ability to attract and retain highly qualified development, services, and managerial personnel. Furthermore, our future success depends on the services and effectiveness of a number of key officers and employees, including our CEO. Competition for personnel of the highest caliber is intense in the software industry. The loss of the technical knowledge and industry expertise of certain key individuals could seriously impede our success. Moreover, the loss of these individuals, particularly to a competitor, some of which may be in a position to offer greater compensation, and any resulting loss of customers or market confidence could reduce our market share, diminish our brand and adversely affect our business. The uncertainty associated with our Board’s review of various alternatives to enhance stockholder value may enhance attrition and impact our ability to attract qualified replacement candidates. If we do not succeed in retaining and motivating our key employees, and attracting new key personnel, our business, its financial performance and our stock price may decline.

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NOVELL, INC.

RISK FACTORS (Continued)

If third parties claim that we infringed their intellectual property, our ability to use some technologies and products could be limited and we may incur significant costs to resolve these claims.

Litigation regarding intellectual property rights is common in the software industry. We have from time to time received letters or been the subject of claims suggesting that we are infringing the intellectual property rights of others. In addition, we have faced and expect to continue to face from time to time disputes over rights and obligations concerning intellectual property, including with respect to third party proprietary and open source components. The cost and time of defending ourselves can be significant. If an infringement claim is successful, we and our customers may be required to obtain one or more licenses from third parties, and we may be obligated to pay or reimburse our customers for monetary damages. In such instances, we or our customers may not be able to obtain necessary licenses from third parties at a reasonable cost or at all, and may face delays in product shipment while developing or arranging for alternative technologies, which could adversely affect our operating results.

In the event claims for indemnification are brought for intellectual property infringement, we could incur significant expenses, thereby adversely affecting our operating results.

We indemnify customers against certain claims that our products, including open source components thereof, infringe the intellectual property rights of others. Although indemnification programs for proprietary software are common in our industry, indemnification programs that cover open source software are less so. In the event that we are required to indemnify our customers against claims for intellectual property infringement, we could incur significant expense reimbursing customers for their legal costs and, in the event those claims are successful, for damages.

Legal actions taken by claimants alleging intellectual property infringement could adversely affect our revenue and business plan if these legal actions cause a reduction in demand for our SUSE Linux and Ximian^® products.

In January 2004, The SCO Group, Inc. (“SCO”) filed suit against us in Utah State Court and the case was later removed to the U.S. District Court in Utah (See Part I, Item 1, Note I, “Legal Proceedings,” in the consolidated financial statements). SCO’s complaint asserted ownership of UNIX copyrights and further alleged that our public statements and filings regarding the ownership of the copyrights in UNIX have harmed SCO’s business reputation and affected its efforts to protect its ownership interest in UNIX and UnixWare. In August 2007, the U.S. District Court granted us summary judgment against SCO, concluding that we retained ownership of the UNIX copyrights, and dismissed SCO’s claims against us. In August 2009, the Tenth Circuit Court of Appeals issued an opinion that reversed in part and affirmed in part the Trial Court’s decision. In March 2010, we received a favorable jury verdict concluding that we had not transferred the UNIX copyrights and, therefore, defeated SCO’s damage claims against us. Although the jury verdict is a significant win for us, SCO’s remaining claims, including whether SCO is entitled to an immediate transfer of certain UNIX copyrights, must still be determined by the U.S. District Court. If SCO is able to succeed on such remaining claims, our future revenue and business plans associated with our SUSE Linux and Ximian products could be adversely affected.

We may not be able to protect our confidential information, and this could adversely affect our business.

We generally enter into contractual relationships with our employees and third parties to protect our confidential information. The misappropriation of our trade secrets or other proprietary information could harm our business. In addition, we may not be able to timely detect unauthorized use of our intellectual property and take appropriate steps to enforce our rights. In the event we are unable to enforce these contractual obligations and our intellectual property rights, our business could be adversely affected.

Litigation matters related to or arising out of our historical stock-based compensation practices could have a material adverse effect on our business, financial condition, operating results and cash flows.

As discussed in Part I, Item 1, Note I, “Legal Proceedings,” of this report, derivative actions were filed against us and our current and former officers and directors relating to our historical stock-based compensation practices. In addition, two separate lawsuits have been filed against our current Board of Directors in connection with the Elliott proposal. No assurance can be given regarding the outcome of these litigation matters or any possible government actions relating to our historical stock-based compensation practices. The resolution of such matters may be time consuming and expensive, and may distract management from the conduct of our business. Furthermore, if we are subject to adverse findings in litigation actions, we could be required to pay damages or penalties or have other remedies imposed, which could harm our business, financial condition, operating results and cash flows.

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NOVELL, INC.

RISK FACTORS (Continued)

Failure to maintain effective internal controls over financial reporting could have a material adverse effect on our business, operating results and stock price.

We must continue to document and test our internal controls over financial reporting in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), which requires an annual management assessment of the effectiveness of our internal controls over financial reporting and a report by our independent registered public accounting firm addressing this assessment. During the course of our documentation and testing we may identify deficiencies that we may not be able to remediate in time to meet the deadlines imposed by Section 404 for continuing compliance with the requirements of Section 404. If we fail to maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we and/or our independent registered public accounting firm may not be able to conclude at each fiscal year-end that we have effective internal controls over financial reporting in accordance with Section 404. In addition, we may incur increased costs in order to address the requirements of Section 404. The extent and timing of incurrence of any such costs is difficult to predict. Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud. If, in any year, we and/or our independent registered public accounting firm cannot attest that we have effective internal controls over financial reporting in accordance with Section 404, our business and operating results could be harmed and result in a negative market reaction.

Our financial and operating results may fluctuate from quarter to quarter, which may cause the price of our common stock to decline.

Our financial and operating results may fluctuate from quarter to quarter due to a variety of factors including, but not limited to:

• the timing of orders from customers and shipments to customers;

• the decisions of our current and future customers not to renew their subscription agreements with us;

• the impact of foreign currency exchange rates on the price of our products in international locations;

• the inability to respond to the decline in revenue through the distribution channel; and

• the inability to deliver products that are satisfactory to our customers and distribution partners.

In addition, we often experience a higher volume of revenue at the end of each quarter. Because of this, fixed costs that are not appropriate for prevailing revenue levels may not be detected until late in any given quarter and operating results could be adversely affected. Due to these factors or other unanticipated events, our financial and operating results in any one quarter may not be a reliable indicator of our future performance.

During fiscal 2009 we recorded goodwill impairment charges of $270.0 million. If our goodwill or intangible assets become further impaired, we may be required to record a significant charge to earnings.

Under generally accepted accounting principles, we review our intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is tested for impairment at least annually. In determining whether an asset is impaired, we must make assumptions regarding recoverability of costs, estimated future cash flows from the asset, intended use of the asset and other related factors. Fair values are estimated using the combination of a discounted cash flow methodology and a market analysis and weighting the results. Factors that may be considered a change in circumstances, indicating that the carrying value of our goodwill or amortizable intangible assets may not be recoverable, include a decline in stock price and market capitalization, reduced future cash flow estimates, and slower growth rates in our industry. We may be required to record a significant charge in our financial statements during the period in which any impairment of our goodwill or amortizable intangible assets is determined, negatively impacting our operating results. For more information on our goodwill impairment charge of $270.0 million recorded in fiscal 2009, see Part II, Item 8, Note K, “Goodwill and Intangible Assets” in the consolidated financial statements of our Annual Report on Form 10-K for the fiscal year ended October 31, 2009.

Changes to the estimates used in the analysis, including estimated future cash flows, could cause either of our business unit segments or our indefinite-lived intangibles to be valued differently in future periods. It is at least reasonably possible that future analyses could result in additional material non-cash goodwill impairment charges.

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NOVELL, INC.

RISK FACTORS (Continued)

Because we recognize revenue from maintenance and subscriptions over the term of the agreements, downturns or upturns in sales may not be immediately reflected in our operating results.

We recognize maintenance and subscription revenue from customers ratably over the term of their agreements, which are generally one to three years. As a result, much of the revenue we report in each quarter is deferred revenue from maintenance and subscription agreements entered into during previous quarters. Consequently, a decline in maintenance and/or subscriptions sales in any one quarter will not necessarily be fully reflected in the revenue in that quarter and will negatively affect our revenue in future quarters. In addition, we may be unable to adjust our cost structure to reflect this reduced revenue. Accordingly, the effect of significant downturns in sales and market acceptance of our products may not be fully reflected in our operating results until future periods. Our maintenance and subscription model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from new customers must be recognized over the term of the applicable agreement.

If we do not make effective use of our substantial cash resources, our financial results could suffer and the value of our common stock could decline.

Our ability to increase stockholder value is dependent, in part, on the effective use of our cash balance. We may use these funds to continue to operate our business, finance strategic acquisitions, execute corporate transactions, or repurchase shares of our common stock. We cannot ensure that any of these measures will be executed, or that such measures will improve our financial results or increase stockholder value.

We may experience risks in our investments due to changes in the market, which could adversely affect the value or liquidity of our investments.

At April 30, 2010, we had $979.6 million in cash, cash equivalents and short-term investments. We maintain a portfolio of cash equivalents and short-term and long-term investments in a variety of securities that may include commercial paper, certificates of deposit, money market funds and government debt securities. These available-for-sale investments are subject to interest rate risk, credit risk, general market risk, and currency risk and may decline in value.

Our investments are subject to general credit, liquidity, market, currency and interest rate risks. As a result, we may experience reductions in value or loss of liquidity of our investments. In addition, should any investment cease paying or reduce the amount of interest paid to us, our interest income would suffer. These market risks associated with our investment portfolio could have a material adverse effect on our business, financial condition, and operating results.

We have real estate lease commitments for unoccupied space and restoration obligations, and if we are unable to sublet this space on acceptable terms our operating results and financial condition could be adversely affected.

We are party to real estate leases worldwide for a total of approximately 634,000 square feet. At October 31, 2009, we actively utilized approximately 95% of this space, or 602,000 square feet. We own 995,000 square feet of office space. At October 31, 2009, approximately 19%, or 213,000 square feet of our owned space is currently unoccupied. Approximately 17% or 165,000 square feet of the owned space is sublet to a third party.

Our stock price may be volatile in the future, and the stock price may decline.

The market price of our common stock has experienced significant fluctuations in the past and may continue to fluctuate in the future. The market price of our common stock may be affected by a number of factors, including:

• announcements of quarterly operating results and revenue and earnings forecasts by us that fail to meet or be consistent with our earlier projections or the expectations of our investors or securities analysts;

• announcements by either our competitors or our customers that fail to meet or be consistent with their earlier projections or the expectations of our investors or securities analysts;

• rumors, announcements, or press articles regarding our, or our competitors’ operations, management, organization, financial condition, or financial statements;

• changes in revenue and earnings estimates by us, our investors, or securities analysts;

• accounting charges, including charges relating to the impairment of goodwill, intangible assets or other assets;

• announcements of planned acquisitions or dispositions by us or by our competitors;

• announcements of new or planned products by us, our competitors, or our customers;

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NOVELL, INC.

RISK FACTORS (Continued)

• gain or loss of a significant customer or partner;

• the inception of, or material developments in relation to, litigation initiated by us or brought against us;

• inquiries by the SEC, NASDAQ, law enforcement, or other regulatory bodies;

• acts of terrorism, the threat of war, and other crises or emergency situations;

• economic slowdowns or the perception of an oncoming economic slowdown in any of the major markets in which we operate; and

• uncertainty associated with our Board’s review of various alternatives to enhance stockholder value.

The stock market in general, and the market prices of stocks of technology companies in particular, have experienced extreme price volatility that has adversely affected, and may continue to adversely affect, the market price of our common stock.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table presents information regarding purchases of shares of our common stock pursuant to our share repurchase program and for our stock-based compensation plans during the second quarter of fiscal 2010.

(In thousands, except per share amounts)                                                      Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum dollar value of shares that may yet be purchased under the plans or programs
February 1, 2010 through February 28, 2010	10	$	4.75	—	$	33,180
March 1, 2010 through March 31, 2010	136		5.82	—		33,180
April 1, 2010 through April 30, 2010	13		5.85	—		33,180
Total	159	$	5.75	—		33,180

The total number of shares purchased was for shares surrendered to us to satisfy tax withholding obligations in connection with our equity plans.

During fiscal 2008, our Board of Directors authorized the repurchase of up to $100 million of our outstanding common stock. There is no fixed termination date for the repurchase program. There were no repurchases under the program during the second quarters or first six months of fiscal 2010 or 2009. As of April 30, 2010, $33.2 million remains available to be used for repurchasing common stock under the current Board authorization.

Item 6. Exhibits

The list of exhibits set forth on the Exhibit Index filed as a part of this Quarterly Report on Form 10-Q is incorporated herein by reference.

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NOVELL, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Novell, Inc. (Registrant)
Date:   June 8, 2010	By:	/s/ DANA C. RUSSELL
	Dana C. Russell
	Senior Vice President and Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)

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NOVELL, INC.

EXHIBIT INDEX

The following exhibits are filed as part of this Quarterly Report on Form 10-Q:

Exhibit Number	Description
10.1*	Form of Restricted Stock Unit Agreement.
10.2*	Form of Restricted Stock Agreement.
10.3*	Form of Nonqualified Stock Option Grant Agreement (for Directors).
10.4*	Form of Restricted Stock Unit Agreement (for Directors).
10.5*	Form of 2010 Restricted Stock Unit Agreement.
10.6*	One-time incremental retainer to Chairman.
10.7*	Non-Employee Director Remuneration and Expense Reimbursement Summary.
10.8*	Letter agreement with Mr. Plaskett to amend (1) a Restricted Stock Unit Agreement dated April 7, 2009, (2) a Nonqualified Stock Option Agreement dated April 7, 2009, and (3) a Stock Option Agreement Outside Directors Grant dated June 3, 2008.
10.9*	Letter agreement with Ms. White to amend (1) a Restricted Stock Unit Agreement dated April 7, 2009, (2) a Nonqualified Stock Option Agreement dated April 7, 2009, and (3) a Stock Option Agreement Outside Directors Grant dated June 3, 2008.
31.1	Rule 13a-14(a) Certification.
31.2	Rule 13a-14(a) Certification.
32.1	18 U.S.C. Section 1350 Certification.
32.2	18 U.S.C. Section 1350 Certification.

* Indicates management contracts or compensatory plans.

46

EX-10.1

Exhibit 10.1

NOVELL, INC.

2009 OMNIBUS INCENTIVE PLAN

RESTRICTED STOCK UNIT AGREEMENT

This RESTRICTED STOCK UNIT AGREEMENT, dated as of              , 20    (the “Date of Grant”), is delivered by Novell, Inc. (the “Company”) to                      (the “Grantee”).

RECITALS

A. The Novell, Inc. 2009 Omnibus Incentive Plan (the “Plan”) provides for the grant of restricted stock units in accordance with the terms and conditions of the Plan. The Compensation Committee of the Company’s Board of Directors (the “Committee”) has decided to make a grant of restricted stock units as an inducement for the Grantee to continue his or her employment with the Company, or an Affiliate or a Subsidiary (as such terms are defined in the Plan), and promote the best interests of the Company and its shareholders. A copy of the Plan is available at https://innerweb.novell.com/organizations/finance/shareholder_services/.

B. The Plan is administered by the Committee (as defined in the Plan).

NOW, THEREFORE, the parties to this Agreement, intending to be legally bound hereby, agree as follows:

1. Grant of Restricted Units. The Company hereby grants the Grantee              restricted stock units (the “Restricted Units”). The Restricted Units are subject to the terms and conditions set forth in this Agreement and the Plan; provided, however, that if an executed, written agreement between the Company and the Grantee (an “Employment Agreement”) includes provisions that differ from those set forth in this Agreement, the provisions of the Employment Agreement will apply to the extent not contrary to the terms of the Plan.

2. Restricted Unit Account. Restricted Units represent hypothetical shares of common stock of the Company (“Shares”), and not actual Shares. The Company shall establish and maintain a Restricted Unit account, as a bookkeeping account on its records, for the Grantee and shall record in such account the number of Restricted Units granted to the Grantee. No Shares shall be issued to the Grantee at the time the grant is made, and the Grantee shall not be, nor have any of the rights or privileges of, a shareholder of the Company with respect to any Restricted Units recorded in the account. The Grantee shall not have any interest in any fund or specific assets of the Company by reason of this award or the Restricted Unit account established for the Grantee.

3. Vesting. The Restricted Units shall be subject to forfeiture until the Restricted Units vest. The Restricted Units shall vest according to the following schedule, if the Grantee continues to be employed by, or provide service to, the Company, an Affiliate, or a Subsidiary on the applicable vesting date:

Restricted Units vest in              equal installments if the last reported sales price of the Corporation’s common stock on NASDAQ for the immediately preceding              consecutive trading day period equals or exceeds $        , $         and $        , respectively.

The vesting of the Restricted Units shall be cumulative, but shall not exceed 100% of the Restricted Units. If the foregoing schedule would produce fractional Restricted Units, the number of Restricted Units that vest shall be rounded down to the nearest whole Restricted Unit.

4. Termination of Restricted Units.

(a) Except as otherwise provided in an Employment Agreement, if the Grantee ceases to be employed by, or provide services to, the Company, an Affiliate, or a Subsidiary for any reason before all of the Restricted Units vest, any unvested Restricted Units shall automatically terminate and shall be forfeited as of the date of the Grantee’s termination of employment or service.

(b) Notwithstanding anything to the contrary herein, if the Restricted Units have not fully vested in accordance with Paragraph 3 above by the seventh anniversary of the Date of Grant, the remaining unvested Restricted Units shall automatically terminate and shall be forfeited as of the day immediately following the seventh anniversary of the Date of Grant.

(c) No payment shall be made with respect to any unvested Restricted Units that terminate as described in this Paragraph 4.

5. Payment of Restricted Units.

(a) If and when the Restricted Units vest, the Company shall issue to the Grantee one Share for each vested Restricted Unit, subject to tax withholding as described below, within two (2) months after the applicable vesting date.

(b) The issuance of Shares to the Grantee pursuant to this Agreement is subject to all applicable foreign, federal, state, local and other taxes. All obligations of the Company under this Agreement shall be subject to the rights of the Company to withhold amounts required to be withheld for any taxes, if applicable. The Grantee shall be required to pay to the Company, or make other arrangements satisfactory to the Company to provide for the payment of, any foreign, federal, state, local or other taxes that the Company is required to withhold with respect to the Restricted Units. Subject to Committee approval, the Grantee may elect to satisfy any tax withholding obligation of the Company with respect to Restricted Units by having shares withheld up to an amount that does not exceed the minimum applicable withholding tax rate for federal (including FICA), state, local and other tax liabilities.

(c) The obligation of the Company to deliver Shares when Restricted Units vest shall be subject to all applicable laws, rules, and regulations and such approvals by governmental agencies as may be deemed appropriate by the Committee, including such actions as Company counsel shall deem necessary or appropriate to comply with relevant securities laws and regulations.

6. Change of Control. If a Change of Control (as defined in the Plan) occurs, the provisions of the Plan and the terms of any Employment Agreement between the Company and the Grantee applicable to a Change of Control shall apply to the Restricted Units.

7. Nature of Grant. In accepting the Restricted Units, the Grantee acknowledges that: (i) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated at any time, unless otherwise provided in the Plan and this Agreement; (ii) the grant of the Restricted Units is voluntary and occasional and does not create any contractual or other right to receive future grants of restricted stock units, or benefits in lieu of restricted stock units, even if restricted stock units have been granted repeatedly in the past; (iii) all decisions with respect to future restricted stock unit grants, if any, will be at the sole discretion of the Company and the Committee; (iv) the Grantee’s participation in the Plan shall not create a right to further employment with the Company, an Affiliate, or a Subsidiary and shall not interfere with the ability of the Company, an Affiliate, or a Subsidiary to terminate Grantee’s employment relationship at any time with or without cause; (v) the Grantee is voluntarily participating in the Plan; (vi) the Restricted Units are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (vii) in the event that the Grantee is not an employee of the Company, an Affiliate, or a Subsidiary, the Restricted Units grant will not be interpreted to form an employment contract or relationship with the Company or with any Affiliate or Subsidiary; (viii) the future value of the underlying Shares is unknown and

cannot be predicted with certainty; (ix) the value of Shares acquired upon vesting may increase or decrease in value, and no claim or entitlement to compensation or damages shall arise from termination of Restricted Units or from any diminution in value of the Restricted Units or Shares received upon vesting of Restricted Units, and the Grantee irrevocably releases the Company and all Affiliates and Subsidiaries from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this Agreement, the Grantee shall be deemed irrevocably to have waived his or her entitlement to pursue such claim; and (x) in the event of an involuntary termination of the Grantee’s employment (whether or not in breach of local labor laws), the Grantee’s right to receive Restricted Units and vest under the Plan, if any, will, except as otherwise provided in an Employment Agreement, terminate effective as of the date that Grantee is no longer actively employed and will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden leave” or similar period pursuant to local law); furthermore, in the event of involuntary termination of employment (whether or not in breach of local labor laws), the Grantee’s right to receive Shares pursuant to the Restricted Units after termination of employment, if any, will be measured by the date of termination of Grantee’s active employment and will not be extended by any notice period mandated under local law; the Committee shall have the exclusive discretion to determine when the Grantee is no longer actively employed for purposes of the Restricted Units award.

8. Grant Subject to Plan Provisions. This grant is made pursuant to the Plan, the terms of which are incorporated herein by reference, and in all respects shall be interpreted in accordance with the Plan. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Agreement, the terms and conditions of the Plan shall prevail. The grant and payment of the Restricted Units are subject to interpretations, regulations and determinations concerning the Plan established from time to time by the Committee in accordance with the provisions of the Plan, including, but not limited to, provisions pertaining to (i) rights and obligations with respect to withholding taxes, (ii) the registration, qualification or listing of the Shares, (iii) changes in capitalization of the Company, and (iv) other requirements of applicable law. The Committee shall have the authority to interpret and construe the Restricted Units pursuant to the terms of the Plan, and its decisions shall be conclusive as to any questions arising hereunder. Notwithstanding the foregoing, the Committee or the full Board of Directors (or, in the case of any restricted stock unit grant to the Company’s chief executive officer, the independent members of the Board of Directors) may modify the vesting schedule in any manner it deems appropriate, including without limitation reducing any specified Share Price targets, and any such modification shall be conclusive and binding.

9. No Employment or Other Rights. THE GRANTEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF RESTRICTED UNITS PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING IN THE EMPLOY OR SERVICE OF THE COMPANY, AN AFFILIATE, OR A SUBSIDIARY AT THE WILL OF THE COMPANY, AN AFFILIATE, OR A SUBSIDIARY, AS THE CASE MAY BE (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED A RESTRICTED UNIT OR PURCHASING SHARES HEREUNDER). THE GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER, AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE OR SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH THE GRANTEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE THE GRANTEE’S RELATIONSHIP AS AN EMPLOYEE OR SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.

10. Data Privacy. The Grantee understands that the Company holds certain personal information about him or her, including, but not limited to, the Grantee’s name, home address and telephone number; date of birth; social security number, social insurance number or other identification number; salary; nationality; job title; any Shares held in the Company; and/or details of all Restricted Units or any other entitlement to Shares awarded, canceled, vested, unvested or outstanding in the Grantee’s favor (collectively, “Data”). The Grantee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Grantee’s Data by and among, as applicable, the Company and its Subsidiaries and Affiliates for the exclusive purpose of implementing, administering and managing the Grantee’s participation in the Plan. The Grantee understands that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the Grantee’s country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than the Grantee’s country. The Grantee understands that he or she may

request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative. The Grantee authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Grantee’s participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom the Grantee may elect to deposit any Shares acquired upon vesting of Restricted Units. The Grantee understands that Data will be held only as long as is necessary to implement, administer and manage the Grantee’s participation in the Plan. The Grantee understands that he or she may, at any time, view the Data, request additional information about the storage and processing of the Data, require any necessary amendments to the Data or refuse or withdraw the consents herein, in each case without cost, by contacting in writing his or her local human resources representative. The Grantee understands, however, that refusing or withdrawing his or her consent may affect his or her ability to participate in the Plan. For more information on the consequences of the Grantee’s refusal to consent or withdrawal of consent, the Grantee understands that he or she may contact his or her local human resources representative.

11. No Stockholder Rights. Neither the Grantee, nor any person entitled to receive payment in the event of the Grantee’s death, shall have any of the rights and privileges of a stockholder with respect to Shares until certificates for Shares have been issued upon vesting of Restricted Units.

12. Assignment and Transfers. Except as the Committee may otherwise permit pursuant to the Plan, the rights and interests of the Grantee under this Agreement may not be sold, assigned, encumbered or otherwise transferred except, in the event of the death of the Grantee, by will or by the laws of descent and distribution. In the event of any attempt by the Grantee to alienate, assign, pledge, hypothecate, or otherwise dispose of the Restricted Units or any right hereunder, except as provided for in this Agreement, or in the event of the levy or any attachment, execution or similar process upon the rights or interests hereby conferred, the Company may terminate the Restricted Units by notice to the Grantee, and the Restricted Units and all rights hereunder shall thereupon become null and void. The rights and protections of the Company hereunder shall extend to any successors or assigns of the Company and to the Company’s Subsidiaries and Affiliates. This Agreement may be assigned by the Company without the Grantee’s consent.

13. Applicable Law. The validity, construction, interpretation and effect of this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to the conflicts of laws provisions thereof. This Agreement and the Restricted Units are intended to be exempt from the requirements of section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), by settling the Restricted Units within the short-term deferral exemption set forth in the requirements under section 409A of the Code, and this Agreement and the Restricted Units shall be interpreted on a basis consistent with such intent. For purposes of section 409A of the Code, each payment made under this Agreement shall be treated as a separate payment. In no event shall the Grantee, directly or indirectly, designate the calendar year of payment.

14. I.R.C. Section 83(b). Pursuant to Section 83(b) of the U.S. Internal Revenue Code of 1986, as amended, the Grantee will not be entitled to make an election to be taxed upon grant of the Restricted Units.

15. Notice. Any notice to the Company provided for in this instrument shall be addressed to the Company in care of Director of Shareholder Services at the corporate headquarters of the Company, and any notice to the Grantee shall be addressed to the Grantee at the residential address written beneath the Grantee’s name below. The Grantee agrees to notify the Company in writing upon any change in such residential address. Any notice shall be delivered by hand, sent by telecopy or enclosed in a properly sealed envelope addressed as stated above, registered and deposited, postage prepaid, in a post office regularly maintained by the applicable postal service.

IN WITNESS WHEREOF, the Company has caused its duly authorized officers to execute and attest this Agreement, and the Grantee has executed this Agreement, effective as of the Date of Grant.

NOVELL, INC.

By:

Name:

Title:

I hereby accept the Restricted Units described in this Agreement, and I agree to be bound by the terms of the Plan and this Agreement. I hereby further agree that all the decisions and determinations of the Committee shall be final and binding.

Grantee:

Print Name:

EX-10.2

Exhibit 10.2

NOVELL, INC.

2009 OMNIBUS INCENTIVE PLAN

RESTRICTED STOCK AGREEMENT

This RESTRICTED STOCK AGREEMENT, dated as of              , 20     (the “Date of Grant”), is delivered by Novell, Inc. (the “Company”) to                      (the “Grantee”).

RECITALS

A. The Novell, Inc. 2009 Omnibus Incentive Plan (the “Plan”) provides for the grant of restricted stock in accordance with the terms and conditions of the Plan. Pursuant to the Non-Employee Director Remuneration and Expense Reimbursement Summary, as in effect from time to time and approved by the Board of Directors of the Company (the “Board”), the Committee (as defined in the Plan) has approved a grant of restricted stock as an inducement for the Grantee to promote the best interests of the Company and its stockholders. A copy of the Plan is available at https://innerweb.novell.com/organizations/finance/shareholder_services/.

B. The Plan is administered by the Committee.

NOW, THEREFORE, the parties to this Agreement, intending to be legally bound hereby, agree as follows:

1. Grant of Restricted Stock. The Company hereby grants the Grantee              shares of restricted common stock of the Company (the “Restricted Stock”). The Restricted Stock is subject to the terms and conditions set forth in this Agreement and the Plan.

2. Vesting of Restricted Stock.

(a) The Restricted Stock shall be subject to forfeiture until the Restricted Stock vests. Except as otherwise provided in subparagraphs 2(b) or 2(c) below, the Restricted Stock shall vest in accordance with the following schedule, provided that the Grantee is a Director (as defined in the Plan) of the Company on such dates.

If the foregoing schedule would produce fractional shares of Company common stock (the “Shares”), the number of Shares that vest shall be rounded down to the nearest whole Share. The vesting of the Restricted Stock shall be cumulative, but shall not exceed 100% of the Shares subject to the Restricted Stock.

(b) Immediately upon the Grantee’s death while a Director of the Company, each Share of the Grantee’s outstanding, unvested Restricted Stock shall vest with respect to all of the Shares that would have vested during the twelve (12) months following such death if the Grantee had remained a Director of the Company.

(c) Immediately upon the effective date of the Retirement (as defined below) of the Grantee (i.e., the last date of the Grantee’s service as a Director of the Company), each Share of the Grantee’s outstanding, unvested Restricted Stock shall vest. For purposes hereof, “Retirement” means separation from the Board under circumstances determined from time to time or in any specific instance by the Committee to constitute retirement.

3. Termination of Restricted Stock. Except as otherwise provided in Paragraph 2 above, if the Grantee ceases to serve as a Director for any reason before all of the Shares of Restricted Stock vest, the Grantee’s rights to any unvested Shares of Restricted Stock shall automatically terminate and such unvested Shares shall be forfeited as of the date of the Grantee’s termination as a Director. No payment shall be made with respect to any unvested Shares of Restricted Stock that are forfeited as described in this Paragraph 3.

4. Issuance of Certificates.

(a) Stock certificates representing the Shares subject to the Restricted Stock may be issued by the Company and held in escrow by the Company until the Restricted Stock vests, or the Company may hold non-certificated Shares until the Restricted Stock vests. Before the Restricted Stock vests, the Grantee shall receive any cash dividends with respect to the Shares subject to the Restricted Stock and may vote such Shares. In the event of a dividend or distribution payable in stock or other property or a reclassification, split up or similar event before the Restricted Stock vests, the Shares or other property issued or declared with respect to the unvested Shares of Restricted Stock shall be subject to the same terms and conditions relating to vesting as the Shares to which they relate.

(b) Each certificate representing unvested Shares of Restricted Stock may bear the following legend: THE SALE OR TRANSFER OF SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE, WHETHER VOLUNTARY, INVOLUNTARY, OR BY OPERATION OF LAW, IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN THE NOVELL, INC. 2009 OMNIBUS INCENTIVE PLAN, AND IN THE ASSOCIATED AWARD AGREEMENT. A COPY OF THE PLAN AND SUCH AWARD AGREEMENT MAY BE OBTAINED FROM NOVELL INC. When the Grantee obtains a vested right to the Shares, a certificate (in paper or electronic form) representing the vested Shares shall be issued to the Grantee, free of the restrictions under Paragraph 2 of this Agreement and without the foregoing legend.

(c) The issuance of Shares to the Grantee pursuant to this Agreement is subject to all applicable foreign, federal, state, local and other taxes. All obligations of the Company under this Agreement shall be subject to the rights of the Company to withhold amounts required to be withheld for any taxes, if applicable.

(d) The obligation of the Company to deliver Shares upon the vesting of the Restricted Stock shall be subject to all applicable laws, rules, and regulations and such approvals by governmental agencies as may be deemed appropriate by the Committee, including such actions as Company counsel shall deem necessary or appropriate to comply with relevant securities laws and regulations.

5. Change of Control. If a Change of Control (as defined in the Plan) occurs, the provisions of the Plan applicable to a Change of Control shall apply to the Restricted Stock.

6. Nature of Grant. In accepting the Restricted Stock, the Grantee acknowledges that: (i) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated at any time, unless otherwise provided in the Plan and this Agreement; (ii) the grant of the Restricted Stock does not create any contractual or other right to receive future grants of restricted stock, or benefits in lieu of restricted stock, even if restricted stock has been granted repeatedly in the past; (iii) all decisions with respect to future restricted stock grants, if any, will be at the sole discretion of the Board or the Committee; (iv) the Grantee is voluntarily participating in the Plan; (v) in the event that the Grantee is not an employee of the Company, an Affiliate, or a Subsidiary, the Restricted Stock grant will not be interpreted to form an employment contract or relationship with the Company or with any Affiliate or Subsidiary; (vi) the future value of the underlying Shares is unknown and cannot be predicted with certainty; and (vii) the value of Shares acquired upon vesting may increase or decrease in value, and no claim or entitlement to compensation or damages shall arise from termination of the Restricted Stock or from any diminution in value of the Restricted Stock or Shares received upon vesting of the Restricted Stock, and the Grantee irrevocably releases the Company and all Affiliates and Subsidiaries from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this Agreement, the Grantee shall be deemed irrevocably to have waived his or her entitlement to pursue such claim.

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7. Grant Subject to Plan Provisions. This grant is made pursuant to the Plan, the terms of which are incorporated herein by reference, and in all respects shall be interpreted in accordance with the Plan. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Agreement, the terms and conditions of the Plan shall prevail. The grant of the Restricted Stock is subject to interpretations, regulations and determinations concerning the Plan established from time to time by the Committee in accordance with the provisions of the Plan, including, but not limited to, provisions pertaining to (i) the registration, qualification or listing of the Shares, (ii) changes in capitalization of the Company, and (iii) other requirements of applicable law. The Committee shall have the authority to interpret and construe the Restricted Stock pursuant to the terms of the Plan, and its decisions shall be conclusive as to any questions arising hereunder.

8. Assignment and Transfers. Except as the Committee may otherwise permit pursuant to the Plan, the rights and interests of the Grantee under this Agreement may not be sold, assigned, encumbered or otherwise transferred except, in the event of the death of the Grantee, by will or by the laws of descent and distribution. In the event of any attempt by the Grantee to alienate, assign, pledge, hypothecate, or otherwise dispose of the Restricted Stock or any right hereunder, except as provided for in this Agreement, or in the event of the levy or any attachment, execution or similar process upon the rights or interests hereby conferred, the Company may terminate the Restricted Stock by notice to the Grantee, and the Restricted Stock and all rights hereunder shall thereupon become null and void. The rights and protections of the Company hereunder shall extend to any successors or assigns of the Company and to the Company’s Subsidiaries and Affiliates. This Agreement may be assigned by the Company without the Grantee’s consent.

10. Applicable Law. The validity, construction, interpretation and effect of this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to the conflicts of laws provisions thereof. This Agreement and the Restricted Stock are intended to be exempt from the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), because restricted stock is not considered to be non-qualified deferred compensation under Section 409A of the Code.

11. I.R.C. Section 83(b). The Grantee hereby acknowledges that the Grantee has been informed that, with respect to the Restricted Stock, the Grantee may file an election with the Internal Revenue Service, within 30 days of the execution of this Agreement, electing pursuant to Section 83(b) of the Code to be taxed currently on any difference between the purchase price of the Restricted Stock and the Fair Market Value (as defined in the Plan) of the Shares on the Date of Grant. Absent such an election, taxable income will be measured and recognized by the Grantee at the time or times at which the forfeiture restrictions on the Restricted Stock lapse. The Grantee is strongly encouraged to seek the advice of his or her own tax consultants in connection with the issuance of the Restricted Stock and the advisability of filing of the election under Section 83(b) of the Code. The Grantee may contact Shareholder Services for the applicable election forms.

THE GRANTEE ACKNOWLEDGES THAT IT IS NOT THE COMPANY’S, BUT RATHER THE GRANTEE’S SOLE RESPONSIBILITY TO FILE THE ELECTION UNDER SECTION 83(b) TIMELY.

12. Notice. Any notice to the Company provided for in this instrument shall be addressed to the Company in care of Director of Shareholder Services at the corporate headquarters of the Company, and any notice to the Grantee shall be addressed to the Grantee at the residential address written beneath the Grantee’s name below. The Grantee agrees to notify the Company in writing upon any change in such residential address. Any notice shall be delivered by hand, sent by telecopy or enclosed in a properly sealed envelope addressed as stated above, registered and deposited, postage prepaid, in a post office regularly maintained by the applicable postal service.

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IN WITNESS WHEREOF, the Company has caused its duly authorized officers to execute and attest this Agreement, and the Grantee has executed this Agreement, effective as of the Date of Grant.

NOVELL, INC.

By:

Name:

Title:

I hereby accept the Restricted Stock described in this Agreement, and I agree to be bound by the terms of the Plan and this Agreement. I hereby further agree that all the decisions and determinations of the Committee shall be final and binding.

Grantee:

Print Name:

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EX-10.3

Exhibit 10.3

NOVELL, INC.

2009 OMNIBUS INCENTIVE PLAN

NONQUALIFIED STOCK OPTION GRANT

This NONQUALIFIED STOCK OPTION GRANT AGREEMENT (the “Agreement”), dated as of              , 20     (the “Date of Grant”), is delivered by Novell, Inc. (the “Company”) to              (the “Grantee”).

RECITALS

A. The Novell, Inc. 2009 Omnibus Incentive Plan (the “Plan”) provides for the grant of options to purchase shares of common stock of the Company. Pursuant to the Non-Employee Director Remuneration and Expense Reimbursement Summary, approved by the Board of Directors of the Company (the “Board”), the Compensation Committee of the Board has approved a stock option grant as an inducement for the Grantee to promote the best interests of the Company and its stockholders. A copy of the Plan is available on the Company’s intranet site at https://innerweb.novell.com/organizations/finance/shareholder_services/.

B. The Plan is administered by the Committee (as defined in the Plan).

NOW, THEREFORE, the parties to this Agreement, intending to be legally bound hereby, agree as follows:

1. Grant of Option. Subject to the terms and conditions set forth in this Agreement and in the Plan, the Company hereby grants to the Grantee a nonqualified stock option (the “Option”) to purchase          shares of common stock of the Company (“Shares”) at an exercise price of $         per Share. The Option shall become exercisable according to Paragraph 2 below and its term shall be as set forth in Paragraph 3 below. In no event, however, will the Option expire later than the Termination Date (as defined below in Paragraph 3).

2. Exercisability of Option.

(a) Except as otherwise provided in subparagraphs 2(b) or 2(c) below, the Option shall vest and become exercisable in full upon the earlier to occur of one year from the date of grant or the business day prior to the date of the next annual meeting of stockholders following the grant date, provided that the Grantee is a Director (as defined in the Plan) of the Company on such dates.

(b) Immediately upon the Grantee’s death while a Director of the Company, the Option shall vest and become exercisable with respect to all Shares that would have vested during the twelve (12) months following such death if the Grantee had remained a Director of the Company.

(c) Immediately upon the effective date of the Retirement (as defined below) of the Grantee (i.e., the last date of the Grantee’s service as a Director of the Company), the Option shall vest and become exercisable. For purposes hereof, “Retirement” means separation from the Board under circumstances determined from time to time or in any specific instance by the Committee to constitute retirement.

3. Term of Option.

(a) The Option shall have a term of eight (8) years from the Date of Grant and shall terminate at the expiration of that period (the “Termination Date”), unless it is terminated at an earlier date pursuant to the provisions of this Agreement or the Plan.

(b) The Option shall automatically terminate upon the happening of the first of the following events:

(i) The expiration of the six-month period after the Grantee ceases to be a Director of the Company if the departure from the Board is for any reason other than death, Retirement, Disability (as defined below), or Cause (as defined in the Plan).

(ii) The expiration of the one-year period after the Grantee ceases to be a Director of the Company if the Grantee dies while serving as a Director of the Company.

(iii) The expiration of the one-year period after the Grantee ceases to be a Director of the Company on account of the Grantee’s Retirement from the Board.

(iv) The expiration of the one-year period after the Grantee ceases to be a Director of the Company on account of the Grantee’s Disability. For purposes hereof, “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended.

(v) The date on which the Grantee ceases to be a Director of the Company for Cause. In addition, notwithstanding the prior provisions of this Paragraph 3, if the Grantee engages in conduct that constitutes Cause after the Grantee ceases to be a Director, the Option shall immediately terminate.

Notwithstanding the foregoing, in no event may the Option be exercised after the eighth (8th) anniversary of the Date of Grant. Any portion of the Option that is not exercisable at the time the Grantee ceases to be a Director of the Company shall immediately terminate.

4. Exercise Procedures.

(a) Subject to the provisions of Paragraphs 2 and 3 above, the Grantee may exercise part or all of the exercisable Option by (i) delivering to the Shareholder Services Department of the Company written notice of intent to exercise (the “Exercise Notice”), which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the “Exercised Shares”), the method of payment, and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan; (ii) through use of the on-line service designated by the Company (currently E*TRADE stock Plans); or (iii) through the services of a broker of the Director’s own choosing, who will contact the Shareholder Services Department to make the necessary arrangements . A condition of the issuance of the Shares as to which an Option shall be exercised shall be the payment of the

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aggregate exercise price. The aggregate exercise price of any exercised Option shall be payable to the Company in accordance with one of the following methods: (i) in cash or its equivalent; (ii) by tendering (either by actual delivery or attestation) previously acquired Shares, which have been owned by the Grantee for at least six months prior to such delivery, having an aggregate Fair Market Value (as defined in the Plan) at the time of exercise equal to the aggregate exercise price; (iii) by a cashless (broker-assisted) exercise; (iv) by any combination of (i), (ii) and (iii); or (v) any other method approved or accepted by the Committee in its sole discretion. The Committee may impose from time to time such limitations as it deems appropriate on the use of Shares of the Company for the payment of the aggregate exercise price.

(b) The obligation of the Company to deliver Shares upon exercise of the Option shall be subject to all applicable laws, rules, and regulations and such approvals by governmental agencies as may be deemed appropriate by the Committee, including such actions as Company counsel shall deem necessary or appropriate to comply with relevant securities laws and regulations.

(c) All obligations of the Company under this Agreement shall be subject to the rights of the Company as set forth in the Plan to withhold amounts required to be withheld for any taxes, if applicable.

5. Change of Control. If a Change of Control (as defined in the Plan) occurs, the provisions of the Plan applicable to a Change of Control shall apply to the Option.

6. Restrictions on Exercise. Except as the Committee may otherwise permit pursuant to the Plan, only the Grantee may exercise the Option during the Grantee’s lifetime and, after the Grantee’s death, the Option shall be exercisable (subject to the limitations specified in the Plan) solely by the legal representatives of the Grantee, or by the person who acquires the right to exercise the Option by will or by the laws of descent and distribution, to the extent that the Option is exercisable pursuant to this Agreement.

7. Grant Subject to Plan Provisions. This grant is made pursuant to the Plan, the terms of which are incorporated herein by reference, and in all respects shall be interpreted in accordance with the Plan. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Agreement, the terms and conditions of the Plan shall prevail. The grant and exercise of the Option are subject to interpretations, regulations and determinations concerning the Plan established from time to time by the Committee in accordance with the provisions of the Plan, including, but not limited to, provisions pertaining to (a) rights and obligations with respect to withholding taxes, (b) the registration, qualification or listing of the Shares, (c) changes in capitalization of the Company, and (d) other requirements of applicable law. The Committee shall have the authority to interpret and construe the Option pursuant to the terms of the Plan, and its decisions shall be conclusive as to any questions arising hereunder.

8. No Stockholder Rights. Neither the Grantee, nor any person entitled to exercise the Grantee’s rights in the event of the Grantee’s death, shall have any of the rights and privileges of a stockholder with respect to the Shares subject to the Option, until certificates for Shares have been issued upon the exercise of the Option.

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9. Assignment and Transfers. Except as the Committee may otherwise permit pursuant to the Plan, the rights and interests of the Grantee under this Agreement may not be sold, assigned, encumbered or otherwise transferred except, in the event of the death of the Grantee, by will or by the laws of descent and distribution. In the event of any attempt by the Grantee to alienate, assign, pledge, hypothecate, or otherwise dispose of the Option or any right hereunder, except as provided for in this Agreement or the Plan, or in the event of the levy or any attachment, execution or similar process upon the rights or interests hereby conferred, the Company may terminate the Option by notice to the Grantee, and the Option and all rights hereunder shall thereupon become null and void. The rights and protections of the Company hereunder shall extend to any successors or assigns of the Company and to the Company’s parents, Subsidiaries, and Affiliates. This Agreement may be assigned by the Company without the Grantee’s consent.

10. Applicable Law. The validity, construction, interpretation and effect of this instrument shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to the conflicts of laws provisions thereof.

11. Notice. Any notice to the Company provided for in this instrument shall be addressed to the Company in care of Director of Shareholder Services at the corporate headquarters of the Company, and any notice to the Grantee shall be addressed to the Grantee at the residential address written beneath the Grantee’s name below. The Grantee agrees to notify the Company in writing upon any change in such residential address. Any notice shall be delivered by hand, sent by telecopy or enclosed in a properly sealed envelope addressed as stated above, registered and deposited, postage prepaid, in a post office regularly maintained by the applicable postal service.

IN WITNESS WHEREOF, the Company has caused its duly authorized officers to execute and attest this Agreement, and the Grantee has executed this Agreement, effective as of the Date of Grant.

NOVELL, INC.

By:

Name:

Title:

I hereby accept the Option described in this Agreement, and I agree to be bound by the terms of the Plan and this Agreement. I hereby further agree that all the decisions and determinations of the Committee shall be final and binding.

Grantee:

Print Name:

Residential Address:

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EX-10.4

Exhibit 10.4

NOVELL, INC.

2009 OMNIBUS INCENTIVE PLAN

RESTRICTED STOCK UNIT AGREEMENT

This RESTRICTED STOCK UNIT AGREEMENT, dated as of              , 20     (the “Date of Grant”), is delivered by Novell, Inc. (the “Company”) to                      (the “Grantee”).

RECITALS

A. The Novell, Inc. 2009 Omnibus Incentive Plan (the “Plan”) provides for the grant of restricted stock units in accordance with the terms and conditions of the Plan. Pursuant to the Non-Employee Director Remuneration and Expense Reimbursement Summary, approved by the Board of Directors of the Company (the “Board”), the Compensation Committee of the Board has approved a grant of restricted stock units (“Restricted Units”) as an inducement for the Grantee to promote the best interests of the Company and its stockholders. A copy of the Plan is available at https://innerweb.novell.com/organizations/finance/shareholder_services/.

B. The Plan is administered by the Committee (as defined in the Plan).

NOW, THEREFORE, the parties to this Agreement, intending to be legally bound hereby, agree as follows:

1. Grant of Restricted Units. The Company hereby grants the Grantee              Restricted Units. The Restricted Units are subject to the terms and conditions set forth in this Agreement and the Plan.

2. Restricted Unit Account. Restricted Units represent hypothetical shares of common stock of the Company (“Shares”), and not actual Shares. The Company shall establish and maintain a Restricted Unit account, as a bookkeeping account on its records, for the Grantee and shall record in such account the number of Restricted Units granted to the Grantee. No Shares shall be issued to the Grantee at the time the grant is made, and the Grantee shall not be, nor have any of the rights or privileges of, a shareholder of the Company with respect to any Restricted Units recorded in the account. The Grantee shall not have any interest in any fund or specific assets of the Company by reason of this award or the Restricted Unit account established for the Grantee.

3. Vesting.

(a) The Restricted Units shall be subject to forfeiture until the Restricted Units vest. Except as otherwise provided in subparagraphs 3(b) or 3(c) below, the Restricted Units shall vest in full upon the earlier to occur of one year from the date of grant or the business day prior to the date of the next annual meeting of stockholders following the grant date, provided that the Grantee is a Director (as defined in the Plan) of the Company on such dates.

(b) Immediately upon the Grantee’s death while a Director of the Company, each of the Grantee’s outstanding, unvested Restricted Units shall vest with respect to all Restricted Units that would have vested during the twelve (12) months following such death if the Grantee had remained a Director of the Company.

(c) Immediately upon the effective date of the Retirement (as defined below) of the Grantee (i.e., the last date of the Grantee’s service as a Director of the Company), each of the Grantee’s outstanding, unvested Restricted Units shall vest. For purposes hereof, “Retirement” separation from the Board under circumstances determined from time to time or in any specific instance by the Committee to constitute retirement.

4. Termination of Restricted Units. Except as otherwise provided in Paragraph 3 above, if the Grantee ceases to serve as a Director for any reason before all of the Restricted Units vest, any unvested Restricted Units shall automatically terminate and shall be forfeited as of the date of the Grantee’s termination as a Director. No payment shall be made with respect to any unvested Restricted Units that terminate as described in this Paragraph 4.

5. Payment of Restricted Units.

(a) If and when the Restricted Units vest, the Company shall issue to the Grantee one Share for each vested Restricted Unit within two (2) months after the applicable vesting date.

(b) The issuance of Shares to the Grantee pursuant to this Agreement is subject to all applicable foreign, federal, state, local and other taxes. All obligations of the Company under this Agreement shall be subject to the rights of the Company to withhold amounts required to be withheld for any taxes, if applicable.

(c) The obligation of the Company to deliver Shares when Restricted Units vest shall be subject to all applicable laws, rules, and regulations and such approvals by governmental agencies as may be deemed appropriate by the Committee, including such actions as Company counsel shall deem necessary or appropriate to comply with relevant securities laws and regulations.

6. Change of Control. If a Change of Control (as defined in the Plan) occurs, the provisions of the Plan applicable to a Change of Control shall apply to the Restricted Units; provided, however, that if the Restricted Units are subject to the requirements of section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), the Restricted Units shall be paid to the Grantee upon the Change of Control only if the transaction constituting the Change of Control is a “change in control event” within the meaning of section 409A of the Code. If the transaction constituting a Change of Control is not a “change in control event” within the meaning of section 409A of the Code, the Restricted Units shall be paid to the Grantee within thirty (30) days following the earlier of (a) the date the Restricted Units are otherwise scheduled to vest pursuant to Section 3 above or (b) the date the Grantee ceases to be a Director.

7. Nature of Grant. In accepting the Restricted Units, the Grantee acknowledges that: (i) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated at any time, unless otherwise provided in the Plan

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and this Agreement; (ii) the grant of the Restricted Units does not create any contractual or other right to receive future grants of restricted stock units, or benefits in lieu of restricted stock units, even if restricted stock units have been granted repeatedly in the past; (iii) all decisions with respect to future restricted stock unit grants, if any, will be at the sole discretion of the Board; (iv) the Grantee is voluntarily participating in the Plan; (v) in the event that the Grantee is not an employee of the Company, an Affiliate, or a Subsidiary, the Restricted Units grant will not be interpreted to form an employment contract or relationship with the Company or with any Affiliate or Subsidiary; (vi) the future value of the underlying Shares is unknown and cannot be predicted with certainty; and (vii) the value of Shares acquired upon vesting may increase or decrease in value, and no claim or entitlement to compensation or damages shall arise from termination of Restricted Units or from any diminution in value of the Restricted Units or Shares received upon vesting of Restricted Units, and the Grantee irrevocably releases the Company and all Affiliates and Subsidiaries from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this Agreement, the Grantee shall be deemed irrevocably to have waived his or her entitlement to pursue such claim.

8. Grant Subject to Plan Provisions. This grant is made pursuant to the Plan, the terms of which are incorporated herein by reference, and in all respects shall be interpreted in accordance with the Plan. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Agreement, the terms and conditions of the Plan shall prevail. The grant and payment of the Restricted Units are subject to interpretations, regulations and determinations concerning the Plan established from time to time by the Committee in accordance with the provisions of the Plan, including, but not limited to, provisions pertaining to (i) the registration, qualification or listing of the Shares, (ii) changes in capitalization of the Company, and (iii) other requirements of applicable law. The Committee shall have the authority to interpret and construe the Restricted Units pursuant to the terms of the Plan, and its decisions shall be conclusive as to any questions arising hereunder.

9. No Stockholder Rights. Neither the Grantee, nor any person entitled to receive payment in the event of the Grantee’s death, shall have any of the rights and privileges of a stockholder with respect to Shares until certificates for Shares have been issued upon vesting of Restricted Units.

10. Assignment and Transfers. Except as the Committee may otherwise permit pursuant to the Plan, the rights and interests of the Grantee under this Agreement may not be sold, assigned, encumbered or otherwise transferred except, in the event of the death of the Grantee, by will or by the laws of descent and distribution. In the event of any attempt by the Grantee to alienate, assign, pledge, hypothecate, or otherwise dispose of the Restricted Units or any right hereunder, except as provided for in this Agreement, or in the event of the levy or any attachment, execution or similar process upon the rights or interests hereby conferred, the Company may terminate the Restricted Units by notice to the Grantee, and the Restricted Units and all rights hereunder shall thereupon become null and void. The rights and protections of the Company hereunder shall extend to any successors or assigns of the Company and to the Company’s Subsidiaries and Affiliates. This Agreement may be assigned by the Company without the Grantee’s consent.

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11. Applicable Law. The validity, construction, interpretation and effect of this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to the conflicts of laws provisions thereof. This Agreement and the Restricted Units are intended to comply with section 409A of the Code and its corresponding regulations, or an exemption, and payment may only be made under this Agreement upon an event and in a manner permitted by section 409A of the Code, to the extent applicable. For purposes of section 409A of the Code, each payment made under this Agreement shall be treated as a separate payment. In no event shall the Grantee, directly or indirectly, designate the calendar year of payment.

12. I.R.C. Section 83(b). Pursuant to Section 83(b) of the U.S. Internal Revenue Code of 1986, as amended, the Grantee will not be entitled to make an election to be taxed upon grant of the Restricted Units.

13. Notice. Any notice to the Company provided for in this instrument shall be addressed to the Company in care of Director of Shareholder Services at the corporate headquarters of the Company, and any notice to the Grantee shall be addressed to the Grantee at the residential address written beneath the Grantee’s name below. The Grantee agrees to notify the Company in writing upon any change in such residential address. Any notice shall be delivered by hand, sent by telecopy or enclosed in a properly sealed envelope addressed as stated above, registered and deposited, postage prepaid, in a post office regularly maintained by the applicable postal service.

IN WITNESS WHEREOF, the Company has caused its duly authorized officers to execute and attest this Agreement, and the Grantee has executed this Agreement, effective as of the Date of Grant.

NOVELL, INC.

By:

Name:

Title:

I hereby accept the Restricted Units described in this Agreement, and I agree to be bound by the terms of the Plan and this Agreement. I hereby further agree that all the decisions and determinations of the Committee shall be final and binding.

Grantee:

Print Name:

Residential Address:

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EX-10.5

Exhibit 10.5

NOVELL, INC.

2009 OMNIBUS INCENTIVE PLAN

2010 RESTRICTED STOCK UNIT AGREEMENT

This 2010 RESTRICTED STOCK UNIT AGREEMENT, dated as of              , 20     (the “Date of Grant”), is delivered by Novell, Inc. (the “Company”) to                      (the “Grantee”).

RECITALS

A. The Novell, Inc. 2009 Omnibus Incentive Plan (the “Plan”) provides for the grant of restricted stock units in accordance with the terms and conditions of the Plan. The Compensation Committee of the Company’s Board of Directors (the “Committee”) has decided to make a grant of restricted stock units as an inducement for the Grantee to continue his or her employment with the Company, or an Affiliate or a Subsidiary (as such terms are defined in the Plan), and promote the best interests of the Company and its shareholders. A copy of the Plan is available at https://innerweb.novell.com/organizations/finance/shareholder_services/.

B. The Plan is administered by the Committee (as defined in the Plan).

NOW, THEREFORE, the parties to this Agreement, intending to be legally bound hereby, agree as follows:

1. Grant of Restricted Units. The Company hereby grants the Grantee restricted stock units (the “Restricted Units”). The Restricted Units are subject to the terms and conditions set forth in this Agreement and the Plan; provided however, that, subject to the provisions of Section 6 of this Agreement, if an executed, written agreement between the Company and the Grantee (an “Employment Agreement”) includes provisions that differ from those set forth in this Agreement, the provisions of the Employment Agreement will apply to the extent not contrary to the terms of the Plan.

2. Restricted Unit Account. Restricted Units represent hypothetical shares of common stock of the Company (“Shares”), and not actual Shares. The Company shall establish and maintain a Restricted Unit account, as a bookkeeping account on its records, for the Grantee and shall record in such account the number of Restricted Units granted to the Grantee. No Shares shall be issued to the Grantee at the time the grant is made, and the Grantee shall not be, nor have any of the rights or privileges of, a shareholder of the Company with respect to any Restricted Units recorded in the account. The Grantee shall not have any interest in any fund or specific assets of the Company by reason of this award or the Restricted Unit account established for the Grantee.

3. Vesting. The Restricted Units shall be subject to forfeiture until the Restricted Units vest. Except as provided below, fifty percent (50%) of the Restricted Units shall vest on the first anniversary of the Date of Grant and the remaining fifty percent (50%) of the Restricted Units shall vest on the second anniversary of the Date of Grant in accordance with the following schedule, if the Grantee continues to be employed by, or provide service to, the Company, an Affiliate, or a Subsidiary on the applicable vesting date.

Vesting Date Number of Restricted Units that Vest

In the event that the Grantee’s employment or service with the Company, an Affiliate, or a Subsidiary or, in the event of a Change in Control, the acquiror or successor of the Company, an Affiliate or a Subsidiary, is involuntarily terminated without Cause (as defined in the Plan), any unvested Restricted Unit shall become one-hundred percent (100%) vested as of the date of the Grantee’s termination of employment or service.

The vesting of the Restricted Units shall be cumulative, but shall not exceed one hundred percent (100%) of the Restricted Units. If the foregoing schedule would produce fractional Restricted Units, the number of Restricted Units that vest shall be rounded down to the nearest whole Restricted Unit.

Unless the Committee provides otherwise, vesting of the Restricted Units granted hereunder shall be (i) tolled during any unpaid personal leave of absence and (ii) tolled as of the 91st day of any other leave of absence.

4. Termination of Restricted Units. Except as otherwise provided in an Employment Agreement, if the Grantee ceases to be employed by, or provide services to, the Company, an Affiliate, a Subsidiary or, in the event of a Change in Control, the acquiror or successor of the Company, an Affiliate or a Subsidiary, due to termination of Grantee’s employment or service for Cause or due to Grantee’s resignation, retirement, death or disability before all of the Restricted Units vest, any Restricted Units that are unvested as of the date of termination of employment or service shall automatically terminate and shall be forfeited as of the date of the Grantee’s termination of employment or service. No payment shall be made with respect to any unvested Restricted Units that terminate as described in this Paragraph 4.

5. Payment of Restricted Units.

(a) If and when the Restricted Units vest, the Company shall issue to the Grantee one Share for each vested Restricted Unit, subject to tax withholding as described below, within two (2) months after the applicable vesting date.

(b) The issuance of Shares to the Grantee pursuant to this Agreement is subject to all applicable foreign, federal, state, local and other taxes. All obligations of the Company under this Agreement shall be subject to the rights of the Company to withhold amounts required to be withheld for any taxes, if applicable. The Grantee shall be required to pay to the Company, or make other arrangements satisfactory to the Company to provide for the payment of, any foreign,

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federal, state, local or other taxes that the Company is required to withhold with respect to the Restricted Units. The Company may elect to satisfy any tax withholding obligation with respect to Restricted Units by (a) having shares withheld up to an amount that does not exceed the minimum applicable withholding tax rate for federal (including FICA), state, local and other tax liabilities, or (b) taking other reasonable measures determined in its sole discretion to be appropriate to meet applicable withholding requirements.

(c) The obligation of the Company to deliver Shares when Restricted Units vest shall be subject to all applicable laws, rules, and regulations and such approvals by governmental agencies as may be deemed appropriate by the Committee, including such actions as Company counsel shall deem necessary or appropriate to comply with relevant securities laws and regulations.

6. Change of Control. Notwithstanding the provisions of Section 17.1(c) of the Plan or any other agreement, plan, program or arrangement of the Company or a Subsidiary, the vesting of the Restricted Units shall not accelerate upon the occurrence of a Change of Control (as defined in the Plan). The vesting of the Restricted Units (as such Restricted Units may be adjusted pursuant to this Section 6) shall remain subject to accelerated vesting upon the termination of the Grantee’s employment without Cause as set forth in Section 3 hereof. In connection with a Change of Control, the Committee shall equitably adjust unvested Restricted Units, in manner to be determined in its sole and absolute discretion, in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available pursuant to the grant of Restricted Units. Such adjustments may include, but shall not be limited to, an exchange of unvested Restricted Units for (i) restricted stock units of an acquirer of or successor to the Company, with such replacement restricted stock units having a value equal to the value of the Shares underlying the Restricted Units in the Change of Control or (ii) a right to receive a cash payment in an amount equal to the value of the Shares underlying the Restricted Units in the Change of Control, in each case payable in accordance with the vesting and payment provisions set forth in this Agreement. Any determination made by the Committee pursuant to this Section 6 shall be final and binding on all persons, including, without limitation, the Grantee, the Company and its successors and any other party. Notwithstanding anything in the Plan to the contrary, the Committee shall not have the discretion to cancel the Restricted Units in connection with a Change of Control without making an equitable adjustment or substitution as set forth in this Section 6.

7. Nature of Grant. In accepting the Restricted Units, the Grantee acknowledges that: (i) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated at any time, unless otherwise provided in the Plan and this Agreement; (ii) the grant of the Restricted Units is voluntary and occasional and does not create any contractual or other right to receive future grants of restricted stock units, or benefits in lieu of restricted stock units, even if restricted stock units have been granted repeatedly in the past; (iii) all decisions with respect to future restricted stock unit grants, if any, will be at the sole discretion of the Company and the Committee; (iv) the Grantee’s participation in the Plan shall not create a right to further employment with the Company, an Affiliate, or a Subsidiary and shall not interfere with the ability of the Company, an Affiliate, or a Subsidiary to terminate Grantee’s employment relationship at any time with or without cause; (v) the Grantee is voluntarily participating in the Plan; (vi) the Restricted Units are not part of normal or

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expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (vii) in the event that the Grantee is not an employee of the Company, an Affiliate, or a Subsidiary, the Restricted Units grant will not be interpreted to form an employment contract or relationship with the Company or with any Affiliate or Subsidiary; (viii) the future value of the underlying Shares is unknown and cannot be predicted with certainty; (ix) the value of Shares acquired upon vesting may increase or decrease in value, and no claim or entitlement to compensation or damages shall arise from termination of Restricted Units or from any diminution in value of the Restricted Units or Shares received upon vesting of Restricted Units, and the Grantee irrevocably releases the Company and all Affiliates and Subsidiaries from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this Agreement, the Grantee shall be deemed irrevocably to have waived his or her entitlement to pursue such claim; and (x) in the event of termination of the Grantee’s employment or service for Cause (whether or not in breach of local labor laws) or due to Grantee’s resignation, retirement, death or disability, the Grantee’s right to receive Restricted Units and vest under the Plan, if any, will, except as otherwise provided in an Employment Agreement, terminate effective as of the date that Grantee is no longer actively employed and will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden leave” or similar period pursuant to local law); furthermore, in the event of termination of the Grantee’s employment or service for Cause (whether or not in breach of local labor laws) or due to Grantee’s resignation, retirement, death or disability, the Grantee’s right to receive Shares pursuant to the Restricted Units after termination of employment, if any, will be measured by the date of termination of Grantee’s active employment and will not be extended by any notice period mandated under local law; the Committee shall have the exclusive discretion to determine when the Grantee is no longer actively employed for purposes of the Restricted Units award.

8. Grant Subject to Plan Provisions. This grant is made pursuant to the Plan, the terms of which are incorporated herein by reference, and in all respects shall be interpreted in accordance with the Plan. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Agreement, the terms and conditions of the Plan shall prevail. The grant and payment of the Restricted Units are subject to interpretations, regulations and determinations concerning the Plan established from time to time by the Committee in accordance with the provisions of the Plan, including, but not limited to, provisions pertaining to (i) rights and obligations with respect to withholding taxes, (ii) the registration, qualification or listing of the Shares, (iii) changes in capitalization of the Company, and (iv) other requirements of applicable law. The Committee shall have the authority to interpret and construe the Restricted Units pursuant to the terms of the Plan, and its decisions shall be conclusive as to any questions arising hereunder.

9. No Employment or Other Rights. THE GRANTEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF RESTRICTED UNITS PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING IN THE EMPLOY OR SERVICE OF THE COMPANY, AN AFFILIATE, OR A SUBSIDIARY AT THE WILL OF THE COMPANY, AN AFFILIATE, OR A SUBSIDIARY, AS THE CASE MAY BE (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED A RESTRICTED UNIT OR PURCHASING SHARES HEREUNDER). THE GRANTEE FURTHER

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ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER, AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE OR SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH THE GRANTEE’S RIGHT OR THE COMPANY’S RIGHT TO TERMINATE THE GRANTEE’S RELATIONSHIP AS AN EMPLOYEE OR SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.

10. Data Privacy. The Grantee understands that the Company holds certain personal information about him or her, including, but not limited to, the Grantee’s name, home address and telephone number; date of birth; social security number, social insurance number or other identification number; salary; nationality; job title; any Shares held in the Company; and/or details of all Restricted Units or any other entitlement to Shares awarded, canceled, vested, unvested or outstanding in the Grantee’s favor (collectively, “Data”). The Grantee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Grantee’s Data by and among, as applicable, the Company and its Subsidiaries and Affiliates for the exclusive purpose of implementing, administering and managing the Grantee’s participation in the Plan. The Grantee understands that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the Grantee’s country or elsewhere, and that the recipient’s country may have different data privacy laws and protections than the Grantee’s country. The Grantee understands that he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative. The Grantee authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Grantee’s participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom the Grantee may elect to deposit any Shares acquired upon vesting of Restricted Units. The Grantee understands that Data will be held only as long as is necessary to implement, administer and manage the Grantee’s participation in the Plan. The Grantee understands that he or she may, at any time, view the Data, request additional information about the storage and processing of the Data, require any necessary amendments to the Data or refuse or withdraw the consents herein, in each case without cost, by contacting in writing his or her local human resources representative. The Grantee understands, however, that refusing or withdrawing his or her consent may affect his or her ability to participate in the Plan. For more information on the consequences of the Grantee’s refusal to consent or withdrawal of consent, the Grantee understands that he or she may contact his or her local human resources representative.

11. No Stockholder Rights. Neither the Grantee, nor any person entitled to receive payment in the event of the Grantee’s death, shall have any of the rights and privileges of a stockholder with respect to Shares until certificates for Shares have been issued upon vesting of Restricted Units.

12. Assignment and Transfers. Except as the Committee may otherwise permit pursuant to the Plan, the rights and interests of the Grantee under this Agreement may not be sold, assigned, encumbered or otherwise transferred except, in the event of the death of the Grantee, by will or

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by the laws of descent and distribution. In the event of any attempt by the Grantee to alienate, assign, pledge, hypothecate, or otherwise dispose of the Restricted Units or any right hereunder, except as provided for in this Agreement, or in the event of the levy or any attachment, execution or similar process upon the rights or interests hereby conferred, the Company may terminate the Restricted Units by notice to the Grantee, and the Restricted Units and all rights hereunder shall thereupon become null and void. The rights and protections of the Company hereunder shall extend to any successors or assigns of the Company and to the Company’s Subsidiaries and Affiliates. This Agreement may be assigned by the Company without the Grantee’s consent.

13. Applicable Law. The validity, construction, interpretation and effect of this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to the conflicts of laws provisions thereof. This Agreement and the Restricted Units are intended to be exempt from the requirements of section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), by settling the Restricted Units within the short-term deferral exemption set forth in the requirements under section 409A of the Code, and this Agreement and the Restricted Units shall be interpreted on a basis consistent with such intent. For purposes of section 409A of the Code, each payment made under this Agreement shall be treated as a separate payment. In no event shall the Grantee, directly or indirectly, designate the calendar year of payment.

14. I.R.C. Section 83(b). Pursuant to Section 83(b) of the Code, the Grantee will not be entitled to make an election to be taxed upon grant of the Restricted Units.

15. Notice. Any notice to the Company provided for in this instrument shall be addressed to the Company in care of Director of Shareholder Services at the corporate headquarters of the Company, and any notice to the Grantee shall be addressed to the Grantee at the residential address written beneath the Grantee’s name below. The Grantee agrees to notify the Company in writing upon any change in such residential address. Any notice shall be delivered by hand, sent by telecopy or enclosed in a properly sealed envelope addressed as stated above, registered and deposited, postage prepaid, in a post office regularly maintained by the applicable postal service.

IN WITNESS WHEREOF, the Company has caused its duly authorized officers to execute and attest this Agreement, and the Grantee has executed this Agreement, effective as of the Date of Grant.

NOVELL, INC.

By:

Name:

Title:

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I hereby accept the Restricted Units described in this Agreement, and I agree to be bound by the terms of the Plan and this Agreement. I hereby further agree that all the decisions and determinations of the Committee shall be final and binding.

Grantee:

Print Name:

Residential Address:

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EX-10.6

Exhibit 10.6

On April 2, 2010, the Board of Directors of Novell, Inc., upon the recommendation of its Compensation Committee, approved a one-time $50,000 incremental Board retainer payment to the Chairman of the Board, in recognition of his significant involvement and increased work effort and time commitment in relation to the Board’s current review of strategic alternatives to enhance shareholder value.

EX-10.7

Exhibit 10.7

Non-Employee Director Remuneration

and

Expense Reimbursement Summary

1. Cash Compensation

a) Annual Retainers

• A non-employee Chairperson of the Board of Directors will receive an annual Board retainer of $125,000 paid quarterly in advance on May 1, August 1, November 1, and February 1.

• Each non-employee member of the Board of Directors other than the non-employee Chairperson will receive an annual Board retainer of $50,000 paid quarterly in advance on May 1, August 1, November 1, and February 1.

• The non-employee director who serves as Chairperson of the Audit Committee will receive, in addition to his or her Board retainer, an annual Committee retainer of $20,000 paid quarterly in advance on May 1, August 1, November 1, and February 1.

• Each non-employee director who serves as Chairperson of a Board Committee other than the Audit Committee will receive, in addition to his or her Board retainer, an annual Committee retainer of $10,000 paid quarterly in advance on May 1, August 1, November 1, and February 1.

• Retainers are paid through the end of the quarter in which service as a Director terminates.

• Pursuant to a deferral program effective for calendar years prior to 2010 (the “Prior Deferral Program”), non-employee directors were permitted to convert all or any portion of their annual Board retainers (but not their Committee retainers) to Common Stock Equivalents (the “Retainer CSEs”).

o Retainer CSEs are purchased on each date an installment of the annual Board retainer is paid.

o Any non-employee director who elects to purchase Retainer CSEs will receive a supplemental credit equal to 25% of the portion of the annual Board retainer used to purchase Retainer CSEs (referred to as the “Match”).

o The Match may be applied only to the purchase of additional CSEs (“Match CSEs”).

o The number of Retainer CSEs and Match CSEs to be received is based on the closing price of Novell common stock on the day before the purchase date.

o Retainer CSEs are fully vested at the time of purchase.

o Match CSEs, unlike Retainer CSEs, are subject to a cliff vesting period of three years from the date of purchase.

o The Retainer CSEs will be converted into shares of Novell common stock on the earlier to occur of (i) the termination of service as a non-employee director and (ii) a date prior to the termination of service as a non-employee director specified by the non-employee director (the “Deferral Payment Date”).

o Vested Match CSEs will be converted into shares of Novell common stock on the termination of service as a non-employee director.

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• With respect to calendar years beginning with calendar year 2010, non-employee directors may convert their annual Board retainers to Retainer CSEs pursuant to the Novell, Inc. 2009 Directors Deferral Plan, a sub-plan of the Novell, Inc. 2009 Omnibus Incentive Plan (the “2009 Deferral Program”).

o Under the 2009 Deferral Program, (i) Retainer CSEs are purchased on each date an installment of the annual Board retainer is paid; (ii) any non-employee director who elects to purchase Retainer CSEs will receive Match CSEs; (iii) the number of Retainer CSEs and Match CSEs to be received is based on the closing price of Novell common stock on the day before the purchase date; and (iv) Retainer CSEs are fully vested at the time of purchase.

o Under the 2009 Deferral Program, Retainer CSEs will be paid out on the earliest to occur of (i) a change of control; (ii) a non-employee director’s separation from service; or (iii) if elected, the Deferral Payment Date.

o Under the 2009 Deferral Program, Match CSEs become 100% vested on the earliest to occur of (i) the third anniversary of the last date CSEs are purchased with the Match in the relevant calendar year; (ii) a change of control; (iii) the non-employee director’s retirement; or (iv) the non-employee director’s death.

o The vested Match CSEs are paid to the non-employee director on the earliest to occur of (i) his or her separation from service, (ii) a change of control, or (iii) the later to occur of the Deferral Payment Date or the date on which the Match CSEs vest.

b) Meeting Fees

• Each non-employee director will receive $1,500 for each Board and Board telephonic meeting he or she attends.

• Each non-employee director will receive $1,500 for each Committee and Committee telephonic meeting he or she attends as a Committee member.

2. Equity Compensation

• Each non-employee director will receive an annual equity award with a value of $130,000 (the “Annual Equity Award”).

• The Annual Equity Award will be granted at the first Compensation Committee meeting following Novell’s Annual Meeting of Stockholders that falls during an open trading window for Novell’s securities.

• The Annual Equity Award will be comprised of stock options with a grant date value of $43,000 and either restricted stock units or shares of restricted stock, as elected by each non-employee director, with a grant date value of $87,000.

• The stock options and either restricted stock units or shares of restricted stock comprising the Annual Equity Award will vest in full upon the earlier to occur of one year from the date of grant or the business day prior to the date of the next annual meeting of stockholders following the grant date and will have the following additional terms:

o Upon the retirement of a non-employee director, there will be 100% acceleration of all unvested stock options, restricted stock units and shares of restricted stock, and vested stock options will remain exercisable for twelve months following retirement.

o Upon the disability of a non-employee director, there will be no acceleration of unvested stock options, restricted stock units or unvested restricted stock, but vested stock options will remain exercisable for twelve months following a disability.

Page 2 of 4

o Upon the death of a non-employee director, there will be an acceleration of vesting of those stock options, restricted stock units, and shares of restricted stock that would have vested within twelve months following such death had the non-employee director not died and remained a non-employee director, and vested stock options will remain exercisable for twelve months following the death of a non-employee director.

• New non-employee directors will receive a one-time grant of 50,000 stock options that will vest in full upon the earlier to occur of one year from the date of grant or the business day prior to the date of the next annual meeting of stockholders following the grant date.

• Pursuant to the 2009 Deferral Program, non-employee directors may defer receipt of the shares of Novell common stock received upon vesting of the restricted stock units portion of the Annual Equity Award until the earliest to occur of (i) a change of control; (ii) a non-employee director’s separation from service; or (iii) if elected, the Deferral Payment Date.

• Non-employee directors may not sell shares of Novell common stock unless they continue to own an amount of Novell common stock equal to three times their annual Board retainer.

o Non-employee Chairperson of the Board of Directors Total Stock Ownership Requirement (“Total SOR”) is $375,000 ($125k × 3)

o Other non-employee directors Total SOR is $150,000 ($50k × 3)

o Forms of equity that count towards Total SOR consist of shares that are already owned and held, shares acquired on the open market, shares acquired upon the exercise of stock options, vested restricted stock units, vested shares of restricted stock, Retainer CSEs, and any vested Match CSEs

3. Reimbursements

a) Meetings

• Novell will provide reimbursement for attendance to all Board and Committee meetings covering the following:

o first class airfare ticket or equivalent

o lodging

o meals

o ground transportation to and from the meeting

b) Conferences

• Novell will provide reimbursement for attendance to one conference per year covering the following:

o registration fees

o first class airfare ticket or equivalent

o lodging

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o meals

o ground transportation to and from the conference

c) Orientation

• Novell will provide reimbursement for new non-employee directors for attendance to one third-party orientation program covering the following:

o registration fees

o first class airfare ticket or equivalent

o lodging

o meals

o ground transportation to and from the orientation program

Page 4 of 4

EX-10.8

Exhibit 10.8

Thomas G. Plaskett

c/o Novell, Inc.

404 Wyman St.

Waltham, MA 02451

Dear Mr. Plaskett:

You and Novell, Inc. (the “Company”) are parties to (1) a Restricted Stock Unit Agreement, dated April 7, 2009, granted under the Novell, Inc. 2009 Omnibus Incentive Plan (the “2009 Plan”), (2) a Nonqualified Stock Option Agreement, dated April 7, 2009, granted under the 2009 Plan and (3) a Stock Option Agreement Outside Directors Grant, dated June 3, 2008, granted under the Novell, Inc. 2000 Stock Plan (the “2000 Plan”) (together, the “Equity Agreements”). In recognition of your loyal service to the Company as a non-employee member of the Company’s Board of Directors (the “Board”) for the past several years, the Board has determined that it is appropriate to amend the Equity Agreements to accelerate the vesting of the restricted stock units and nonqualified stock options granted thereunder so that they are fully vested as of April 18, 2010.

Accordingly, pursuant to the authority of the Board under the 2009 Plan and the 2000 Plan, the Equity Agreements are hereby amended as follows:

1. The last sentence in the first paragraph of Section 3(a) of the Restricted Stock Unit Agreement, dated April 7, 2009, is hereby amended to read as follows:

“Except as otherwise provided in subparagraphs 3(b) or 3(c) below, 50% of the Restricted Units shall vest on the first anniversary of the Date of Grant and 50% of the Restricted Units shall vest on April 18, 2010, provided that the Grantee is a Director (as defined in the Plan) of the Company on such dates.”

2. The first paragraph in Section 2(a) of the Nonqualified Stock Option Grant Agreement, dated April 7, 2009, is hereby amended to read as follows:

“Except as otherwise provided in subparagraphs 2(b) or 2(c) below, the Option shall vest and become exercisable as to 50% of the Shares subject to the Option on the first anniversary of the Date of Grant and as to 50% of the Shares subject to the Option on April 18, 2010, provided that the Grantee is a Director (as defined in the Plan) of the Company on such dates.”

3. The paragraph entitled “Vesting Schedule” in Section 1 of the Stock Option Agreement Outside Directors Grant, dated June 3, 2008, is hereby amended to read as follows:

“Except as otherwise set forth in the Plan, this Option will vest over two (2) years with 50% of the Shares subject to the Option vesting on June 3, 2009 and 50% of the Shares subject to the Option vesting on April 18, 2010, provided that the Optionee is a Service Provider on such vesting dates.”

4. In all respects not amended, the Equity Agreements are hereby ratified and confirmed.

The Equity Agreements shall be amended as described above, effective as of the date first written above, provided that you consent to the foregoing amendments by signing below.

Sincerely,

Novell, Inc.

Name:

Title:

Agreed and Accepted:

Thomas G. Plaskett

EX-10.9

Exhibit 10.9

Kathy Brittain White

c/o Novell, Inc.

404 Wyman St.

Waltham, MA 02451

Dear Ms. White:

You and Novell, Inc. (the “Company”) are parties to (1) a Restricted Stock Unit Agreement, dated April 7, 2009, granted under the Novell, Inc. 2009 Omnibus Incentive Plan (the “2009 Plan”), (2) a Nonqualified Stock Option Agreement, dated April 7, 2009, granted under the 2009 Plan and (3) a Stock Option Agreement Outside Directors Grant, dated June 3, 2008, granted under the Novell, Inc. 2000 Stock Plan (the “2000 Plan”) (together, the “Equity Agreements”). In recognition of your loyal service to the Company as a non-employee member of the Company’s Board of Directors (the “Board”) for the past several years, the Board has determined that it is appropriate to amend the Equity Agreements to accelerate the vesting of the restricted stock units and nonqualified stock options granted thereunder so that they are fully vested as of April 18, 2010.

Accordingly, pursuant to the authority of the Board under the 2009 Plan and the 2000 Plan, the Equity Agreements are hereby amended as follows:

1. The last sentence in the first paragraph of Section 3(a) of the Restricted Stock Unit Agreement, dated April 7, 2009, is hereby amended to read as follows:

“Except as otherwise provided in subparagraphs 3(b) or 3(c) below, 50% of the Restricted Units shall vest on the first anniversary of the Date of Grant and 50% of the Restricted Units shall vest on April 18, 2010, provided that the Grantee is a Director (as defined in the Plan) of the Company on such dates.”

2. The first paragraph in Section 2(a) of the Nonqualified Stock Option Grant Agreement, dated April 7, 2009, is hereby amended to read as follows:

“Except as otherwise provided in subparagraphs 2(b) or 2(c) below, the Option shall vest and become exercisable as to 50% of the Shares subject to the Option on the first anniversary of the Date of Grant and as to 50% of the Shares subject to the Option on April 18, 2010, provided that the Grantee is a Director (as defined in the Plan) of the Company on such dates.”

3. The paragraph entitled “Vesting Schedule” in Section 1 of the Stock Option Agreement Outside Directors Grant, dated June 3, 2008, is hereby amended to read as follows:

“Except as otherwise set forth in the Plan, this Option will vest over two (2) years with 50% of the Shares subject to the Option vesting on June 3, 2009 and 50% of the Shares subject to the Option vesting on April 18, 2010, provided that the Optionee is a Service Provider on such vesting dates.”

4. In all respects not amended, the Equity Agreements are hereby ratified and confirmed.

The Equity Agreements shall be amended as described above, effective as of the date first written above, provided that you consent to the foregoing amendments by signing below.

Sincerely,

Novell, Inc.

Name:

Title:

Agreed and Accepted:

Kathy Brittain White

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Ronald W. Hovsepian, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Novell, Inc;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 8, 2010

/s/ Ronald W. Hovsepian

Ronald W. Hovsepian

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Dana C. Russell, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Novell, Inc;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 8, 2010

/s/ Dana C. Russell

Dana C. Russell

Senior Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report of Novell, Inc., a Delaware corporation (the “Company”), on Form 10-Q for the period ended April 30, 2010, as filed with the Securities and Exchange Commission (the “Report”), Ronald W. Hovsepian, President and Chief Executive Officer of the Company, does hereby certify, pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350), that to his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

* * *

/s/ Ronald W. Hovsepian

Ronald W. Hovsepian

President and Chief Executive Officer

Date: June 8, 2010

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Quarterly Report of Novell, Inc., a Delaware corporation (the “Company”), on Form 10-Q for the period ended April 30, 2010, as filed with the Securities and Exchange Commission (the “Report”), Dana C. Russell, Senior Vice President and Chief Financial Officer of the Company, does hereby certify, pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350), that to his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

* * *

/s/ Dana C. Russell

Dana C. Russell

Senior Vice President and Chief Financial Officer

Date: June 8, 2010