Summary of NOVELL INC - Yahoo! Finance

Results of Operations and Financial Condition, Financial Statements and Exhibits

Item 2.02 Results of Operations and Financial Condition.

On August 28, 2008, Novell, Inc. ("Novell") issued a press release to report Novell's financial results for the third fiscal quarter ended July 31, 2008. A copy of the press release is attached to this current report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.

We disclosed non-GAAP financial measures in the press release for the fiscal quarters and first nine months ended July 31, 2008 and July 31, 2007. These non-GAAP measures include adjusted income from operations, operating margin, income from continuing operations, net income, income per share from continuing operations and net income per share.

We provide non-GAAP financial measures to enhance an overall understanding of our current financial performance and prospects for the future and to enable investors to evaluate our performance in the same way that management does. Management uses these non-GAAP financial measures to evaluate performance, allocate resources, and determine bonuses.

The non-GAAP financial measures do not replace the presentation of our GAAP financial results, but they eliminate expenses and gains that are unusual, that are excluded from analysts' consensus estimates, and/or that arise outside of the ordinary course of business.

During the fiscal quarters and first nine months ended July 31, 2008 and July 31, 2007, the following items were excluded from our GAAP income (loss) from operations to arrive at our non-GAAP income from operations:

º Stock-based compensation expense - We excluded stock-based compensation expense incurred in the fiscal quarters and first nine months ended July 31, 2008 and July 31, 2007 to be consistent with the way the financial community evaluates our performance and the methods used by analysts to calculate consensus estimates.
º Acquisition-related intangible asset amortization - We excluded acquisition-related intangible asset amortization incurred in the fiscal quarters and first nine months ended July 31, 2008 and July 31, 2007 because such charges are unrelated to our core operating performance and the intangible assets acquired vary significantly based on the timing and magnitude of our acquisition transactions and the maturities of the businesses acquired.
º Restructuring expenses - We excluded restructuring expenses incurred in the fiscal quarters and first nine months ended July 31, 2008 and July 31, 2007 because such expenses are not expected to recur once the restructuring is completed.
º Purchased in-process research and development - We excluded purchased in-process research and development incurred in the first nine months ended July 31, 2008 as the result of an acquisition that closed during the period because (1) acquisitions containing purchased in-process research and development occur infrequently; and (2) purchased in-process research and development distorts trends and is not considered part of our on-going, ordinary business.
º Litigation-related expense (income) - We excluded gains and losses from, and/or reserves for, certain litigation settlements recorded in the fiscal quarters and first nine months ended July 31, 2008 and July 31, 2007 because the claims leading to these settlements did not arise in the ordinary course of our business.
º Acquisition integration costs - We excluded expenses incurred in the first nine months ended July 31, 2008 associated with the integration of a company we acquired in the period because (1) acquisitions requiring substantial integration activities occur infrequently; and (2) expenses related to integration activities distort trends and are not considered part of our on-going, ordinary business.
º Loss on subsidiary sales - We excluded losses incurred in the fiscal quarter ended July 31, 2008 associated with the planned sales of our wholly-owned subsidiaries in Mexico and Argentina because sales of subsidiaries occur infrequently and are not considered part of our on-going, ordinary business.
º Impairment of intangible assets - We excluded expenses incurred in the fiscal quarter ended July 31, 2007 related to the impairment of intangible assets because the impairment of intangible assets occurs infrequently and is not considered part of our on-going, ordinary business.
º Stock-based compensation review expenses - We excluded expenses related to our self-initiated, voluntary review of historical stock-based compensation practices and related potential accounting impact incurred in the fiscal quarter and first nine months ended July 31, 2007 because this type of review occurs infrequently and the expenses related to the review were not considered part of our on-going, ordinary business.

We excluded the items described above and the following items from our GAAP net income (loss) to arrive at our non-GAAP income from continuing operations, non-GAAP net income, non-GAAP income per share from continuing operations and non-GAAP net income per share:

º Gain on sale of venture capital funds - We excluded the gain on the sale of our venture capital funds recorded in the first nine months ended July 31, 2007 because the sale of our venture capital fund portfolio resulted from our decision to eliminate this type of investment vehicle from our cash management program and, accordingly, was a one-time occurrence that was not considered part of our on-going, ordinary business.
º Gain on debenture repurchases - We excluded a gain from the repurchase of a portion of our outstanding 0.50% senior convertible debentures due 2024 recorded in the fiscal quarter and first nine months ended July 31, 2008 because the repurchase of long-term debt securities occurs infrequently and is not considered part of our on-going, ordinary business.
º (Gain) loss on impaired long-term investments - We excluded a loss from the impairment of long-term investments in the fiscal quarter ended July 31, 2008 because impairments of long-term investments occur infrequently and are not considered part of our ongoing, ordinary business. We excluded gains from the sale of long-term investments recorded in the first nine months ended July 31, 2008 and July 31, 2007 because the sale of long-term investments under our former investment program is not considered part of our on-going business.
º Income tax adjustments - We adjusted our income taxes because we made adjustments, related to the excluded items indicated above, to our GAAP net income (loss).
º Income (loss) from discontinued operations, net of taxes - We excluded a loss from discontinued operations related to our Swiss-based business consulting unit recorded in the first nine months ended July 31, 2008 and income (loss) from discontinued operations related to our Swiss and UK-based business consulting units recorded in the fiscal quarter and first nine months ended July 31, 2007 because (1) we have exited the business consulting segment; and (2) the sale of those business consulting units and the financial results related thereto were not considered part of our on-going, ordinary business.