UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    Form 10-Q


                                   (Mark one)
              [X] Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934
                  For the Quarterly Period Ended April 30, 2003

                                       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                             (I.R.S. Employer
 incorporation or organization)                            Identification No.)

                             1800 South Novell Place
                                Provo, Utah 84606
              (Address of principal executive offices and zip code)

                                 (801) 861-7000
              (Registrant's telephone number, including area code)


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 X NO __

Indicate by check mark wither the registrant is an accelerated filer (as defined
in Rule 12b-2 of the Exchange Act)

                                   YES X NO __

As of May 30, 2003, there were 371,352,787 shares of the registrant's common
stock outstanding.


<PAGE>


Part I.  Financial Information
Item 1. Financial Statements

                                  NOVELL, INC.
                      CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<S>                                                                  <C>                          <C>

                                                                       April 30, 2003             October 31, 2002
                                                                       --------------             ----------------
In thousands, except share and per share data                           (Unaudited)
Assets Current assets:
  Cash and short-term investments                                    $        626,397              $       635,858
  Receivables (less allowances of $32,677 - April 30,
    2003 and $39,676 - October 31, 2002)                                      183,672                      214,827
  Prepaid expenses                                                             32,293                       24,077
  Deferred income taxes                                                        19,420                       21,204
  Other current assets                                                         25,166                       23,572
                                                                     ----------------              ---------------

Total current assets                                                          886,948                      919,538
                                                                     ----------------              ---------------

Property, plant and equipment, net                                            353,183                      369,189
Goodwill                                                                      180,579                      179,534
Intangible assets                                                              30,092                       36,351
Long-term investments                                                          55,603                       73,452
Deferred income taxes                                                          83,791                       74,323
Other assets                                                                   12,385                       12,678
                                                                     ----------------              ---------------

Total assets                                                         $      1,602,581              $     1,665,065
                                                                     ================              ===============

Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable                                                   $         61,007              $        57,241
  Accrued compensation                                                         78,498                       87,778
  Other accrued liabilities                                                   124,337                      134,850
  Income taxes payable                                                         28,764                       36,294
  Deferred revenue                                                            267,546                      275,344
                                                                     ----------------              ---------------

Total current liabilities                                                     560,152                      591,507
                                                                     ----------------              ---------------

Minority interests                                                              7,841                        8,016

Stockholders' equity:
  Common stock, par value $.10 per share:
    Authorized - 600,000,000 shares;
    Issued -371,295,559 shares-April 30, 2003,
          367,537,926 shares-October 31, 2002                                  37,130                       36,753
  Preferred stock, par value $.10 per share;
    Authorized - 500,000 shares, Issued - 0 shares                                 --                           --
  Additional paid-in capital                                                  303,760                      297,139

  Retained earnings                                                           698,164                      738,663
  Accumulated other comprehensive income                                          651                           57
  Other                                                                        (5,117)                      (7,070)
                                                                     -----------------             ----------------

Total stockholders' equity                                                  1,034,588                    1,065,542
                                                                     ----------------              ---------------

Total liabilities and stockholders' equity                           $      1,602,581              $     1,665,065
                                                                     ================              ===============

</TABLE>
See notes to consolidated unaudited condensed financial statements.


<PAGE>


                                  NOVELL, INC.
            CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<S>                                                                          <C>                           <C>

                                                                                          Three Months Ended
                                                                              April 30, 2003               April 30, 2002
In thousands, except per share data
Net revenue
  New software licenses                                                      $        64,465               $        70,448
  Maintenance and services                                                           211,502                       203,405
                                                                             ---------------               ---------------
Net revenue                                                                          275,967                       273,853
                                                                             ---------------               ---------------

Cost of revenue
  New software license costs                                                           5,962                         6,981
  Maintenance and service costs                                                      102,809                       105,847
                                                                             ---------------               ---------------
Cost of revenue                                                                      108,771                       112,828
                                                                             ---------------               ---------------

Gross profit                                                                         167,196                       161,025
                                                                             ---------------               ---------------

Operating expenses:
  Sales and marketing                                                                101,737                        82,145
  Product development                                                                 48,354                        42,385
  General and administrative                                                          30,939                        31,055
  Restructuring                                                                        8,675                        19,100
                                                                             ---------------               ---------------

Total operating expenses                                                             189,705                       174,685
                                                                             ---------------               ---------------

Loss from operations                                                                 (22,509)                      (13,660)
                                                                             ---------------               ----------------

Other income (expense), net:
  Investment income (expense)                                                        (10,459)                      (17,199)
  Other, net                                                                          (2,016)                       (1,183)
                                                                             ----------------              ----------------

Other income (expense), net                                                          (12,475)                      (18,382)
                                                                             ----------------              ----------------

Loss before taxes and cumulative effect of accounting change                         (34,984)                      (32,042)

Income tax benefit                                                                    (6,372)                       (2,293)
                                                                             ----------------              ----------------

Loss before cumulative effect of accounting change                                   (28,612)                      (29,749)

Cumulative effect of accounting change                                                    --                      (143,702)
                                                                             ---------------               ----------------

Net loss                                                                     $       (28,612)              $      (173,451)
                                                                             ================              ================

Basic and diluted net loss per share:
Before cumulative effect of accounting change                                $        (0.08)               $        (0.08)
Cumulative effect of accounting change                                                    --                        (0.40)
                                                                             ---------------               ---------------
Basic and diluted net loss per share                                         $        (0.08)               $        (0.48)
                                                                             ===============               ===============

Basic and diluted weighted average shares outstanding                                368,746                       362,754
</TABLE>

See notes to consolidated unaudited condensed financial statements.



<PAGE>


                                  NOVELL, INC.
            CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<S>                                                                          <C>                           <C>
                                                                                           Six Months Ended
                                                                              April 30, 2003               April 30, 2002
In thousands, except per share data
Net revenue
  New software licenses                                                      $       125,503               $       142,086
  Maintenance and services                                                           410,435                       409,626
                                                                             ---------------               ---------------
Net revenue                                                                          535,938                       551,712
                                                                             ---------------               ---------------

Cost of revenue
  New software license costs                                                          11,185                        13,613
  Maintenance and service costs                                                      195,150                       216,784
                                                                             ---------------               ---------------
Cost of revenue                                                                      206,335                       230,397
                                                                             ---------------               ---------------

Gross profit                                                                         329,603                       321,315
                                                                             ---------------               ---------------

Operating expenses:
  Sales and marketing                                                                200,042                       167,621
  Product development                                                                 91,276                        85,398
  General and administrative                                                          58,284                        61,380
  Restructuring                                                                        8,675                        19,100
                                                                             ---------------               ---------------

Total operating expenses                                                             358,277                       333,499
                                                                             ---------------               ---------------

Loss from operations                                                                 (28,674)                      (12,184)
                                                                             ---------------               ----------------

Other income (expense), net:
  Investment income (expense)                                                        (17,599)                      (14,591)
  Other, net                                                                          (1,065)                        6,663
                                                                             ----------------              ---------------

Other income (expense), net                                                          (18,664)                       (7,928)
                                                                             ----------------              ----------------

Loss before taxes and cumulative effect of accounting change                         (47,338)                      (20,112)

Income tax expense (benefit)                                                          (6,838)                        1,286
                                                                             ----------------              ---------------

Loss before cumulative effect of accounting change                                   (40,500)                      (21,398)

Cumulative effect of accounting change                                                    --                      (143,702)
                                                                             ---------------               ----------------

Net loss                                                                     $       (40,500)              $      (165,100)
                                                                             ================              ================

Basic and diluted net loss per share:
Before cumulative effect of accounting change                                $        (0.11)               $        (0.06)
Cumulative effect of accounting change                                                    --                        (0.40)
                                                                             ---------------               ---------------
Basic and diluted net loss per share                                         $        (0.11)               $        (0.46)
                                                                             ===============               ===============

Basic and diluted weighted average shares outstanding                                368,411                       362,591
</TABLE>

See notes to consolidated unaudited condensed financial statements.


<PAGE>


                                  NOVELL, INC.
            CONSOLIDATED UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<S>                                                                          <C>                           <C>
                                                                                            Six Months Ended
In thousands                                                                    April 30, 2003            April 30, 2002
                                                                                --------------            --------------
Cash flows from operating activities:
Net loss                                                                        $     (40,500)            $    (165,100)
Adjustments to reconcile net loss to net cash used for operating
   activities:
Gain on sale of property, plant and equipment                                            (365)                   (8,762)
Depreciation and amortization                                                          34,984                    33,495
Loss on impaired goodwill                                                                  --                   143,702
Loss on impaired investments                                                           24,523                    29,839
Non-cash restructuring charges                                                          8,675                    16,426
Decrease in receivables                                                                31,155                    53,665
(Increase) decrease in prepaid expenses                                                (8,216)                      948
Increase in deferred income taxes                                                      (7,685)                      (64)
(Increase) decrease in other current assets                                            (1,594)                    4,686
Increase (decrease) in accounts payable                                                 3,766                   (21,594)
Decrease in other current liabilities, net                                            (40,432)                  (73,803)
Decrease in deferred revenue                                                           (7,798)                  (30,993)
                                                                                --------------            --------------

   Net cash used for operating activities                                              (3,487)                  (17,555)
                                                                                --------------            --------------

Cash flows from financing activities:
Issuance of common stock, net                                                           6,998                     7,176
                                                                                -------------             -------------

   Net cash provided by financing activities                                            6,998                     7,176
                                                                                -------------             -------------

Cash flows from investing activities:
Expenditures for property, plant and equipment                                        (21,777)                  (13,161)
Proceeds from the sale of property, plant and equipment                                   785                    16,050
Purchases of short-term investments                                                  (278,384)                 (706,780)
Maturities of short-term investments                                                   63,685                   471,449
Sales of short-term investments                                                       141,897                   223,211
Cash paid for Volera minority interest shares                                          (1,050)                       --
Expenditures for long-term investments                                                 (7,806)                  (16,583)
Other                                                                                   9,676                     8,128
                                                                                -------------             -------------

   Net cash used for investing activities                                             (92,974)                  (17,686)
                                                                                --------------            --------------

Total decrease in cash and cash equivalents                                           (89,463)                  (28,065)

Cash and cash equivalents - beginning of period                                       463,987                   337,927
                                                                                -------------             -------------

Cash and cash equivalents - end of period                                             374,524                   309,862

Short-term investments - end of period                                                251,873                   373,433
                                                                                -------------             -------------

Cash and short-term investments - end of period                                 $     626,397             $     683,295
                                                                                =============             =============
</TABLE>

See notes to consolidated unaudited condensed financial statements.


<PAGE>


                                  NOVELL, INC.
         NOTES TO CONSOLIDATED UNAUDITED CONDENSED FINANCIAL STATEMENTS


A.   Quarterly Financial Statements

     The preparation of financial statements in conformity with generally
     accepted accounting principles requires management to make estimates and
     assumptions that affect the amounts reported in the financial statements
     and accompanying notes. As discussed under the subheading "Critical
     Accounting Policies" in Part I, Item 2, "Management's Discussion and
     Analysis of Financial Condition and Results of Operations," actual results
     could differ materially from those estimates. The accompanying consolidated
     unaudited condensed financial statements have been prepared in accordance
     with the instructions to Form 10-Q but do not include all of the
     information and footnotes required by generally accepted accounting
     principles and should, therefore, be read in conjunction with our fiscal
     2002 Annual Report on Form 10-K. These financial statements do include all
     normal recurring adjustments that we believe are necessary for a fair
     presentation of the statements. The interim operating results are not
     necessarily indicative of the results for a full year. Certain
     reclassifications, none of which affected net loss, have been made to the
     prior year's amounts in order to conform to the current year's
     presentation.

B.   Foreign Currency Translation

     Due to increased activity in non-U.S. dollar currencies, beginning November
     1, 2002, we have determined the functional currency of all of our
     international subsidiaries, except for our Irish subsidiaries, to be the
     local currency. These subsidiaries generate and expend cash primarily in
     their respective local currency. Assets and liabilities of these
     subsidiaries are translated at current exchange rates prevailing during the
     year. Such translation adjustments are recorded in accumulated other
     comprehensive income. Previously, the functional currency of our
     international subsidiaries, except Novell Japan, Novell India, and the
     international subsidiaries of Cambridge Technology Partners ("Cambridge")
     and SilverStream, was the U.S. dollar.

C.   Cash and Short-term Investments

     We consider all highly liquid debt instruments purchased with a term to
     maturity of three months or less to be cash equivalents. Short-term
     investments are widely diversified, consisting primarily of investment
     grade securities that either mature within the next 12 months or have other
     characteristics of short-term investments. These include:

        oVariable rate preferred stock instruments that are publicly traded and
         earn dividends periodically at a rate set in an auction. These
         instruments have auction dates within 180 days of the prior auction
         date.

        oFixed income securities, which have contractual maturities ranging from
         zero to seven years. These securities are available to be used for
         current operations and thus are classified as short-term investments,
         even though some maturities may extend beyond one year.

     No other short-term investments have contractual maturities. All marketable
     debt and equity securities that are included in cash and short-term
     investments are considered available-for-sale and are carried at fair
     market value. The unrealized gains and losses related to these securities
     are included in accumulated other comprehensive income, net of tax, after
     any applicable tax valuation allowances (see Note M). Fair market values
     are based on quoted market prices when available; if quoted market prices
     are not available, the fair market values are based on quoted market prices
     of similar instruments of companies that are comparable in size, product
     offerings, and market sector. When securities are sold, their cost is
     determined based on the specific identification method.



<PAGE>


     The following is a summary of cash and short-term investments, all of which
are considered available-for-sale.
<TABLE>
<S>                                               <C>                <C>             <C>            <C>
                                                                        Gross          Gross         Fair Market
                                                      Cost at        Unrealized      Unrealized        Value at
 In thousands                                     April 30, 2003        Gains          Losses       April 30, 2003
                                                  --------------        -----          ------       --------------
 Cash and cash equivalents:
   Cash                                             $   131,579       $       --     $       --       $   131,579
   Government and agency securities                      31,511               --             --            31,511
   Corporate obligations                                 80,069               --             --            80,069
   Money market funds                                   131,365               --             --           131,365
                                                    -----------       ----------     ----------       -----------
           Total cash and cash equivalents              374,524               --             --           374,524
                                                    -----------       ----------     ----------       -----------
 Short-term investments:
   Variable rate instruments                             54,000               --             --            54,000
   Government and agency securities                      46,460              373            (20)           46,813
   Corporate obligations                                143,865            2,698            (28)          146,535
   Equity securities                                      4,663              235           (373)            4,525
                                                    -----------       ----------     ----------      ------------
           Total short-term investments                 248,988            3,306           (421)          251,873
                                                    -----------       ----------     -----------     ------------

           Total cash and short-term                $   623,512       $    3,306     $     (421)     $    626,397
                                                    ===========       ==========     ===========     ============
 investments

                                                                        Gross           Gross        Fair Market
                                                      Cost at         Unrealized     Unrealized        Value at
In thousands                                     October 31, 2002       Gains          Losses      October 31, 2002
                                                 ----------------       -----          ------      ----------------
Cash and cash equivalents:
  Cash                                             $     179,098     $        --      $       --     $    179,098
  Government and agency securities                        60,121              --              --           60,121
  Corporate obligations                                   23,219              --              --           23,219
  Money market funds                                     201,549              --              --          201,549
                                                   -------------     -----------      ----------     ------------
          Total cash and cash equivalents                463,987              --              --          463,987
                                                   -------------     -----------     -----------     ------------
Short-term investments:
  Variable rate instruments                               14,499               1              --           14,500
  Government and agency securities                        38,025             379              --           38,404
  Corporate obligations                                  110,746           2,533            (113)         113,166
  Equity securities                                        5,982             368            (549)           5,801
                                                   -------------     -----------      ----------     ------------
          Total short-term investments                   169,252           3,281            (662)         171,871
                                                   -------------     -----------      ----------     ------------

          Total cash and short-term investments    $     633,239     $     3,281      $     (662)    $    635,858
                                                   =============     ===========      ==========   --============
</TABLE>

     During the second quarter of fiscal 2003, we realized gains of $0.7 million
     and realized losses of $0.2 million from the sale of short-term
     investments. During the second quarter of fiscal 2002, we realized gains of
     $2.3 million and realized losses of $0.1 million from the sale of
     short-term investments. During the first six months of fiscal 2003, we
     realized gains of $1.1 million and realized losses of $0.3 million from the
     sale of short-term investments. During the first six months of fiscal 2002,
     we realized gains of $5.5 million and realized losses of $0.3 million from
     the sale of short-term investments.

     We routinely review all of our investments for impairment. We did not
     record any impairment losses on short-term investments during the first six
     months of fiscal 2003 or fiscal 2002.



<PAGE>


D.   Long-term Investments

     The primary components of long-term investments as of April 30, 2003 were
     investments made through the Novell Venture account or the Cambridge
     Technology Capital Fund I L.P. ("CTC I"), and direct investments we made
     for strategic purposes in equity securities of privately-held companies.
     Long-term investments are accounted for initially at cost and written down
     to fair market value when indicators of impairment are deemed to be other
     than temporary.

     We routinely review our investments in private securities and venture funds
     for impairment. To assess impairment, we analyze forecasted financial
     performance of the investees, the liquidation preference value of the stock
     we hold, and our estimate of the potential for investment recovery based on
     all these factors. During the second quarter and first six months of fiscal
     2003, we recognized impairment losses on long-term investments totaling
     $13.7 million and $24.5 million, respectively. During the second quarter
     and first six months of fiscal 2002, we recognized impairment losses of
     $24.4 million and $29.8 million, respectively. As of April 30, 2003 and
     2002, there were no unrealized gains or losses on our long-term equity
     investments.

E.   Goodwill and Intangible Assets

     Goodwill includes approximately $129.0 million from the July 2002
     acquisition of SilverStream Software, Inc. ("SilverStream"), approximately
     $42.5 million from the July 2001 acquisition of Cambridge, and
     approximately $9.1 million related to several small technology-related
     acquisitions. Beginning November 1, 2002, we reorganized our operations and
     began reporting our financial results in four segments; three are based on
     geographic area and the fourth is Celerant management consulting. The
     geographic segments are Americas, EMEA, and Asia Pacific.

o        Americas - includes the United States, Canada, and Latin America
o        EMEA - includes Eastern and Western Europe, Middle East, and Africa
o        Asia Pacific -includes China, Japan, Southeast Asia, Australia, New
         Zealand, and India

     Prior to November 1, 2002, we operated and reported financial results based
     on three business segments: product, consulting, and Volera, Inc.

     The following is a summary of goodwill, which has been reallocated to the
new segments:
<TABLE>
<S>                                         <C>            <C>         <C>          <C>         <C>
     In thousands                            Americas       EMEA        Asia        Celerant      Total
                                             --------       ----        -----       --------      -----
                                                                       Pacific

     Balance as of November 1, 2002         $  69,842     $  60,447    $   6,745   $  42,500    $  179,534
     Adjustments                                  523           470           52          --         1,045
                                            ---------     ---------    ---------   ---------    ----------
     Balance as of April 30, 2003           $  70,365     $  60,917    $   6,797   $  42,500    $  180,579
                                            =========     =========    -========   =========    ==========
</TABLE>

     Adjustments relate to additional SilverStream merger-related liabilities
     that we incurred for obligations of SilverStream prior to the acquisition.

     The following is a summary of intangible assets:
<TABLE>
<S>                                                                <C>                    <C>
          In thousands                                             April 30, 2003         October 31, 2002
                                                                   --------------         ----------------

          Developed technology                                       $     26,510            $     32,769
          Trade names                                                       3,582                   3,582
                                                                     ------------            ------------
            Total intangible assets                                  $     30,092            $     36,351
                                                                     ============            ============
</TABLE>

     Developed technology relates primarily to the exteNd product line that we
     acquired as a part of our July 2002 acquisition of SilverStream Software,
     Inc. and is being amortized over three years. Amortization for the second
     quarter and first six months of fiscal 2003 was $3.0 million and $6.3
     million, respectively. Amortization for the second quarters and first six
     months of fiscal 2002 was $0.8 million and $2.2 million, respectively.
     Trade names relate to the SilverStream individual product names, which we
     continue to use. Trade names have an indefinite life and therefore are not
     amortized but are reviewed for impairment at least annually.

F.   Income Taxes

     Our estimated effective tax rate before investment impairment losses for
     the second quarter and first six months of fiscal 2003 was 30%. However,
     with impairment losses the actual tax benefit rate for the second quarter
     of fiscal 2003 was 18% and the actual tax benefit rate for the first six
     months of fiscal 2003 was 14%. The effective tax rate for fiscal 2002 was
     12%. The effective tax rate for the first six months of fiscal 2003
     differed from the fiscal 2002 effective tax rate primarily because of
     differences in the amount of non-deductible items in each period. No tax
     benefit for the investment impairment losses was taken in the first and
     second quarter of fiscal 2003 because corporations can only use capital
     losses to offset capital gains. We could not be assured at the end of the
     second quarter that we could generate sufficient capital gains during the
     five-year carry-over period to recognize the tax benefit of the capital
     losses. Accordingly, a valuation allowance has been established against the
     capital loss amounts we may not be able to recognize.

     We paid income taxes of $6.7 million in the first six months of fiscal 2003
     and $9.0 million during the same period of fiscal 2002.

G.   Line of Credit

     We currently have a $15 million unsecured revolving bank line of credit,
     which expires on March 3, 2004. The line can be used for either letter of
     credit or working capital purposes and is subject to the terms of a loan
     agreement containing financial covenants and restrictions, none of which
     are expected to significantly affect our operations. At April 30, 2003,
     there was $7.0 million outstanding under the line, which we repaid on May
     1, 2003, and standby letters of credit of $8.0 million outstanding under
     this agreement.

     Our subsidiary in China has a $0.8 million short-term revolving loan, which
     expires on February 29, 2004. The loan is being used for our China
     operations. At April 30, 2003, there was $0.8 million outstanding under
     this revolving loan.

H.       Restructuring

     During the second quarter of fiscal 2003, we determined that the amount we
     had originally accrued for facility-related costs in previous
     restructurings was too low and accrued an additional $8.7 million. The
     original liability was based on estimated sublease rates and timing of
     signing subleases, which have been affected by the decline in the real
     estate market. This additional amount, which pertains to three separate
     restructuring events, is included in the following tables.

     Second quarter of fiscal 2002
     During the second quarter of fiscal 2002, we recorded a pre-tax
     restructuring charge of approximately $20 million resulting from our
     continued migration towards becoming a solutions provider and as a result
     of changing business needs. Specific actions taken included reducing our
     workforce worldwide by approximately 50 employees (less than 1%),
     consolidating facilities, closing offices in unprofitable locations, and
     disposing of excess property and equipment. During the second quarter of
     fiscal 2003, we determined that the amount we had originally accrued for
     facility-related costs was too low and accrued an additional $7.7 million.
     The original liability was based on estimated sublease rates and timing of
     signing subleases, which have been affected by the decline in the real
     estate market.



<PAGE>


     The following table summarizes the activity during fiscal 2003 related to
the second quarter of fiscal 2002 restructuring.
<TABLE>
<S>                                                  <C>          <C>           <C>        <C>            <C>
                                                                   Balance at                             Balance at
                                                      Original    October 31,      Cash                   April 30,
                                                       Charge        2002       Payments   Adjustments       2003
                                                       ------     ----------   ----------  -----------    ----------
   In thousands
   Severance and benefits                             $ 14,748      $  4,258    $ (2,551)    $     --       $  1,707
   Excess facilities and property and equipment          5,146         4,221        (963)       7,735         10,993
   Other restructuring-related costs                       492           300          --           --            300
                                                      --------      --------    --------     --------       --------
                                                      $ 20,386      $  8,779    $ (3,514)    $  7,735       $ 13,000
                                                      ========      ========    =========    ========       ========
</TABLE>

     As of April 30, 2003, the remaining balance of the second quarter of fiscal
     2002 restructuring charge included accrued liabilities related to severance
     and benefits, which will be paid out over the remaining severance
     obligation period not to exceed three years, and redundant facilities and
     other fixed contracts, which will be paid over the respective remaining
     contract terms.

     Fourth quarter of fiscal 2001
     During the fourth quarter of fiscal 2001, we recorded $51 million of
     pre-tax restructuring charges resulting from the restructuring of our
     operations in light of changes in general market conditions, changing
     customer demands, and the evolution of our business strategy. This business
     strategy focuses on Net business solutions designed to secure and power the
     networked world across leading operating systems. The execution of this
     strategy included refining our consulting initiatives, refocusing research
     and development efforts, defining sales and marketing efforts to be more
     customer and solutions oriented, and adjusting our overall cost structure
     given current revenue levels and our direction.

     Specific actions included reducing our workforce worldwide by approximately
     1,100 employees  (approximately  16%),  consolidating excess facilities and
     disposing  of excess  property  and  equipment,  terminating  a  management
     consulting  contract  that no  longer  fit with our  strategic  focus,  and
     abandoning and writing off  technologies  that no longer fit within our new
     strategy.  We also  realigned our remaining  resources to better manage our
     business.  During the second quarter of fiscal 2003, we determined that the
     amount we had originally accrued for facility-related costs was too low and
     accrued an  additional  $0.3 million.  The original  liability was based on
     estimated sublease rates and timing of signing  subleases,  which have been
     affected by the  decline in the real estate  market.  The  following  table
     summarizes  the costs and  activities  during  fiscal  2003  related to the
     fourth quarter of 2001 restructuring.
<TABLE>
<S>                                                  <C>          <C>           <C>        <C>            <C>

                                                                   Balance at                             Balance at
                                                      Original     October 31,     Cash                   April 30,
                                                       Charge         2002       Payments    Adjustments      2003
                                                       ------     -----------  ----------   ------------  --------
    In thousands
    Severance and benefits                             $ 32,793     $  1,117   $    (801)    $     --       $    316
    Excess facilities and property and equipment         10,896        4,651      (1,656)         262          3,257
    Other restructuring-related costs                     6,973          624        (241)          --            383
                                                       --------     --------   ----------    --------        -------
                                                       $ 50,662     $  6,392   $  (2,698)    $    262       $  3,956
                                                       ========     ========   ==========    ========       ========
</TABLE>

     As of April 30, 2003, the remaining balance of the fourth quarter fiscal
     2001 restructuring charge included accrued liabilities largely related to
     severance and benefits, which will be paid out during fiscal 2003, and
     excess facilities costs, which will be paid over the respective remaining
     lease terms.

     Third quarter of fiscal 2001
     During the third quarter of fiscal 2001, we recorded a pre-tax
     restructuring charge of approximately $30 million as a result of our July
     2001 acquisition of Cambridge Technology Partners and changes in our
     business to move towards a Net business solutions strategy. Specific
     actions included reducing our workforce worldwide by approximately 280
     employees across all functional areas (approximately 5% before the addition
     of Cambridge), consolidating facilities and disposing of excess property
     and equipment, abandoning and writing off technologies that no longer fit
     within our new strategy, and discontinuing unprofitable product lines.
     During the second quarter of fiscal 2003, we determined that the amount we
     had originally accrued for facility-related costs was too low and accrued
     an additional $0.7 million. The original liability was based on estimated
     sublease rates and timing of signing subleases, which have been affected by
     the decline in the real estate market.

     The following table summarizes the activity during fiscal 2003 related to
the third quarter of fiscal 2001 restructuring costs.

 <TABLE>
<S>                                                  <C>          <C>           <C>        <C>            <C>
                                                                  Balance at                              Balance at
                                                       Original     October 31,     Cash                     April 30,
                                                       Charge         2002       Payments  Adjustments        2003
                                                       ------     -----------  ----------   ------------  -----------
    In thousands
    Severance and benefits                             $ 15,978     $     --    $     --     $     --      $      --
    Excess facilities and property and equipment         10,740        3,889      (1,068)         678          3,499
    Other restructuring-related costs                     3,675          137        (137)          --             --
                                                       --------     --------    ---------    --------      ---------
                                                       $ 30,393     $  4,026    $ (1,205)    $    678      $   3,499
                                                       ========     ========    =========    ========      =========
</TABLE>

     As of April 30, 2003, the remaining balance of the third quarter of fiscal
     2001 restructuring charge included accrued liabilities related to excess
     facilities costs, which will be paid over the respective remaining lease
     terms.

I.   Guarantees

     During the first quarter of fiscal 2002, we sold our subsidiary in the
     Czech Republic. As a part of this transaction, we provided a guarantee to
     the landlord of the building we lease in the Czech Republic whereby we
     agreed to pay any and all monies due under the lease, including legal fees
     if the new lessee defaults on the lease. During fiscal 2003, we paid
     approximately $0.1 million against this guarantee and have accrued an
     additional $0.4 million, which represents our liability exposure if the new
     lessee continues in default, excluding legal fees.

     As an element of our standard contract terms, we include an indemnification
     clause in our agreements with our customers that indemnifies the licensee
     against certain liability and damages arising from intellectual property
     infringement claims arising from their use or distribution of our software.
     These terms are common in the high technology industry. We do not record a
     liability for potential litigation claims related to indemnification
     agreements with our customers. We do not believe the likelihood of a
     material obligation is probable.

     We also have some outstanding intercompany guarantees, which guarantee
payment of certain obligations of our subsidiaries.

J.   Commitments and Contingencies

     In 1997, the Board of Directors established the Novell Venture account
     within our investment portfolio for the purpose of promoting our business
     and strategic objectives by making investments in privately-held companies,
     mainly small capitalization stocks in the high technology industry sector,
     and in funds managed by venture capitalists. As of April 30, 2003, we had a
     balance of $45.8 million related to investments in various venture capital
     funds and had commitments to contribute an additional $64.2 million to
     these funds over the next three to four years, upon the request of the fund
     managers. As a result of our acquisition of Cambridge, we also own both
     limited and general partnership interests in CTC I of approximately 24%. As
     of April 30, 2003, we had an investment balance of $0.2 million in CTC I
     and had commitments to contribute up to an additional $0.3 over the next
     three to four years. We do not intend to make any new long-term investments
     through the Novell Venture account or into venture capital funds.

     In May 2002, France Telecom SA and U.S. Philips Corporation, alleged
     co-owners of a U.S. patent, filed suit in the U.S. District Court, District
     of Delaware, against Novell. The plaintiffs allege that Novell's NetWare
     client software infringes the patent. In the suit, the plaintiffs seek
     unspecified monetary damages and an injunction prohibiting infringement of
     the patent. We intend to vigorously defend ourselves in this suit. Although
     there can be no assurance as to the ultimate disposition of the suit, we do
     not believe that the resolution of this litigation will have a material
     adverse effect on our financial position, results of operations or cash
     flows.

     SilverStream 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
     Exchange 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 these issuers, including SilverStream's. The plaintiffs
     are seeking monetary damages, statutory compensation and other relief that
     may be deemed appropriate by the court. 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. All issuers,
     including SilverStream, filed a Motion to Dismiss on July 15, 2002. We
     believe that SilverStream and its former officers and directors have
     meritorious defenses to the claims made in the complaints and intend to
     contest the claims against SilverStream and its former directors and
     officers vigorously. 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.

     In February 1998, a suit was filed in the U.S. District Court, District of
     Utah, against us and certain of our officers and directors, alleging
     violation of federal securities laws by concealing the true nature of our
     financial condition and seeking unspecified damages. The lawsuit was
     brought as a purported class action on behalf of purchasers of our common
     stock from November 1, 1996 through April 22, 1997. After a first dismissal
     of the suit on November 3, 2000 and a subsequent amendment to the complaint
     filed on February 20, 2001, the U.S. District Court dismissed the amended
     complaint with prejudice for failure to state a claim. The Order of
     Dismissal was entered on April 16, 2002 and the plaintiffs have filed a
     Notice of Appeal to the Tenth Circuit Court of Appeals. We intend to
     vigorously defend the upholding of the U.S. District Court's ruling. While
     there can be no assurance as to the ultimate disposition of the lawsuit, we
     do not believe that the resolution of this litigation will have a material
     adverse effect on our financial position, results of operations or cash
     flows.

     We are a party to a number of additional legal claims arising in the
     ordinary course of our business. We believe that the ultimate resolution of
     these claims will not have a material adverse effect on our financial
     position, results of operations or cash flows.

K.   Segment Information

     Beginning November 1, 2002, we reorganized our operations and began
     reporting our financial results in four segments; three are based on
     geographic areas and the fourth is Celerant management consulting. The
     geographic segments are Americas, EMEA, and Asia Pacific. Performance is
     evaluated by our Chief Executive Officer and Worldwide Management
     Committee, our chief decision makers, and is based on reviewing revenue and
     segment operating income (loss) information for each of the geographic
     segments and for the Celerant management consulting segment. The geographic
     segments include:

o        Americas - includes the United States, Canada, and Latin America
o        EMEA - includes Eastern and Western Europe, Middle East, and Africa
o        Asia Pacific -includes China, Japan, Southeast Asia, Australia, New
         Zealand, and India

     All geographic segments sell our software, licenses and services offerings
     (except Celerant management consulting services). These offerings are sold
     in the U.S. via direct, OEM, reseller, and distributor channels, and
     internationally are sold directly and through distributors who sell to
     dealers and end users


<PAGE>


     Operating results by segment
<TABLE>
<S>                                              <C>               <C>               <C>               <C>

                                                   Three months April 30, 2003         Three months April 30, 2002
                                                   ---------------------------         ---------------------------
                                                                     Operating                           Operating
                                                  Net Revenue      Income (Loss)      Net Revenue      Income (Loss)
                                                  -----------      -------------      -----------      -------------
    In thousands
      Americas                                   $  129,503        $   47,831        $  147,431        $   65,560
      EMEA                                           88,673            30,270            74,324            28,697
      Asia Pacific                                   20,908             2,397            19,919             3,518
      Common unallocated operating costs                 --           (94,464)               --           (93,805)
                                                 ----------        ----------        ----------        ----------
    Total geographical segments                     239,084           (13,966)          241,674             3,970
    Celerant management consulting                   36,883             2,249            32,179             2,435
    Unallocated integration costs and
     restructuring adjustments                           --           (10,792)               --           (20,065)
                                                 ----------        -----------       ----------        -----------
    Total                                        $  275,967        $  (22,509)       $  273,853        $  (13,660)
                                                 ==========        ===========       ==========        ===========

                                                 Six months ended April 30, 2003     Six months ended April 30, 2002
                                                 -------------------------------     -------------------------------
                                                                     Operating                           Operating
                                                  Net Revenue      Income (Loss)      Net Revenue      Income (Loss)
                                                  -----------      -------------      -----------      -------------
    In thousands
      Americas                                   $  261,344        $  101,702        $  297,453        $  131,691
      EMEA                                          170,400            59,345           154,109            60,422
      Asia Pacific                                   38,765             3,315            38,968             5,641
      Common unallocated operating costs                 --          (184,169)               --          (190,626)
                                                 ----------        ----------        ----------        ----------
    Total geographical segments                     470,509           (19,807)          490,530             7,128
    Celerant management consulting                   65,429             2,180            61,182             2,444
    Unallocated integration costs and
     restructuring adjustments                           --           (11,047)               --           (21,756)
                                                 ----------        -----------       ----------        -----------
    Total                                        $  535,938        $  (28,674)       $  551,712        $  (12,184)
                                                 ==========        ===========       ==========        ===========
</TABLE>

     Common unallocated operating costs include corporate services common to all
     segments such as corporate sales and marketing, product development,
     corporate general and administrative costs, and corporate infrastructure
     costs. Celerant does not utilize these corporate services.

     In addition to reviewing geographic and Celerant management consulting
     segment results, our chief decision makers review net revenue by solution
     category. These solution categories are:

o       Identity management and secure web services - solutions that help
        customers with their identity management and security issues. Products
        include Secure-Login/Single Sign-On, DirXML, iChain, exteNd, and
        BorderManager. Products in this category are branded as Nsure and
        exteNd.
o       Cross platform services - solutions that offer an effective and open
        approach to networking and collaboration services, including file,
        print, messaging, scheduling, workspace, etc. while using a
        cross-platform approach. Products include NetWare, GroupWise, ZEN, and
        Novell iFolder. Products in this category are branded as Nterprise.
o       Worldwide services - comprehensive worldwide IT consulting and support
        services that apply Net business solutions to our customers' business
        situations, providing the business knowledge and technical expertise to
        help our customers implement our identity management, secure web
        services, and cross platform services. Services in this category are
        branded as Ngage.
o       Celerant management consulting- operational strategy and implementation
        consulting services offered to a wide range of customers across various
        sectors, worldwide.



<PAGE>


     Revenue by solution category
<TABLE>
<S>                                                     <C>              <C>              <C>            <C>

                                                        Three months ended April 30,      Six months ended April 30,
                                                        -----------------------------     --------------------------
                                                             2003            2002            2003            2002
                                                             ----            ----            ----            ----
     In thousands
       Identity management and secure web services       $   22,669      $   16,630       $   45,814      $   33,478
       Cross platform services                              142,014         147,052          277,866         297,057
                                                         ----------      ----------       ----------      ----------
     Total software licenses and maintenance                164,683         163,682          323,680         330,535
     Worldwide services                                      74,401          77,992          146,829         159,994
                                                         ----------      ----------       ----------      ----------
     Total IT software and solutions                        239,084         241,674          470,509         490,529
     Celerant management consulting                          36,883          32,179           65,429          61,183
                                                         -----------     -----------      ----------      ----------
     Total net revenue                                   $  275,967      $  273,853       $  535,938      $  551,712
                                                         ==========      ==========       ==========      ==========
</TABLE>

     Separate financial information is not evaluated by business segment in
     regards to asset allocation. Prior to November 1, 2002, we operated and
     reported financial results based on three business segments: product,
     consulting, and Volera, Inc.

     For the second quarters of fiscal 2003 and fiscal 2002, sales in the U.S.
     were $125.8 million and $143.1 million, respectively, and sales to
     international customers were approximately $150.1 million and $130.8
     million, respectively. In the second quarters of fiscal 2003 and fiscal
     2002, 75% and 71%, respectively, of our international sales were in EMEA.

     On a year-to-date basis, sales in the U.S. were $249.6 million in fiscal
     2003 and $290.5 million in fiscal 2002, and sales to international
     customers were $286.3 million in fiscal 2003 and $261.2 million in fiscal
     2002. For the first six months of fiscal 2003 and fiscal 2002,
     international sales in EMEA accounted for 75% and 73%, respectively, of our
     total international sales.

     No single international country accounted for more than 10% of our total
revenue.

L.   Net Income (Loss) Per Share

     Earnings per share for the second quarters and first six months of fiscal
2003 and 2002 were calculated as follows:
<TABLE>
<S>                                                      <C>                <C>             <C>              <C>

                                                         Three months ended April 30,      Six months ended April 30,
                                                         -----------------------------     --------------------------
                                                             2003             2002            2003             2002
                                                             ----             ----            ----             ----
     In thousands, except per share data
     Basic & diluted net loss per share:
     Net loss                                            $  (28,612)        $(173,451)       $ (40,500)      $(165,100)
                                                         ===========        ==========       ==========      ==========
     Weighted average shares outstanding                    368,746           362,754          368,411         362,591
     Basic net loss per share                            $    (0.08)        $   (0.48)       $   (0.11)      $    (0.46)
                                                         ===========        ==========       ==========      ===========
</TABLE>




<PAGE>


M.   Comprehensive Income (Loss)

     The components of comprehensive income (loss), net of tax, for the second
     quarters and year-to-date periods of fiscal 2003 and 2002, were as follows:
<TABLE>
<S>                                                     <C>             <C>              <C>              <C>

                                                         Three months ended April 30,      Six months ended April 30,
                                                         -----------------------------     --------------------------
                                                             2003             2002            2003             2002
                                                             ----             ----            ----             ----
     In thousands
     Net loss                                           $   (28,612)     $    (173,451)  $   (40,500)      $  (165,100)
     Change in net unrealized gain/(loss) on
       investments                                              (36)            (3,769)          265            (4,015)
     Change in cumulative translation adjustment                700             (1,681)          329              (314)
                                                        -----------      --------------  -----------       ------------
     Comprehensive income (loss)                        $   (27,948)     $    (178,901)  $   (39,906)      $  (169,429)
                                                        ============     ==============  ============      ============
</TABLE>

     The components of accumulated other comprehensive income (loss), net of
     related tax, at April 30, 2003 and October 31, 2002 are as follows:
<TABLE>
<S>                                                        <C>               <C>

                                                           April 30, 2003    October 31, 2002
     In thousands
     Net unrealized gain on investment                       $     2,469        $     2,204
     Cumulative translation adjustment                            (1,818)            (2,147)
                                                             ------------       ------------
     Accumulated other comprehensive income                  $       651        $        57
                                                             ===========        ===========
</TABLE>

N.   Stock Option and Other Equity Plans

     At April 30, 2003, we had authorized stock option and other equity plans
     under which options to purchase shares of our common stock could be granted
     to employees, consultants and outside directors. We apply the intrinsic
     value method in accounting for our stock option and equity plans.
     Accordingly, no compensation expense (except compensation expense related
     to restricted stock purchase grants, below-market option grants, and grants
     to non-employees) has been recognized for our stock option and other equity
     plans. If compensation expense for our stock option and other equity plans
     had been determined based on the fair value method of accounting for stock
     grants, using the Black-Scholes option pricing model, our net loss and net
     loss per share would have been the pro forma amounts indicated in the
     following table.
<TABLE>
<S>                                                    <C>                <C>             <C>           <C>

                                                        Three months ended April 30,      Six months ended April 30,
                                                        -----------------------------     --------------------------
                                                             2003             2002            2003            2002
                                                             ----             ----            ----            ----
     In thousands, except per share data
     Net loss:
       As reported                                     $   (28,612)       $  (173,451)    $  (40,500)    $(165,100)
       Pro forma *                                     $   (35,658)       $  (190,343)    $  (55,774)    $(196,474)
     Net loss per share:
       As reported basic and diluted                   $     (0.08)       $     (0.48)    $    (0.11)    $   (0.46)
       Pro forma basic and diluted*                    $     (0.10)       $     (0.52)    $    (0.15)    $   (0.54)
</TABLE>

       *  Pro forma amounts have been adjusted to reflect the impact of
          including compensation expense related to our stock option and
          other equity plans.

     For the purpose of the above table, the fair value of each option grant was
     estimated as of the date of grant using the Black-Scholes option pricing
     model with the following weighted-average assumptions used for grants in
     the second quarters of fiscal 2003 and fiscal 2002: a risk-free interest
     rate of approximately 2.8% and 4.6%, respectively; a dividend yield of 0.0%
     for both quarters; a weighted-average expected life of five years for both
     quarters; and a volatility factor of the expected market price of our
     common stock of 0.88 and 0.87, respectively. The weighted average fair
     value of options granted in the second quarters of fiscal 2003 and fiscal
     2002 were $1.65 and $1.94, respectively.

     For the first six months of fiscal 2003 and fiscal 2002 assumptions
     included: a risk-free interest rate of approximately 2.9% and 4.4%,
     respectively; a dividend yield of 0.0% for both periods; a weighted-average
     expected life of five years for both periods; and a volatility factor of
     the expected market price of our common stock of 0.88 and 0.87,
     respectively. The weighted average fair value of options granted in the
     first six months of fiscal 2003 and fiscal 2002 were $2.06 and $2.51,
     respectively.

     For purposes of the above table, the Company does not recognize
     compensation expense related to employee purchase rights under the Purchase
     Plan. Pro forma compensation expense is estimated for the fair value of the
     employees' purchase right using the Black-Scholes option pricing model with
     the following assumptions for the shares issued in the second quarters of
     fiscal 2003 and fiscal 2002: risk-free interest rate of approximately 2.3%
     and 1.5%, respectively; a dividend yield of 0.0% for both periods; a
     weighted-average expected life of 6 months for both periods; and a
     volatility factor of the expected market price of our common stock of 0.88
     and 0.87, respectively. The weighted average fair value of the purchase
     rights issued in the second quarters of fiscal 2003 and fiscal 2002 was
     $0.93 and $1.52. There were no purchase rights issued in the first quarters
     of fiscal 2003 and fiscal 2002.

     Pursuant to an Exchange Offer dated May 14, 2003, which our stockholders
     approved at our Annual Meeting held on May 1, 2003 through the approval of
     amendments to our employee stock option plans, we offered a stock option
     exchange program (the program) to our non-executive employees giving them
     the right to exchange outstanding stock options with an exercise price of
     $5.03 per share or more for new options to be issued six months and one day
     after the close of the tender offer. The options tendered under the program
     will be replaced with options to purchase a fewer number of shares than the
     original options would have provided, based upon an exchange ratio, which
     is based on the exercise price of the tendered option.

     The program was structured to comply with current accounting guidelines so
     that we will not be subject to variable accounting and thus will not
     recognize compensation expense in connection with the grant of the
     replacement options. If the current accounting standards or guidelines are
     changed prior to the completion of the tender offer, we will have to comply
     with the changed accounting treatment.

O.   Derivative Instruments

     A large portion of our revenue, expense, and capital purchasing activities
     are transacted in U.S. dollars. However, we do enter into transactions in
     other currencies, primarily the Euro, Japanese yen, and certain other
     European, Latin American and Asian currencies. To protect against
     reductions in value caused by changes in foreign exchange rates, we have
     established balance sheet and intercompany hedging programs. We hedge
     currency risks of some assets and liabilities denominated in foreign
     currencies through the use of one-month foreign currency forward contracts.

     We enter into these one-month hedging contracts two business days before
     the end of each month and settle them at the end of the following month.
     Due to the short period of time between entering into the forward contracts
     and the quarter-end, the fair value of the derivatives as of April 30, 2003
     is insignificant. Gains and losses recognized during the quarter on these
     foreign currency contracts are recorded as other income or expense and
     would generally be offset by corresponding losses or gains on the related
     hedged items, resulting in negligible net exposure to our financial
     statements. We do not currently hedge currency risks related to revenue or
     expenses denominated in foreign currencies.

P.       Subsequent Events

     On April 22, 2003, we entered into an agreement to sell our office campus
     and the adjacent vacant land located in San Jose, California for a total of
     approximately $124 million. After transaction costs, we anticipate netting
     approximately $120 million in cash. At April 30, 2003, the net book value
     of the campus and land was approximately $97 million. The closing date for
     the sale of the vacant land was May 27, 2003 and the expected closing date
     for the sale of the office campus is June 30, 2003.


<PAGE>


     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 ("MD&A") and other parts of this Form 10-Q contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 that involve risks and uncertainties. In some cases, such forward-looking
statements may be identified by the use of words such as "may," "will,"
"expects," "plans," "anticipates," "estimates," "potential," or "continue" or
the negative thereof or other comparable words. Such forward-looking statements
include statements regarding, among other things, our revenue expectations,
future business strategies, market conditions and opportunities, and liquidity.
All forward-looking statements are based on management's current expectations
and information available to us on the date hereof, and we assume no obligation
to update any such forward-looking statements. Our actual results may differ
materially from management's expectations and the results discussed in such
forward-looking statements as a result of a number of factors, which include,
but are not limited to, those set forth below in the section titled "Risk
Factors Affecting Future Results of Operations."

Introduction

Novell, Inc. has been a pioneer in the field of computer networking since our
development and release of NetWare in the mid 1980s. As a result of our 20 years
of experience as a leader in the field of computer networking, we have some of
the best networking engineers in the world. These engineers work with our
consulting force to create world-class IT solutions. We are extraordinarily
proud of our people, the skills that they have and the dedication that they
bring to our company. Leveraging this expertise, we expect to continue our
evolution of our cross platform strategy and become a leading company in
providing cross platform solutions, secure Web services, and identity
management. Our solutions leverage our network expertise and the Web to help to
create a world without information boundaries.

Today we provide Net business solutions across a myriad of platforms designed to
secure and empower the networked world, helping organizations solve complex
business challenges, simplify their systems and processes, and capture new
opportunities. Net business solutions include software applications and
consulting services that were developed using open Internet standards and our
own eDirectoryTM network infrastructure products, support highly distributed
network solutions and capitalize on the growth of the Internet. With both
software and services offerings, we can determine how Net business solutions can
be used by an organization and the requirements necessary to ensure proper
security and access. This can then be turned into a Net solutions approach that
helps our customer deliver the right information, to the right individual, at
the right time, and on the right device.

In addition, our Net business solutions include essential network management,
messaging, and collaboration capabilities integrated through our directory
services. Networks are inherently a varied mix of business process,
infrastructure, computer systems, applications, and other devices. Our software
provides the framework and applications for managing, maintaining, and accessing
the information and services of these networks. During fiscal 2003, we announced
our strategy to support the Linux kernel in addition to the NetWare kernel. This
would give our customers a choice by providing Novell products and services that
run on both Netware and Linux platforms.

Our training, service and support, and consulting groups also support our Net
business solutions by providing worldwide consulting, training, developer, and
distribution channel programs that support our product offerings.

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 highly uncertain
at the time the accounting estimate is made, and if different estimates that
reasonably could have been used, or if changes in the accounting estimate that
are reasonably likely to occur periodically, could materially change the
financial statements. We consider certain accounting policies related to revenue
recognition, impairment of long-lived assets, and valuation of deferred tax
assets to be critical accounting policies due to the estimation processes
involved in each.


<PAGE>


Revenue recognition. Revenue from our Celerant management consulting segment and
about half of the revenue from our IT consulting group within our worldwide
services business is derived from fixed-price, fixed-time contracts, which
require the accurate estimation of the cost, scope, and duration of each
engagement. Revenue and the related costs for these projects are recognized
using the percentage-of-completion method, using time-to-completion to measure
the percent complete, with revisions to estimates reflected in the period in
which changes become known. If we do not accurately estimate the resources
required or the scope of work to be performed, or do not manage our projects
properly within the planned periods of time or satisfy our obligations under the
contracts, future consulting margins may be significantly and negatively
affected or losses on existing contracts may need to be recognized. Any such
resulting reductions in margins or contract losses could be material to our
results of operations.

We record a provision against revenue for estimated sales returns and allowances
on product and service related sales in the same period as the related revenues
are recorded. We also record a provision to operating expense for bad debts
resulting from customers' inability to pay for the products or services they
have received due to such factors as bankruptcy. These estimates are based on
historical sales returns and bad debt data, analysis of credit memo data, and
other known factors. If the historical data we use to calculate these estimates
does not properly reflect future returns or bad debts, revenue or net income
could be overstated or understated.

Long-lived Assets. Our long-lived assets include property, plant and equipment,
long-term investments, goodwill and other intangible assets. At April 30, 2003,
our long-lived assets included $353.2 million of net property, plant and
equipment, $55.6 million of long-term investments, $180.6 million of goodwill,
$30.1 million of identifiable intangible assets, and $103.2 million of current
and non-current net deferred tax assets.

Property, Plant and Equipment. We periodically review our property, plant and
equipment for impairment in accordance with Statement of Financial Accounting
Standards No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of
Long-Lived Assets." 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. If these
estimates or their underlying assumptions change, we may be required to record
impairment charges for these assets. For example, in the fourth quarter of
fiscal 2002, we determined that our facilities in San Jose, California and a
small building in Provo, Utah had become impaired due to changes in the intended
use of the facilities, as well as changes in the local commercial real estate
market. This resulted in a pre-tax, non-cash impairment charge of $80 million.
Depending upon relevant factors, such as a decision to sell a facility, or a
continuation of the decline in real estate market conditions, we could be
required to record additional impairment charges.

Long-term Investments. The fair value of long-term investments is dependant on
the actual financial performance of the companies and venture funds in which we
have invested, the investee's market value, and the volatility inherent in the
external markets for these investments. In assessing potential impairment for
these privately-held equity investments, we consider these factors as well as
the forecasted financial performance of our investees, liquidation preference
value of the stock we hold, and estimated potential for investment recovery
based on all these factors. If any of these factors indicate that the investment
has become other-than-temporarily impaired, we will have to record additional
impairment charges not previously recognized. During the first six months of
fiscal 2003, we recognized $24.5 million of impairment losses related to our
long-term investments. If general market conditions do not improve, or if any of
the companies or venture funds included in long-term investments do not meet
performance goals, our investments could become further impaired on an
other-than-temporarily basis as their values decline, causing us to record
further investment impairment charges.

Goodwill and Intangible Assets. In assessing the recoverability of our goodwill
and other intangible assets, we must make assumptions regarding estimated future
cash flows and other factors to determine the fair value of the respective
assets. This process is subjective and requires judgment at many points
throughout the analysis. If these estimates or their related assumptions change
in the future, we may be required to record impairment charges for these assets
not previously recorded.



<PAGE>


We will be performing our annual impairment review under Statement of Financial
Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible
Assets," in the fourth quarter of fiscal 2003, based on August 1, 2002 balances,
to determine whether there has been any impairment of our goodwill as of that
date. Various assumptions will be made as a part of this analysis that could
affect the resulting outcome. For example, to estimate the fair value of our
reporting units, management will make estimates and judgments about future cash
flows based on our fiscal 2003 forecast and current long-range plans used to
manage the business. These long-range estimates could change in the future
depending on changes in the Company as well as external factors. Future changes
in estimates could possibly result in a non-cash goodwill impairment that could
have a material adverse impact on our financial condition and results of
operations.

In connection with our acquisition of SilverStream, we acquired developed
technology related to Silverstream's exteNd products that could be combined with
our products and services. The value of this intangible asset was determined
using expected future cash flows for the exteNd products as well as the combined
products, and an estimated discount factor to account for risks associated with
the product business and future versions of the exteNd products. We also
periodically review our identifiable intangible assets for impairment in
accordance with SFAS No. 144. In determining whether an intangible asset is
impaired, we must make assumptions regarding estimated future cash flows from
the asset, intended use of the asset and other related factors. If the estimates
or the related assumptions used to determine the value of the intangible assets
change, we may be required to record impairment charges for these assets. For
example, if we were to abandon our products which integrate the exteNd Web-based
technology that we acquired from SilverStream, or if the sales forecasts for
these secure Web services products were to change, we could be required to
record an impairment charge in future periods.

Deferred Tax Assets. The carrying value of our net deferred tax assets assumes
that we will be able to generate sufficient future taxable income in certain tax
jurisdictions based on estimates and assumptions. If these estimates and related
assumptions change in the future, we may be required to record additional
valuation allowances against our deferred tax assets resulting in additional
income tax expense in our consolidated statement of operations. Management
evaluates the realizability of the deferred tax assets quarterly and assesses
the need for additional valuation allowances quarterly. During the six months
ended April 30, 2003, we identified an additional $12.0 million of valuation
allowances related to the increase in our net deferred tax assets, primarily
relating to investment impairments, that we may not be able to recognize in
future periods.

Results of operations

Revenue
<TABLE>
<S>                                  <C>           <C>              <C>       <C>         <C>               <C>

                                     Three months ended April 30,            Six months ended April 30,
                                         2003          2002         Change       2003          2002         Change
                                         ----          ----         ------       ----          ----         ------
(Dollars in thousands)
  New software licenses              $   64,465    $    70,448         (9)%   $  125,503   $   142,086        (12)%
  Maintenance and services              211,502        203,405          4%       410,435       409,626          --%
                                     ----------    -----------                ----------   -----------
Total net revenue                    $  275,967    $   273,853          1%    $  535,938   $   551,712         (3)%
                                     ==========    ===========                ==========   ===========
</TABLE>

New software licenses revenue decreased in the second quarter and first six
months of fiscal 2003 compared to the same periods of fiscal 2002 primarily due
to decreased demand for our solutions in the United States as a result of the
weak economic environment and a continuing decline in the demand for our Netware
products. Maintenance and services revenue, which includes software maintenance,
technical support, education, and consulting services grew in the second quarter
of fiscal 2003 compared to the same period in fiscal 2002. This increase was
largely due to growth in product maintenance revenue, increased Celerant
management consulting revenue, and favorable Euro exchange rates, partially
offset by decreased demand for IT consulting services. Maintenance and services
revenue remained flat during the first six months of fiscal 2003 compared to the
same period in fiscal 2002, largely due to declining IT consulting revenue, and
weak sales in the United States as a result of the poor economy, which offset
growth in product maintenance revenue and favorable foreign exchange rates.


<PAGE>


Beginning November 1, 2002, we reorganized our operations and began reporting
our financial results in four new segments; three are based on geographic area
and the fourth is Celerant management consulting. The geographic segments
include:

o        Americas - includes the United States, Canada, and Latin America
o        EMEA - includes Eastern and Western Europe, Middle East, and Africa
o        Asia Pacific -includes China, Japan, Southeast Asia, Australia, New
         Zealand, and India

Company performance is evaluated by our Chief Executive Officer and Worldwide
Management Committee, our chief decision makers, based on reviewing revenue and
segment operating income (loss) for the geographic segments listed above and the
Celerant management consulting segment. Separate financial information is not
evaluated by business segment in regards to asset allocation.
<TABLE>
<S>                                  <C>           <C>              <C>       <C>         <C>               <C>

                                     Three months ended April 30,             Six months ended April 30,
                                         2003          2002         Change       2003          2002         Change
                                         ----          ----         ------       ----          ----         ------
(Dollars in thousands)
  Americas                           $  129,503    $   147,431        (12)%   $  261,344   $   297,453        (12)%
  EMEA                                   88,673         74,324         19%       170,400       154,109         11%
  Asia Pacific                           20,908         19,919          5%        38,765        38,968         (1)%
  Celerant                               36,883         32,179         15%        65,429        61,182          7%
                                     ----------    -----------                ----------   -----------
Total net revenue                    $  275,967    $   273,853          1%    $  535,938   $   551,712         (3)%
                                     ==========    ===========                ==========   ===========
</TABLE>

Revenue in the Americas decreased during the second quarter and first six months
of fiscal 2003 compared to the same periods of fiscal 2002 due to decreased
software and consulting revenue reflecting poor United States market conditions,
declining Netware revenue and lower IT consulting demand and billing rates. In
addition, revenue in the Americas was negatively affected during the first six
months of fiscal 2003 by a temporary distraction to our selling efforts in the
United States while we transferred certain of our customer accounts from our
sales force to our channel partners. Revenue increased in EMEA during the second
quarter and first six months of fiscal 2003 due to favorable foreign exchange
rates and recovering European market conditions, which resulted in greater
demand for our products and services. The increase in revenue in Asia Pacific
during the second quarter of fiscal 2003 was primarily due to strong sales in
Australia. For the first six months of fiscal 2003, Asia Pacific sales decreased
slightly as the weak Japanese economy offset increased sales in Australia.
Celerant worldwide revenue increased in the second quarter and first six months
of fiscal 2003 due primarily to improved revenue growth in Europe resulting in
greater demand for Celerant's consulting services, revenue recognized on a
number of large completed contracts, and favorable foreign exchange rates.
Revenue outside the U.S. represented 54% of total revenue in the second quarter
of fiscal 2003 compared to 48% in the first quarter of fiscal 2002. Revenue
outside the U.S. for the first six months of fiscal 2003 was 53% compared to 47%
in the first six months of fiscal 2002.

In addition to reviewing geographic and Celerant management consulting segment
results, our chief decision makers review net revenue by solution category:
These solutions categories are:

o    Identity management and secure web services - solutions that help customers
     with their identity management and security issues. Products include
     Secure-Login/Single Sign-On, DirXML, iChain, exteNd, and BorderManager.
     This category is branded as Nsure and exteNd.
o    Cross platform services - solutions that offer an effective and open
     approach to networking and collaboration services, including file, print,
     messaging, scheduling, workspace, etc. while using a cross-platform
     approach. Products include NetWare, GroupWise, ZEN, and Novell iFolder.
     This category is branded as Nterprise.
o    Worldwide services - comprehensive worldwide consulting and support
     services that apply Net business solutions to our customers' business
     situations, providing the business knowledge and technical expertise to
     help our customers implement our identity management, secure web services,
     and cross platform services. This category is branded as Ngage.
o    Celerant management consulting - provides operational strategy and
     implementation consulting services, which result in quantifiable value, to
     a wide range of customers across various sectors, worldwide.



<PAGE>

<TABLE>
<S>                                  <C>           <C>              <C>       <C>         <C>               <C>

                                     Three months ended April, 30            Six months ended April 30,
                                         2003          2002         Change       2003          2002         Change
                                         ----          ----         ------       ----          ----         ------
(Dollars in thousands)
  Identity management and secure
    web services                     $   22,669    $    16,630         36%    $   45,814   $    33,478         37%
  Cross platform services               142,014        147,052         (3)%      277,866       297,057         (7)%
  Worldwide services                     74,401         77,992         (5)%      146,829       159,994         (8)%
  Celerant management consulting
                                         36,883         32,179         15%        65,429        61,183          7%
                                     ----------    -----------                ----------   -----------
Total net revenue                    $  275,967    $   273,853         (1)%   $  535,938   $   551,712         (3)%
                                     ==========    ===========                ==========   ===========
</TABLE>

Identity management and secure web services revenue increased in the second
quarter and first six months of fiscal 2003 compared to the same periods of
fiscal 2002 due to the addition of the SilverStream secure web services products
as well as increased demand for our Secure Login/Single SignOn and DirXML
products as the secure identity market continues to grow. Cross platform
services declined in the second quarter and first six months of fiscal 2003
compared to the same periods in fiscal 2002 primarily due to the decline in
demand for our NetWare products, offset slightly by increased demand for our
Groupwise and ZEN products. Worldwide services revenue declined in the second
quarter and first six months of fiscal 2003 compared to the same periods in
fiscal 2002 primarily due to the weakened demand for our IT consulting services
in the U.S. and lower billing rates as a result of the weak economic
environment.

At April 30, 2003, we had $267.5 million of deferred revenue, representing
revenue that is expected to be recognized in future periods. The majority of
this deferred revenue relates to maintenance contracts, which are recognized
ratably over the maintenance period. We have either received payment or recorded
a receivable for the deferred revenue, and have determined collectability to be
reasonably certain. Direct costs incurred to fulfill these maintenance
obligations are relatively small and are recognized as work is performed.

Forward-looking revenue trends
Due to the uncertainty in the U.S. and global economies, heightened political
conflicts throughout the world, and continued volatility in the information
technology marketplace, we do not believe the information technology or
consulting markets will recover, in the U.S. or globally, within the next
several quarters. We anticipate some continued declines in our NetWare revenue.
However, we have announced that the next version of NetWare will include network
services running on both the NetWare kernel and the Linux kernel. This
announcement may help to slow the declines because our customers now have a
clear vision of our migration path. We believe this will help us gain new
customers and increase revenue in future periods. We also believe that the
identity management and secure web services markets will continue to grow as it
matures, which may improve revenue from our offerings in these areas. As
previously disclosed, we have decided not to provide specific revenue forecast
information for the remainder of fiscal 2003 or future periods.

Gross profit
<TABLE>
<S>                                  <C>           <C>              <C>       <C>         <C>               <C>

                                    Three months ended April, 30            Six months ended April 30,
                                         2003          2002         Change       2003          2002         Change
                                         ----          ----         ------       ----          ----         ------
(Dollars thousands)
Gross profit                         $  167,196    $  161,025           4%    $  329,603   $  321,315           3%
Percentage of revenue                       61%           59%                        62%          58%
</TABLE>

Gross profit in total and as a percentage of sales increased in the second
quarter and first six months of fiscal 2003 compared to the same periods of
fiscal 2002 primarily due to improved consulting margins resulting from
headcount reductions in fiscal 2002 and improved performance in our Celerant
management consulting subsidiary. We are continuing to address ways to improve
our gross margin percentage in future periods, such as improving utilization,
increasing IT consulting billing rates, and reducing expenses. However, due to
the uncertainty in the U.S. and global economies, heightened political conflicts
throughout the world, and continued volatility in the information technology
marketplace, we do not believe we will see significant improvements in our gross
margin percentages in the next several quarters. As previously disclosed, we
have decided not to provide specific forecasted earnings information for the
remainder of fiscal 2003 or future periods.

Operating expenses
<TABLE>
<S>                                  <C>           <C>              <C>       <C>         <C>               <C>

                                    Three months ended April, 30            Six months ended April 30,
                                         2003          2002         Change       2003          2002         Change
                                         ----          ----         ------       ----          ----         ------
(Dollars in thousands)
Sales and marketing                  $  101,737    $   82,145          24%    $  200,042   $  167,621          19%
  Percentage of revenue                      37%           30%                        37%          30%
Product development                  $   48,354    $   42,385          14%    $   91,276   $   85,398           7%
  Percentage of revenue                      18%           16%                        17%          16%
General and administrative           $   30,939    $   31,055           --%   $   58,284   $   61,380          (5)%
  Percentage of revenue                      11%           11%                        11%          11%
Restructuring                        $    8,675    $   19,100         (55)%   $    8,675   $   19,100         (55)%
  Percentage of revenue                       3%            7%                         2%           4%
Total operating expenses             $  189,705    $  174,685           9%    $  358,277   $  333,499           7%
  Percentage of revenue                      69%           64%                        67%          60%
</TABLE>

Operating expenses, in total and as a percentage of revenue, increased in the
second quarter and first six months of fiscal 2003 compared to the same periods
in fiscal 2002 primarily due to additional operating expenses related to the
SilverStream acquisition in the third quarter of fiscal 2002, increased sales
and marketing headcount, and increased marketing costs for our new advertising
campaign that was rolled out during the first quarter. These expenses were
offset somewhat by lower salary expenses as a result of lower bonus accruals and
lower headcount due to the restructuring and other headcount reductions in
fiscal 2002.

Sales and marketing expense, in total and as a percentage of revenue, increased
in the second quarter and first six months of fiscal 2003 compared to the same
periods in fiscal 2002 primarily as a result of increased marketing costs
associated with our new advertising campaign and increased sales headcount. We
have spent approximately $10 million per quarter during fiscal 2003 on our new
advertising campaign and anticipate spending approximately the same amount
during the remainder of fiscal 2003 in an effort to attract new customers and
increase revenue. Sales and marketing headcount increased by 164 employees in
the second quarter of fiscal 2003 compared to the second quarter of fiscal 2002,
which increase includes the addition of 119 SilverStream employees. Sales and
marketing expenses can fluctuate as a percentage of revenue in any given period
due to product promotions, advertising, and other discretionary expenses.

Product development expenses, in total and as a percentage of revenue, increased
in the second quarter and first six months of fiscal 2003 compared to the same
periods of fiscal 2002 due primarily to the addition of SilverStream in the
third quarter of fiscal 2002. Product development headcount increased by 240
employees compared to the second quarter of fiscal 2002, which increase includes
the addition of 174 SilverStream employees and additional employees to support
our Linux initiatives. The increase in cost for the additional headcount was
offset slightly by savings related to lower bonus accruals in fiscal 2003 and a
favorable settlement received in the first quarter of fiscal 2003 related to
development obligations dating back to agreements signed in the 1990s. We
anticipate that our product development expenses will remain relatively flat or
decrease slightly in remaining quarters of fiscal 2003 compared to the second
quarter fiscal 2003 amounts as we continue our cost cutting efforts.

General and administrative expenses in the second quarter of fiscal 2003
remained flat compared to the second quarter of fiscal 2002 primarily due to
additional facility-related merger expenses we recorded due to the declining
real estate market, which offset lower operating costs related to decreased
headcount and integration costs. During the first six months of fiscal 2003,
general and administrative costs decreased primarily due to a full year's impact
of the fiscal 2002 restructuring, lower integration costs related to the
Cambridge and SilverStream acquisitions, and lower bad debt charges. General and
administrative headcount decreased by eight employees at the end of the second
quarter of fiscal 2003 compared to the same period of fiscal 2002. As a
percentage of revenue, general and administrative costs remained relatively flat
in the second quarter and first six months of fiscal 2003 compared to the same
periods in fiscal 2002 partially as a result of lower revenue in fiscal 2003. We
anticipate that our general and administrative expenses will remain relatively
flat or decrease slightly during the remainder of fiscal 2003 as we continue our
cost cutting efforts.

Restructuring

During the second quarter of fiscal 2003, we determined that the amount we had
originally accrued for facility-related costs in previous restructurings was too
low and accrued an additional $8.7 million. The original liability was based on
estimated sublease rates and timing of signing subleases, which have been
affected by the decline in the real estate market. This additional amount, which
pertains to three separate restructuring events, is included in the following
tables.

Second quarter of fiscal 2002
During the second quarter of fiscal 2002, we recorded a pre-tax restructuring
charge of approximately $20 million resulting from our continued migration
towards becoming a solutions provider and as a result of changing business
needs. Specific actions taken included reducing our workforce worldwide by
approximately 50 employees (less than 1%), consolidating facilities, closing
offices in unprofitable locations, and disposing of excess property and
equipment. During the second quarter of fiscal 2003, we determined that the
amount we had originally accrued for facility-related costs was too low and
accrued an additional $7.7 million. The original liability was based on
estimated sublease rates and timing of signing subleases, which have been
affected by the decline in the real estate market.

The following table summarizes the activity during fiscal 2003 related to the
second quarter of fiscal 2002 restructuring.
<TABLE>
<S>                                                 <C>         <C>           <C>        <C>           <C>

                                                                Balance at                            Balance at
                                                    Original    October 31,      Cash                  April 30,
                                                     Charge        2002        Payments  Adjustments     2003
                                                     ------     ---------    ----------  -----------   ----------
In thousands
Severance and benefits                              $ 14,748      $  4,258    $ (2,551)    $     --      $  1,707
Excess facilities and property and equipment           5,146         4,221        (963)       7,735        10,993
Other restructuring-related costs                        492           300          --           --           300
                                                    --------      --------    --------     --------      --------
                                                    $ 20,386      $  8,779    $ (3,514)    $  7,735      $ 13,000
                                                    ========      ========    =========    ========      ========
</TABLE>

As of April 30, 2003, the remaining balance of the second quarter of fiscal 2002
restructuring charge included accrued liabilities related to severance and
benefits, which will be paid out over the remaining severance obligation period
not to exceed three years, and redundant facilities and other fixed contracts,
which will be paid over the respective remaining contract terms.

Fourth quarter of fiscal 2001
During the fourth quarter of fiscal 2001, we recorded $51 million of pre-tax
restructuring charges resulting from the restructuring of our operations in
light of changes in general market conditions, changing customer demands, and
the evolution of our business strategy. This business strategy focuses on Net
business solutions designed to secure and power the networked world across
leading operating systems. The execution of this strategy included refining our
consulting initiatives, refocusing research and development efforts, defining
sales and marketing efforts to be more customer and solutions oriented, and
adjusting our overall cost structure given current revenue levels and our
direction.

Specific actions included reducing our workforce worldwide by approximately
1,100 employees (approximately 16%), consolidating excess facilities and
disposing of excess property and equipment, terminating a management consulting
contract that no longer fit with our strategic focus, and abandoning and writing
off technologies that no longer fit within our new strategy. We also realigned
our remaining resources to better manage our business. During the second quarter
of fiscal 2003, we determined that the amount we had originally accrued for
facility-related costs was too low and accrued an additional $0.3 million. The
original liability was based on estimated sublease rates and timing of signing
subleases, which have been affected by the decline in the real estate market.
The following table summarizes the costs and activities during fiscal 2003
related to the fourth quarter of 2001 restructuring.
<TABLE>
<S>                                                 <C>         <C>           <C>        <C>           <C>

                                                                Balance at                             Balance at
                                                   Original     October 31,     Cash                   April 30,
                                                    Charge         2002       Payments   Adjustments       2003
                                                    ------     -----------  ----------  ------------   --------
In thousands
Severance and benefits                              $ 32,793     $  1,117   $    (801)    $     --      $    316
Excess facilities and property and equipment          10,896        4,651      (1,656)         262         3,257
Other restructuring-related costs                      6,973          624        (241)          --           383
                                                    --------     --------   ----------    --------       -------
                                                    $ 50,662     $  6,392   $  (2,698)    $    262      $  3,956
                                                    ========     ========   ==========    ========      ========
</TABLE>

As of April 30, 2003, the remaining balance of the fourth quarter fiscal 2001
restructuring charge included accrued liabilities largely related to severance
and benefits, which will be paid out during fiscal 2003, and excess facilities
costs, which will be paid over the respective remaining lease terms.

Third quarter of fiscal 2001
During the third quarter of fiscal 2001, we recorded a pre-tax restructuring
charge of approximately $30 million as a result of our July 2001 acquisition of
Cambridge Technology Partners and changes in our business to move towards a Net
business solutions strategy. Specific actions included reducing our workforce
worldwide by approximately 280 employees across all functional areas
(approximately 5% before the addition of Cambridge), consolidating facilities
and disposing of excess property and equipment, abandoning and writing off
technologies that no longer fit within our new strategy, and discontinuing
unprofitable product lines. During the second quarter of fiscal 2003, we
determined that the amount we had originally accrued for facility-related costs
was too low and accrued an additional $0.7 million. The original liability was
based on estimated sublease rates and timing of signing subleases, which have
been affected by the decline in the real estate market.

The following table summarizes the activity during fiscal 2003 related to the
third quarter of fiscal 2001 restructuring costs.
<TABLE>
<S>                                                 <C>         <C>           <C>        <C>           <C>

                                                                Balance at                             Balance at
                                                   Original     October 31,     Cash                    April 30,
                                                    Charge         2002       Payments  Adjustments       2003
                                                    ------     -----------  ----------  ------------   ---------
In thousands
Severance and benefits                              $ 15,978     $     --    $     --     $     --     $      --
Excess facilities and property and equipment          10,740        3,889      (1,068)         678         3,499
Other restructuring-related costs                      3,675          137        (137)          --            --
                                                    --------     --------    ---------    --------     ---------
                                                    $ 30,393     $  4,026    $ (1,205)    $    678     $   3,499
                                                    ========     ========    =========    ========     =========
</TABLE>

As of April 30, 2003, the remaining balance of the third quarter of fiscal 2001
restructuring charge included accrued liabilities related to excess facilities
costs, which will be paid over the respective remaining lease terms.

As a result of the fiscal 2002 and the two fiscal 2001 restructurings, we
reduced our expenses by approximately $50 million on a quarterly basis, before
any increased strategic expenditures and the impact of the SilverStream
acquisition. We could incur additional restructuring charges in the future as we
continue to develop our Net solutions strategy and react to market conditions by
reducing costs.



<PAGE>


Employees
<TABLE>
<S>                                                              <C>          <C>       <C>

                                                                 April 30,    April 30,
                                                                   2003         2002     Change
(Dollars in thousands)
Employees at end of quarter (full time equivalents)               6,221         6,041          3%
Revenue per average employee for three months ended              $  177       $   178
</TABLE>

Headcount in the second quarter of fiscal 2003 increased compared to the same
period in fiscal 2002 due primarily to the acquisition of SilverStream in July
2002. These headcount additions were partially offset by restructuring related
headcount reductions, which occurred during fiscal 2002. We continue to monitor
headcount to ensure our resources are aligned with expected business levels and
our business strategy.

Other income (expense), net
<TABLE>
<S>                                  <C>           <C>             <C>        <C>          <C>             <C>

                                     Three months ended April 30,             Six months ended April 30,
                                         2003          2002         Change       2003          2002         Change
                                         ----          ----         ------       ----          ----         ------
(Dollars in thousands)
Other income (expense), net          $  (12,475)   $  (18,382)         32%    $  (18,664)  $    (7,928)      (135)%
Percentage of revenue                        (5)%          (7)%                       (4)%          (1)%
</TABLE>

The primary component of other income (expense), net, was net investment income
(loss), which was a loss of $10.5 million in the second quarter of fiscal 2003
compared to a loss of $17.2 million in the second quarter of fiscal 2002. In the
second quarter of fiscal 2003, the net investment loss included impairment
losses on long-term investments totaling $13.7 million, realized net gains on
the sale of short-term equity securities of $0.5 million, and $2.7 million in
interest income. During the second quarter of fiscal 2002, investment income of
$7.2 million was offset by investment impairment losses of $24.4 million. During
the first six months of fiscal 2003, the net investment loss included impairment
losses on long-term investments totaling $24.5 million, realized net gains on
the sale of short-term equity securities of $0.8 million, and $7.0 million in
interest income. During the first six months of fiscal 2002, investment income
of $15.3 million was offset by investment impairment losses of $29.8 million.
Excluding investment income (loss), other expense, net, decreased $0.8 million
in the second quarter of fiscal 2003 compared to the second quarter of fiscal
2002. During the first six months of fiscal 2003, other expense, net, decreased
$7.7 million compared to the same period in fiscal 2002 due primarily to a $9
million gain on the sale of a building in the first quarter of fiscal 2002.

Income tax expense (benefit)
<TABLE>
<S>                                  <C>           <C>             <C>        <C>          <C>             <C>
                                     Three months ended April 30,            Six months ended April 30,
                                         2003          2002         Change       2003          2002         Change
                                         ----          ----         ------       ----          ----         ------
(Dollars in thousands)
Income tax expense (benefit)         $  (6,372)    $  (2,293)           178%  $  (6,838)   $    1,286          (632)%
Percentage of revenue                       (2)%          (1)%                        (1)%         --%
Effective tax (benefit) rate               (18)%          (7)%                      (14)%          6%
</TABLE>

Our actual effective tax benefit rate for the second quarter of fiscal 2003 was
18% compared to the effective tax benefit rate of 7% for the same period in
2002. Our actual effective tax benefit rate for the first six months of fiscal
2003 was 14% compared to the effective tax rate of 6% for the same period in
2002. The rate differs because of differences in the amount of non-deductible
investment impairments taken in each period.



<PAGE>


Net loss and net loss per share
<TABLE>
<S>                                  <C>           <C>             <C>        <C>          <C>             <C>
                                    Three months ended April 30,            Six months ended April 30,
(Dollars in thousands,                   2003          2002         Change       2003          2002         Change
                                         ----          ----         ------       ----          ----         ------
  except per share)
Net loss                             $  (28,612)   $ (173,451)           84%  $  (40,500)  $ (165,100)           76%
Percentage of revenue                       (10)%         (63)%                       (8)%        (30)%
Net loss per share:
  Basic and diluted                  $    (0.08)   $    (0.48)           84%  $    (0.11)  $    (0.46)           76%
</TABLE>

We incurred a net loss per share of $0.08 in the second quarter of fiscal 2003
compared to net loss per share of $0.48 in the same period of fiscal 2002. The
second quarter and year-to-date fiscal 2002 net loss and net loss per share
includes a $143.7 million cumulative effect of an accounting change, which
resulted from our adoption of SFAS No. 142. Through our initial SFAS No. 142
analysis, we determined that a portion of our goodwill related to the
acquisition of Cambridge Technology Partners in July 2001 had become impaired.
Before the cumulative effect of the accounting change, net loss per share was
$0.08 for the second quarter and $0.06 for the first six months of fiscal 2002.
The net loss per share during the second quarter of fiscal 2003 was primarily
due to a $13.7 million (pre-tax) charge for long-term investment impairments,
higher sales and marketing expenses to roll out our new advertising campaign,
and facility-related restructuring and merger expenses, as discussed previously.
In addition, the net loss per share for the first six months of fiscal 2003
included $10.8 million of additional investment impairment expenses incurred in
the first quarter of fiscal 2003. At this time, we have decided not to provide
specific forecasted earnings information for the remainder of fiscal 2003.

Liquidity and capital resources

                                      April 30,     October 31,
                                          2003         2002      Change
(Dollars in thousands)
Cash and short-term investments       $  626,397    $ 635,858        1%
Percentage of total assets                    39%          38%

Cash and short-term investments totaled $626.4 million at April 30, 2003
compared to $635.9 million at October 31, 2002. The decrease in cash can be
attributed to cash used for operations of $3.5 million, expenditures for fixed
assets of $21.8 million, cash paid to acquire Volera minority interest shares
from Accenture of $1.1 million, and net cash paid for long-term investments of
$7.8 million. These decreases were offset somewhat by cash proceeds from stock
issuances under employee stock option or equity plans of $7.0 million, cash
proceeds from the sale of a portion of our vacant land in San Jose, California
of $0.8 million, cash from our line of credit of $6.9 million, and the impact of
foreign exchange fluctuations.

Our short-term investment portfolio is diversified among security types,
industry groups, and individual issuers. To achieve potentially higher returns,
a portion of our investment portfolio is invested in equity securities and
mutual funds, which incur market risk. We mark our short-term investments to
market each month. Our short-term investment portfolio includes gross unrealized
gains of $3.3 million and gross unrealized losses of $0.4 million as of April
30, 2003. We monitor our investments and record losses when a decline in the
investment's market value is determined to be other than temporary.

We have also invested excess cash in long-term investments through the Novell
Venture account, CTC I, and direct investments in equity securities of
privately-held companies. Investments made through the Novell Venture account
and CTC I generally are in privately-held companies, including small
capitalization stocks in the high technology industry sector, and
expansion-stage privately-held companies. Within the Novell Venture account
there are also investments in venture capital funds that are managed largely by
external venture capitalists. CTC I is managed internally. The value of the
investments made through the Novell Venture account and CTC I is dependent on
the performance, successful acquisition, and/or initial public offering of the
investees. As of April 30, 2003, we had commitments to contribute an additional
$64.2 million to the externally managed venture capital funds over the next
three to four years, as requested by the fund managers, and commitments to the
CTC I fund to contribute up to an additional $300,000 over the next three to
four years. We intend to fund these investments with cash from operations and
cash income from short-term investments, and sales of short-term investments on
hand.

As of April 30, 2003, we had cash and other short-term investments of $433.8
million in accounts outside the U.S. Repatriation of any portion of this amount
would be subject to U.S. federal income taxes. We have provided for the tax
liability on these amounts for financial statement purposes except for $15.0
million of earnings, which is permanently invested outside the U.S.
Repatriation, however, could result in a loss of certain tax attributes of up to
$38.5 million and result in additional U.S. federal income tax payments of such
amounts in future years.

During the first quarter of fiscal 2002, we sold our subsidiary in the Czech
Republic. As a part of this transaction, we provided a guarantee to the landlord
of our building there whereby we agreed to pay any and all monies due under the
lease, including legal fees if the new lessee defaults on the lease. During the
first six months of fiscal 2003, we paid approximately $0.1 million against this
guarantee and have accrued a liability for an additional $0.4 million that we
could be required to pay, excluding legal fees, if the new lessee continues in
default.

As an element of our standard contract terms, we include an indemnification
clause in our agreements with our customers that indemnifies the licensee
against certain liability and damages arising from intellectual property
infringement claims arising from their use or distribution of our software.
These terms are common in the high technology industry. We do not record a
liability for potential litigation claims related to indemnification agreements
with our customers. We do not believe the likelihood of a material obligation is
probable.

On April 22, 2003, we entered into an agreement to sell our office campus and
the adjacent vacant land located in San Jose, California for a total of
approximately $124 million. After transaction costs, we anticipate netting
approximately $120 million in cash. At April 30, 2003, the net book value of the
campus and land was approximately $97 million. The closing date for the sale of
the vacant land was May 27, 2003 and the expected closing date for the sale of
the office campus is June 30, 2003.

Our principal source of liquidity continues to be from operations, on-hand cash,
and income from short-term investments. At April 30, 2003, our principal unused
sources of liquidity consisted of cash on hand in the amount of $374.5 million,
short-term investments in the amount of $251.9 million, and available borrowing
capacity of under our lines of credit. Our liquidity needs are principally for
financing of accounts receivable, fixed assets, strategic investments, product
development, and flexibility in a dynamic and competitive operating environment.

During the first six months of fiscal 2003, we used $3.5 million of cash to fund
operations. We plan to reduce our cost structure over the remainder of fiscal
2003 to help us return to positive net cash flows from operating and investing
activities for fiscal 2003. We anticipate being able to fund our current
operations, any future acquisitions, any further integration, restructuring or
any merger-related costs, and planned capital expenditures for the foreseeable
future with existing cash on hand and short-term investments together with cash
from the planned sale of our facilities in San Jose, California, cash generated
from operations, and investment income. We believe that additional borrowings
under our credit facilities or offerings of equity or debt securities are
possible if the need arises, although such offerings may not be available to us
on acceptable terms. Investments will continue in product development and in new
and existing areas of technology. Cash may also be used to acquire technology
through purchases and strategic acquisitions. Capital expenditures in fiscal
2003 are anticipated to be approximately $50 million, but could be reduced if
our growth is less than presently anticipated.

During the fourth quarter of fiscal 2001, the Board of Directors extended our
stock repurchase program through June 30, 2003 and authorized the use of up to
$500 million for the repurchase of additional outstanding shares of our common
stock. As of April 30, 2003, $89 million of the authorized amount had been spent
to repurchase 14 million shares under this plan at an average price of $6.23 per
share. No shares were repurchased during the first half of fiscal 2003.



<PAGE>


Factors Affecting Future Results of Operations

Our future results of operations involve a number of risks and uncertainties
that could cause actual results to differ materially from expected and historic
results. A number of these risks and uncertainties are discussed in the
following paragraphs.

The Current Economic Climate and Outlook in the Technology  Consulting and
Information  Technology Services Sector Is Weak, Causing Our Business to Suffer

The weakened global economic climate, particularly in the technology sector, has
had an adverse effect on our stock price and ability to sell products and
services. Future economic projections for this sector do not anticipate a quick
recovery. A continuation of the weakened global economy could have further
negative effects on our stock price and ability to sell products and services in
the future.

Our Financial and Operating Results May Vary, Negatively Affecting our Ability
to Detect Trends

We often experience a higher volume of revenue at the end of each quarter and
during our fourth quarter. Because of this, fixed costs that are out of line
with revenue levels may not be detected until late in any given quarter and
results of operations could be adversely affected.

Operating results have been, and may also continue to be, affected by other
factors including, but not limited to:

    o    timing of orders from customers and shipments to customers;

    o    product mix, including a shift from higher margin to lower margin
         products or services;

    o    delays or problems with our fulfillment agents;

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

    o    responding to revenue declines experienced by our distribution
         partners;

    o    deriving anticipated benefits from our restructurings and our corporate
         strategies; and

    o    delivering solutions as expected by our customers and systems
         integration partners.

We May Not Be Able to Successfully Compete in a Challenging Market for Computer
Software and Consulting Services

The market for networking applications and solutions as well as IT consulting is
highly competitive and subject to rapid technological change. We expect
competition to continue to increase both from existing competitors and new
market entrants. We believe that competitive factors common to all of our
solution categories include: the breadth of our offerings; the pricing of our
products and services; and the timing and market acceptance of new solutions
developed by us and our competitors.

Software licenses and maintenance

In addition to the factors listed above, key competitive factors related to our
software licenses and maintenance include brand and product awareness; the
performance, reliability and security of our products; the ability to preserve
our legacy customer base; the completeness of our suite of product and solutions
offerings; our ability to establish and maintain key strategic relationships
with distributors, resellers and other partners; and the pricing strategies of
our competitors. Our key competitors related to software licenses and
maintenance revenue include Microsoft, IBM, BEA Systems, Sun Microsystems,
Altiris, Netegrity, Computer Associates and Critical Path.

Worldwide IT Services

The key competitive factors faced by us related to IT consulting are attracting
and retaining the highest quality consultants and the depth and breadth of our
skills and expertise. The market for IT consulting services is highly
competitive due to the existence of several large IT consulting firms
specializing in the information systems area such as IBM, Accenture, EDS and
Microsoft. Many of these companies have greater financial, technical and
marketing resources and greater name recognition in the IT consulting area,
which could inhibit our ability to grow our IT consulting business.
Additionally, the worldwide marketplace for IT consulting services is highly
fragmented. We often encounter different groups of competitors in different
regions of the world. Many of these local competitors may have niche
consultancies carved out in a local market against whom it may be difficult to
win business.

Celerant Management Consulting

Because of the extremely specialized nature of the implementation consulting
services provided by Celerant, the main competitive factor faced by Celerant is
not so much presented by rival consulting firms, but rather lies with
prospective clients themselves. The primary decision often faced by Celerant's
prospective clients is a weighing of the costs of a Celerant engagement against
the measurable results and financial benefits to be realized during and after
the engagement. Therefore, a key factor lies in convincing clients of Celerant's
ability to deliver those results and benefits. An additional consideration
potential clients factor into their decisions is a judgment as to whether they
can successfully perform the work that they require themselves, or whether they
need the assistance of a third party such as Celerant.

General

We do not have the product breadth and market power of Microsoft. Microsoft's
ability to ship networking products with features and functionality that compete
with ours, together with its greater ability to offer incentives to customers to
purchase certain products in order to obtain favorable sales terms or necessary
compatibility or information with respect to other products, may significantly
inhibit our ability to grow our business. Microsoft has significant financial
resources, which could allow it to aggressively price its products and services
for long periods of time to the potential detriment of competitors. We believe,
and the courts have agreed, that Microsoft exploits its desktop operating
monopoly in anticompetitive ways designed to maintain that monopoly and, in our
view, to extend its market power to quash competitive alternatives to Microsoft
products. For example, in the past, Microsoft has employed tactics that limit or
block effective and efficient interoperability with our products. We will
ensure, to the best of our ability, that our products will interoperate with
those of Microsoft as they enhance new operating systems and applications.

We May Not be Able To Attract and Retain  Qualified  Employees  Because of the
Intense  Competition  for  Qualified  Employees  in the Computer and Consulting
Industries

Our ability to maintain our competitive technological position will depend, in
large part, on our ability to attract and retain highly qualified development,
consulting, and managerial employees. Even in light of the current economic
downturn, competition for employees of the highest caliber is intense in the
software and consulting industries. The loss of a significant group of key
employees would adversely affect our performance. The failure to successfully
attract, hire, retain and promote qualified employees as we need them could have
a material adverse effect on our business.

If We Are Not Successful in Developing a Strong  Business with our Nsure and
exteNd  Products and Services,  Our Long-Term  Growth Will Be Negatively
Impacted

The success of our net directory services products that comprise our Nsure and
exteNd secure web services and identity management solutions sets is important
to our strategy. The acquisition of SilverStream helped further our development
of secure Web services products and enhanced our identity management product
offerings. Our ability to achieve success with our Nsure and exteNd products and
services is dependent on a number of factors including, but not limited to, the
following: growth of the Web-based applications industry; acceptance of the
Nsure and exteNd solution sets by clients; further development of key Nsure and
exteNd product solutions and upgrades; and acceptance of those products by large
industry partners and major accounts. If we are unable to grow the Nsure and
exteNd products and services to become a major component of our business, our
long-term growth will be negatively impacted.

If We Are Unable to Unify Our Diverse Cultures, the Benefits of Our Solutions
Strategy May Not Be Fully Realized

We have a talented, energetic, and exciting group of employees. As a result of
our recent acquisitions, a number of these employees come from diverse
geographic and corporate cultural backgrounds. We are in the process of a
cultural initiative to bring our whole company together towards a new common
culture that revolves around our solutions offerings. If we are not successful
in forging a new, vibrant culture with unified goals and a common vision that is
solutions-based, employee energies may be diverted or diluted and we may not
achieve the full benefits of our solutions strategy.

Our Existing Product Revenue May Deteriorate More Rapidly Than Any Increase in
Sales of Our New Products

We have several existing products, which we have been selling and upgrading for
many years. Sales of these existing products, particularly NetWare, are
declining at a faster rate than we are able to increase sales of new products or
technologies. If we are unsuccessful in increasing sales of new products or
technologies, particularly in our exteNd solution set and Net Directory Services
product line, our long-term growth will be negatively impacted.

If We Do Not Generate New Customers, Our Ability to Grow Our Business Will Be
Negatively Impacted

A significant percentage of our revenue is generated from existing customers. In
order to achieve our growth objectives, we must accelerate the rate at which we
generate new business. We have initiated several new sales and marketing
initiatives in order to accomplish this goal. If those initiatives are not
successful, our ability to cultivate new customers may be adversely affected.

We Have Experienced Delays in the Introduction and Acceptance of New Products
Due to Various Factors

As is common in the computer software industry, we have in the past 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, and the need to "debug" products prior to
extensive distribution. Significant delays in developing, completing, or
shipping new or enhanced products would adversely affect our business.

Moreover, we may experience delays in market acceptance of new releases of our
products as we engage in marketing and education of the user base regarding the
advantages of and system requirements for new products and as customers evaluate
the advantages and disadvantages of upgrading. We have encountered these issues
on each major new release of our products, and expect that we will encounter
such issues in the future. Our ability to achieve desired levels of revenue
growth depends at least in part on the successful completion, introduction and
sale of new versions of our products. There can be no assurance that we will be
able to respond effectively to technological changes or new product
announcements by others, or that our research and development efforts will be
successful. Should we experience material delays or revenue shortfalls with
respect to new product releases, our revenue and net income could be adversely
affected.



<PAGE>


If Third Parties Claim that We Infringed Upon 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 Internet and
software industries. We have in the past received letters or been the subject of
claims suggesting that we are infringing upon the intellectual rights of others.
For example, in May 2002 a suit was filed by France Telecom SA and U.S. Philips
Corporation against us alleging that Novell's NetWare client software infringes
a patent allegedly co-owned by them and seeking unspecified damages and an
injunction. In addition, we have faced and expect to continue to face from time
to time disputes over rights and obligations concerning intellectual property.
We expect third-party infringement claims involving Internet technologies and
software products and services to increase because it has become more common for
such agencies to be able to find attorneys who are willing to represent them or
their clients on a contingency basis. While we have no reason to think we would
not have strong defenses to such claims, the cost and time of defending
ourselves can be significant. In addition, we have agreed, and may agree in the
future, to indemnify customers against claims that our products infringe upon
the intellectual property rights of others. We could incur substantial costs in
defending ourselves and our customers against infringement claims. 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.

We May Not Be Able to Protect Our Confidential Information, Which May Adversely
Affect Our Business

We generally enter into contractual relationships with our employees that
protect our confidential information. In the event that our trade secrets or
other proprietary information are misappropriated, our business could be
seriously harmed. 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.

We Face Increased Risks in Conducting a Global Business, Which May Damage
Business Results

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

    o    costs and difficulties in staffing and managing international
         operations;

    o    unexpected changes in regulatory requirements;

    o    tariffs and other trade barriers;

    o    difficulties in enforcing contractual and intellectual property rights;

    o    longer payment cycles;

    o    local political and economic conditions;

    o    potentially  adverse tax consequences,  including  restrictions on
         repatriating  earnings and the threat of "double taxation"; and

    o    fluctuations in currency exchange rates, which can affect demand and
         increase Novell's costs.



<PAGE>


Some of Our Short-term,  Long-term,  and Venture Capital Fund Investments Have
Become Impaired and Additional  Investments Could Become Impaired

Our investment portfolio includes short-term investments in publicly traded
equity securities, long-term equity investments in privately-held companies,
small capitalization stocks in the high-technology industry sector, and funds
managed by venture capitalists. Many of these investments might become
other-than-temporarily impaired. During the first six months of fiscal 2003, we
recorded an impairment charge of $24.5 million related to some of the
investments in our portfolio in cases where their market value had experienced
an other-than-temporary decline. As of April 30, 2003, we had net unrealized
gains, after taxes, on investments totaling approximately $2.5 million; however,
there can be no assurances that these gains will be realized and that losses
will not occur. If the companies and funds in which we have invested suffer poor
financial performance, or if the privately-held companies in which we have
invested are not successfully acquired or do not experience initial public
offerings, the value of our investments will decrease.

Our Existing Relationships With Other Information Technology Services
Organizations May Be Impaired and We Could Lose Business

We maintain relationships with IT services organizations that recommend, design
and implement solutions for their customers' eBusiness that include Novell Net
services products. At the same time, our service offerings compete with those of
these same organizations. Although many companies in high technology industries
co-exist in a similar state of competition, any of these organizations could
decide at any time to not continue to do business with us or to recommend our
products. A change in the willingness of these IT service organizations to do
business with us could adversely affect our business.

Our Business May Be Negatively Affected if We Do Not Continue to Adapt to Rapid
Technological  Change,  Evolving Business Practices and Changing Consumer
Requirements

The software industry and IT consulting market is characterized by rapidly
changing technology, evolving business practices and changing client needs.
Accordingly, our future success will depend in part on our ability to continue
to adapt and meet these challenges. Among the most important challenges we face
is the need to continue to:

    o    effectively identify and use leading technologies;

    o    enhance strategic and technical expertise;

    o    influence and respond to emerging industry standards and other
         technology changes and to orient management teams to capitalize on
         these changes;

    o    recruit and retain qualified project personnel;

    o    enhance current services;

    o    develop new services that meet changing customer needs; and

    o    effectively advertise and market Net business solutions.

Our Consulting  Services  Contracts  Contain Pricing Risks and, If Our Estimates
Prove  Inaccurate,  We Could Incur Additional Costs or Not Realize Anticipated
Revenue

Revenue from our Celerant consulting business and about half of the revenue from
our IT consulting group within our worldwide services is derived from
fixed-price, fixed-time contracts. Because of the complex nature of the services
provided, it is sometimes difficult to accurately estimate the cost, scope, and
duration of particular client engagements. If we do not accurately estimate the
resources required for a project, do not accurately assess the scope of work
associated with a project, do not manage the project properly, or do not satisfy
our obligations in a manner consistent with the contract, then our costs to
complete the project could increase substantially. We have occasionally had to
commit unanticipated additional resources to complete projects, and we may have
to take similar action in the future. We may not be compensated for these
additional costs or the commitment of these additional resources. Additionally,
our Celerant management consulting business derives a meaningful portion of our
revenues from projects priced on a contingency basis. If results are not met, or
if a dispute arises, potentially large revenues may not be realized.

Our IT Consulting and Celerant Consulting Clients Can Cancel or Reduce the Scope
of Their Engagements With Us on Short Notice

If our clients cancel or reduce the scope of an engagement with the IT
consulting group within our worldwide services business or the Celerant
management consulting business, we may be unable to reassign our professionals
to new engagements without delay. Personnel and related costs constitute a
substantial portion of our operating expenses. Because these expenses are
relatively fixed in the short term, 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
consultants, causing significant reductions in operating results for a
particular quarter.

Actions  Taken By The SCO Group Could  Impact the  Acceptance  of the Linux
Operating  System,  Negatively  Affecting  Novell's  Linux Initiatives

Novell recently announced some important Linux initiatives. These include an
upcoming NetWare version based on the Linux kernel, as well as collaboration and
resource management solutions for Linux. The SCO Group ("SCO") has recently
written a "Letter to Linux Customers" that states that Linux infringes on SCO's
Unix intellectual property and other rights, and that SCO intends to
aggressively protect and enforce those rights. SCO's actions have the potential
to disrupt business relations that might otherwise form at a critical time
around Linux technologies, and could potentially deprive Novell of important
economic opportunities. It is possible that SCO's actions, if carried forward,
could lead to the loss of sales and jobs, delayed projects, canceled financing,
and a balkanized Linux community, any of which could hurt Novell's Linux
initiatives.

Our Stock Price Will Fluctuate

Our future earnings and stock price could be subject to significant volatility,
particularly on a quarterly basis. Due to analysts' expectations of continued
growth, any shortfall in anticipated earnings can be expected to have an
immediate and significant adverse effect on the trading price of our common
stock in any given period. Revenue fluctuations may also contribute to the
volatility of the trading price of our common stock in any given period.

In addition, the market prices for securities of software companies have been,
and continues to be, very volatile. The market price of our common stock, in
particular, has been subject to wide fluctuations in the past. As a result of
the foregoing factors and other factors that may arise in the future, the market
price of our common stock may be subject to significant fluctuations within a
short period of time. These fluctuations may be due to factors specific to us,
to changes in analysts' earnings estimates, or to factors affecting the computer
industry or the securities markets in general.


Item 7A.  Qualitative and Quantitative Disclosures About Market Risk

We are exposed to financial market risks, including changes in interest rates,
foreign currency exchange rates, and the market prices of equity securities. To
mitigate some of these risks, we utilize currency forward contracts and currency
options. We do not use derivative financial instruments for speculative or
trading purposes, and no significant derivative financial instruments were
outstanding at April 30, 2003.

Interest Rate Risk

The primary objective of our short-term investment activities is to preserve
principal while maximizing yields without significantly increasing risk. The
strategy we use to achieve this objective is to invest in widely diversified
short-term investments, consisting primarily of investment grade securities,
substantially all of which either mature within the next twelve months or have
characteristics of short-term investments. A hypothetical 50 basis point
increase in interest rates would result in an approximately $1.3 million
decrease (less than 0.5% of total investments) in the fair value of our
available-for-sale securities.

Market Risk

We also hold available-for-sale equity securities in our short-term investment
portfolio. As of April 30, 2003, gross unrealized losses, before tax effect, on
the short-term public equity securities totaled $0.1 million. A reduction in
prices of 10% of these short-term equity securities would result in
approximately a $0.5 million decrease (less than 0.1% of total investments) in
the fair value of our short-term investments.

In addition, we invest in equity securities of privately-held companies, which
are included in our long-term portfolio of investments, primarily for the
promotion of business and strategic objectives. These investments are generally
in small capitalization stocks in the high technology industry sector or venture
capital funds. Because of the nature of these investments, we are exposed to
risks that the value of these equity securities will change. We typically do not
attempt to reduce or eliminate our market exposure on these securities. A 10%
adverse change in equity prices of equity securities of privately-held companies
would result in an approximately $6 million decrease in the fair value of our
available-for-sale long-term securities.

Foreign Currency Risk

We use derivatives to hedge those net assets and liabilities that, when
translated or remeasured according to accounting principles generally accepted
in the U.S., impact our condensed consolidated statement of operations. Currency
forward contracts are utilized in these hedging programs. All forward contracts
that we enter into are components of hedging programs and are entered into for
the sole purpose of hedging an existing or anticipated currency exposure, not
for speculation or trading purposes. Gains and losses on these currency forward
contracts would generally be offset by corresponding losses and gains on the
foreign currency assets and liabilities that they hedge, resulting in negligible
net gain or loss overall on the hedged exposures. When hedging balance sheet
exposures, all gains and losses on forward contracts are recognized in other
income and expense in the same period as when the gains and losses on
translation or remeasurement of the foreign currency denominated assets and
liabilities occur. All gains and losses related to foreign exchange contracts
are included in cash flows from operating activities in the condensed
consolidated statement of cash flows. Our hedging programs reduce, but do not
always entirely eliminate, the impact of foreign currency exchange rate
movements. If we did not hedge against foreign currency exchange rate movement,
an increase or decrease of 10% in exchange rates would result in an increase or
decrease in income before taxes of approximately $3 million. This number
represents the exposure related to balance sheet remeasurement and intercompany
translation only and assumes that all currencies move in the same direction at
the same time relative to the U.S. dollar.

All of the potential changes noted above are based on sensitivity analyses
performed on our financial position at April 30, 2003. Actual results may differ
materially.




<PAGE>


Item 4.  Controls and Procedures

An evaluation of the effectiveness of the design and operation of the Company's
disclosure controls and procedures as of June 9, 2003 was carried out by the
Company under the supervision and with the participation of the Company's
management, including the Chief Executive Officer and Chief Financial Officer.
Based on that evaluation, the Chief Executive Officer and the Chief Financial
Officer concluded that the Company's disclosure controls and procedures have
been designed and are functioning effectively to provide reasonable assurance
that the information required to be disclosed by the company in periodic reports
filed under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms. A controls systems, no matter how well designed and operated, cannot
provide absolute assurance that the objectives of the controls systems are met,
and no evaluation of controls can provide absolute assurance that all control
issues and instances of fraud, if any, within a company have been detected.
Subsequent to the date of the most recent evaluation of the Company's internal
controls, there were no significant changes in the Company's internal controls,
including any corrective actions with regard to significant deficiencies and
material weaknesses.

Part II. Other Information

Except as listed below, all information required by items in Part II is omitted
because the items are inapplicable or the answer is negative.

Item 1.  Legal Proceedings.

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

Item 4. Submission of Matters to a Vote of Security Holders

The Stockholders of Novell voted on the following proposals at the Annual
Meeting of Stockholders held on May 1, 2003:

1. To elect seven directors.
2. To approve amendments to certain of our stock option plans to permit
   implementation of a stock option exchange program.
3. To approve our Stock-Based Deferred Compensation Plan.
4. To approve amendments to our Employee Stock Purchase Plan.
5. To ratify the appointment of Ernst & Young LLP, as independent auditors for
   the fiscal year ending October 31, 2003.

The following tables set forth the outcome of the matters voted upon at the
meeting:

    Proposal #1
    Election of Directors
    The nominees for director were elected based upon the following votes:

    Nominee                                  Votes For            Votes Withheld
    -------                                  ---------            --------------
    Albert Aiello                           304,922,691              20,192,625
    Fred Corrado                            304,764,016              20,351,300
    Jack L. Messman                         314,403,331              10,711,985
    Richard L. Nolan                        304,833,336              20,281,980
    Thomas G. Plaskett                      306,515,891              18,599,425
    John W. Poduska Sr.                     307,662,498              17,452,818
    James D. Robinson, III                  314,638,870              10,476,446


<PAGE>



    Proposal #2
    To approve amendments to certain of our stock option plans to permit
    implementation of our stock option exchange program. This proposal was
    approved based on the following votes:
<TABLE>
              <C>                          <C>                    <C>                     <C>

                Votes For                  Votes Against          Votes Abstained         Broker Non-votes
                ---------                  -------------          ---------------         ----------------
               152,116,030                   65,715,988              7,077,408              100,205,890
</TABLE>

    Proposal #3
    To approve our Stock-Based Deferred Compensation Plan.  This proposal was
    approved based on the following votes:
<TABLE>
              <C>                          <C>                    <C>                     <C>
                Votes For                  Votes Against          Votes Abstained         Broker Non-votes
                ---------                  -------------          ---------------         ----------------
               310,499,831                   13,566,599              1,048,886                   --
</TABLE>

    Proposal #4
    To approve amendments to our Employee Stock Purchase Plan.  This proposal
    was approved based on the following votes:
<TABLE>
              <C>                          <C>                    <C>                     <C>
                Votes For                  Votes Against          Votes Abstained         Broker Non-votes
                ---------                  -------------          ---------------         ----------------
               303,823,399                   20,187,762              1,104,155                   --
</TABLE>

    Proposal #5
    To ratify the appointment of Ernst & Young LLP, as independent auditors for
    the fiscal year ending October 31, 2003. The stockholders ratified the
    appointment of Ernst & Young, LLP based on the following votes:
<TABLE>
              <C>                          <C>                    <C>                     <C>
                Votes For                  Votes Against          Votes Abstained         Broker Non-votes
                ---------                  -------------          ---------------         ----------------
               305,066,408                   19,347,837               701,071                    --

</TABLE>

Item 6.  Exhibits and Reports on Form 8-K.

(a)  Exhibits

Exhibit
Number          Description

10.1            Severance Agreement dated as of March 25, 2003 between the
                Registrant and Chris Stone.

10.2            Severance Agreement dated as of March 25, 2003 between the
                Registrant and Gerard Van Kemmel.

99.1            Certification pursuant to 18 U.S.C. Section 1350, as adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

99.2            Certification pursuant to 18 U.S.C. Section 1350, as adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 (b) Reports on Form 8-K.

     Form 8-K dated February 3, 2003, reporting under Item 5.




<PAGE>


                                   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 16, 2003                              /s/ Joseph S. Tibbetts, Jr.
                                                 ----------------------------
                                                     Joseph S. Tibbetts, Jr.
                                                     Chief Financial Officer
                                                (Principal Financial Officer and
                                                  Principal Accounting Officer)



<PAGE>


                                 CERTIFICATIONS

         I, Jack L.  Messman, certify that:

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

         2.       Based on my knowledge, this quarterly 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
                  quarterly report;

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this quarterly 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
                  quarterly report;

         4.       The registrant's other certifying officers and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-14 and 15d-14) for the registrant and we have:

                  a)       designed such disclosure controls and procedures 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
                           quarterly report is being prepared;

                  b)       evaluated the effectiveness of the registrant's
                           disclosure controls and procedures as of a date
                           within 90 days prior to the filing date of this
                           quarterly report (the "Evaluation Date"); and

                  c)       presented in this quarterly report our conclusions
                           about the effectiveness of the disclosure controls
                           and procedures based on our evaluation as of the
                           Evaluation Date;

         5.       The registrant's other certifying officers and I have
                  disclosed, based on our most recent evaluation, to the
                  registrant's auditors and the audit committee of registrant's
                  board of directors (or persons performing the equivalent
                  functions):

                  a)       all significant deficiencies in the design or
                           operation of internal controls which could adversely
                           affect the registrant's ability to record, process,
                           summarize and report financial data and have
                           identified for the registrant's auditors any material
                           weaknesses in internal controls; and

                  b)       any fraud, whether or not material, that involves
                           management or other employees who have a significant
                           role in the registrant's internal controls; and

         6.       The registrant's other certifying officers and I have
                  indicated in this quarterly report whether or not there were
                  significant changes in internal controls or in other factors
                  that could significantly affect internal controls subsequent
                  to the date of our most recent evaluation, including any
                  corrective actions with regard to significant deficiencies and
                  material weaknesses.


         Date: June 16, 2003



         /s/ Jack L. Messman
         Jack L. Messman
         President and Chief Executive Officer


<PAGE>


         I, Joseph S. Tibbetts, Jr., certify that:

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

         2.       Based on my knowledge, this quarterly 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
                  quarterly report;

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this quarterly 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
                  quarterly report;

         4.       The registrant's other certifying officers and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-14 and 15d-14) for the registrant and we have:

                  a)       designed such disclosure controls and procedures 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
                           quarterly report is being prepared;

                  b)       evaluated the effectiveness of the registrant's
                           disclosure controls and procedures as of a date
                           within 90 days prior to the filing date of this
                           quarterly report (the "Evaluation Date"); and

                  c)       presented in this quarterly report our conclusions
                           about the effectiveness of the disclosure controls
                           and procedures based on our evaluation as of the
                           Evaluation Date;

         5.       The registrant's other certifying officers and I have
                  disclosed, based on our most recent evaluation, to the
                  registrant's auditors and the audit committee of registrant's
                  board of directors (or persons performing the equivalent
                  functions):

                  a)       all significant deficiencies in the design or
                           operation of internal controls which could adversely
                           affect the registrant's ability to record, process,
                           summarize and report financial data and have
                           identified for the registrant's auditors any material
                           weaknesses in internal controls; and

                  b)       any fraud, whether or not material, that involves
                           management or other employees who have a significant
                           role in the registrant's internal controls; and

         6.       The registrant's other certifying officers and I have
                  indicated in this quarterly report whether or not there were
                  significant changes in internal controls or in other factors
                  that could significantly affect internal controls subsequent
                  to the date of our most recent evaluation, including any
                  corrective actions with regard to significant deficiencies and
                  material weaknesses.


         Date: June 16, 2003



          /s/ Joseph S. Tibbetts, Jr.
         Joseph S. Tibbetts, Jr.
         Senior Vice President and
         Chief Financial Officer


<PAGE>