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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                   FORM 10-K
 
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<S>          <C>                                                                 <C>
     /X/               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                      THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

                          FOR THE FISCAL YEAR ENDED OCTOBER 28, 1995
                                              OR
     / /             TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                    THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

                FOR THE TRANSITION PERIOD FROM             TO

                                COMMISSION FILE NUMBER 0-13351
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                                  NOVELL, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
                                    DELAWARE
                        (STATE OR OTHER JURISDICTION OF
                         INCORPORATION OR ORGANIZATION)
 
                                   87-0393339
                                (I.R.S. EMPLOYER
                              IDENTIFICATION NO.)
 
                             1555 N. TECHNOLOGY WAY
                                OREM, UTAH 84057
             (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
 
                                 (801) 222-6000
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
 
          Securities registered pursuant to Section 12(b) of the Act:
                                      None
 
          Securities registered pursuant to Section 12(g) of the Act:
                     Common Stock, par value $.10 per share
                        Preferred Share Purchase Rights
 
     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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  / /
 
     The aggregate market value of the registrant's common stock held by
nonaffiliates on December 31, 1995 (based on the last reported price of the
Common Stock on the NASDAQ National Market System on such date) was
$5,001,667,863.
 
     As of December 31, 1995 there were 367,868,618 shares of the registrant's
common stock outstanding.
 
     Portions of Registrant's Annual Report to Shareholders for the fiscal year
ended October 28, 1995, are incorporated by reference in Parts II and IV of this
Form 10-K to the extent stated herein. Portions of Registrant's definitive Proxy
Statement for the Annual Meeting of Shareholders to be held on April 10, 1996,
are incorporated by reference in Part III of this Form 10-K to the extent stated
herein.
 
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                                     PART I
 
ITEM 1.  BUSINESS
 
THE COMPANY
 
     Novell, Inc. ("Novell" or the "Company") is a leading provider of network
software. Novell software products provide the infrastructure for a networked
world, enabling customers to connect with other people and the information they
need, anytime and anyplace. Novell partners with other technology and market
leaders to make networks an integral part of everyday life.
 
     The Company was incorporated in Delaware on January 25, 1983. Novell's
executive offices are located at 1555 North Technology Way, Orem, Utah 84057.
Its telephone number at that address is (801) 222-6000.
 
     The Company markets its products through 40 U.S. and 60 international sales
offices. The Company sells its products primarily to distributors and national
retail chains, who in turn sell the Company's products to retail dealers. The
Company also sells its products to OEMs, system integrators, and VARs as well as
direct to large corporations.
 
     The Company primarily conducts product development activities in San Jose,
California; Summit, New Jersey; and Orem and Provo, Utah. It also contracts out
some product development activities to third-party developers.
 
     Over the past several years, the Company has issued common stock or paid
cash to acquire technology companies, invested cash in other technology
companies, and formed strategic alliances with still other technology companies.
Novell undertook these transactions to promote a pervasive computing
environment, and in many cases to also broaden the Company's business as a
system and application software supplier.
 
     In June 1993, the Company acquired UNIX System Laboratories, Inc. (USL) by
issuing approximately 11 million shares Novell common stock valued at $332
million in exchange for all of the outstanding stock of USL not previously owned
by Novell and assumed liabilities of $9 million. The transaction was accounted
for as a purchase and, on this basis, resulted in a one-time write-off of $269
million for purchased research and development in the third quarter of fiscal
1993.
 
     In June 1994, the Company completed a merger with WordPerfect Corporation
(WordPerfect), whereby WordPerfect was merged into Novell. Approximately 51
million shares of Novell common stock were exchanged for all of the outstanding
common stock of WordPerfect. In addition, the outstanding employee stock options
to purchase WordPerfect common stock were converted into options to purchase
approximately 8 million shares of Novell common stock. The transaction was
accounted for as a pooling of interests and therefore all prior financial
statements incorporated by reference herein have been restated as if the merger
took place at the beginning of such periods.
 
     Additionally, in June 1994, the Company acquired from Borland
International, Inc. (Borland) its Quattro Pro spreadsheet product line for $110
million of cash and assumed liabilities of $10 million, and purchased a
three-year license to reproduce and distribute up to one million copies of
current and future versions of Borland's Paradox relational database product for
$35 million of cash. The transaction was accounted for as a purchase and, on
this basis, resulted in a one-time write-off of $114 million for purchased
research and development.
 
     On October 30, 1995, the Company announced its intention to sell its
personal productivity applications product line. Novell's personal productivity
applications product line was acquired in the WordPerfect and Quattro Pro
transactions. Certain other acquired product lines such as GroupWise are not
being sold. The Company is actively negotiating with several parties regarding
the sale of the personal productivity applications product line and anticipates
that it will announce a sale in early 1996.
 
     On December 6, 1995, Novell completed the sale of its UnixWare product line
to the Santa Cruz Operation, Inc. (SCO). The Company expects to report a gain on
this transaction in the first quarter of fiscal 1996. Under the agreement,
Novell received approximately 6.1 million shares of SCO common stock,
 
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resulting in an ownership position of approximately 17% of the outstanding SCO
common stock. The agreement also calls for Novell to receive a revenue stream
from SCO based on revenue performance of the purchased UnixWare product line.
This revenue stream is not to exceed $84 million net present value, and will end
by the year 2002. In addition, Novell will continue to receive revenue from
existing licenses for older versions of UNIX System source code.
 
BUSINESS STRATEGY
 
     Novell believes that the definition of computer networks is changing as
traditional stand-alone computer resources and new categories of computing
devices increasingly become integrated across networks. Networks are expanding
into every area of life, providing access to valuable information wherever
people work, live, or travel. In the process, the boundaries of geography and
technology that once separated private and public data networks are falling away
to create a single information resource for businesses and consumers.
 
     The Company sees its business opportunity in providing software to enable
this convergence of networks into a managed Internet or Smart Global Network
providing access to information anytime, anyplace. It has enhanced its NetWare
network operating system products to make networks smart -- affordable to own
and operate, easy to manage and use, and capable of connecting heterogeneous
systems. It has also expanded its product line beyond NetWare to include
products for accessing, managing, and interconnecting smart networks, and for
extending networks beyond personal computer workgroups to connect office
equipment such as printers and fax machines, industrial controls, utility
meters, cable TV set-top boxes, and other intelligent devices.
 
     The Company believes that the convergence of information resources in the
Smart Global Network is shifting the value of information technology from the
power of stand-alone systems to the ability of systems to connect into the
network. Together with its partners, the Company intends to be a driving force
in expanding the value of networks for customers worldwide.
 
TECHNOLOGIES
 
     Making Networks Smart.  Novell delivers advanced network services in the
NetWare network operating system and in compatible products that add
functionality for administrators and end users. These services add intelligence
to the network to reduce costs of ownership and administration, simplify
management tasks for administrators, and make access to network-based
information easier for end users. In the first release of NetWare eleven years
ago, those services were file and print only. Over the past decade the services
provided by Novell and third parties have expanded significantly to include
directory, network and systems management, messaging, multiprotocol routing, and
security. The Company's NetWare 4 operating system includes NetWare Directory
Services (NDS), a distributed database of users, network equipment, computer
systems, and other network resources. NDS provides centralized network
management, security, and information access capabilities to enable
organizations to efficiently maintain and expand complex networks. The
capabilities of NDS are also integrated with compatible Novell network software
products and over 140 third-party solutions. An additional Novell product, the
TUXEDO System, provides tools to help customers develop and deploy
transaction-intensive client/server applications for distribution across
networks. The Company shipped its first product integrating TUXEDO with NetWare
and NDS in 1995.
 
     Interconnecting Smart Networks.  Novell is developing network software to
support NetWare Connect Services (NCS), a managed class of wide-area networking
and Internet services made available to customers through major
telecommunications carriers. These services enable organizations to out-source
the complexity and some of the cost of maintaining wide-area networks, to make
Internet access more manageable, reliable, and secure, and to extend
local-area-networks beyond the immediate enterprise to support communication and
collaboration with customers, partners, and suppliers. Novell in partnership
with AT&T made the service available in the U.S. in 1995. International partners
Deutsche Telecom, Telstra, NTT, and UniSource will be among the first to make
the service widely available in Europe and the Pacific Rim in 1996. NCS partners
worldwide are cooperating to provide interoperability among their networks and
maintain a common directory for the service based on NetWare Directory Services.
 
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     Extending Networks Beyond Personal Computer Workgroups.  The NetWare
network operating system and related Novell products provide a platform for
extending networks beyond traditional personal computer local-area networks
(LANs) and integrating diverse technologies. This includes the seamless
integration of multiple desktop systems and host environments. Novell believes
that customer environments are inherently heterogeneous and therefore require an
information system that integrates dissimilar technologies. The goal of Novell's
strategy of integrating various desktop systems is to allow IBM, IBM-compatible,
Apple Macintosh, and UNIX-based PCs and workstations to access and share
simultaneously a common set of network resources and information. This gives
customers the freedom to choose the desktop and application server systems that
best fit their application requirements. In addition to the integration of
desktops, host environments from vendors such as IBM, DEC, HP and Olivetti and
numerous other UNIX system vendors are integrated into the NetWare network so
that users can access host-based resources and information from their desktops
across the network. Through Novell Embedded Systems Technology (NEST), the
Company continues to extend NetWare services to connect office and industrial
equipment, TV cable set-top boxes, electric utility energy management equipment,
and a broad range of other intelligent devices. In addition, Novell is working
with leading software developers and manufacturers to network computers and
telephone PBX switches in a new class of integrated solutions.
 
     Providing Network Access.  Novell network access products connect desktop
PC and Macintosh users with applications and services that run on UNIX host
computers and the Internet through TCP/IP communications protocols. The company
also provides dial-in client and server products for remote access to network
resources. Novell mobile NetWare client technology allows users to maintain a
virtual network on their portable computers, even when disconnected, and then
synchronize files when they reconnect to the network. NetWare Web Server
provides a complete add-on solution for NetWare 4 servers to support both
internal communication and external publishing on the Internet's World Wide Web.
A three dimensional network browser is also in development to provide
point-and-click access to network services, electronic publishing that
simplifies creation and access to network-based information, and intelligent
browsing capabilities for accessing distributed network resources. Novell
products also include the GroupWise family of workgroup collaboration products
for electronic mail, calendaring and scheduling, document management and forms
processing. The Company is expanding the functionality of GroupWise in 1996 for
greater integration with network directories, management and Internet access
applications.
 
PROGRAMS
 
     Technical Support Alliance.  In May 1991 Novell announced the formation of
the Technical Support Alliance (TSA), with 40 current members including Apple,
Compaq, Hewlett-Packard, Intel, IBM, Lotus, Microsoft, and Oracle. The TSA was
organized to provide one-stop multivendor support. Member companies provide
cooperative efforts to support their customers.
 
     Certified Novell Engineer Program.  Through the Certified Novell Engineer
(CNE) program, Novell is strengthening the networking industry's Level I support
self-sufficiency. CNEs are individuals who receive high-level training,
information, and advanced technical telephone support (Level II) from Novell.
CNEs may be employed by resellers, independent support organizations, or Novell
Support Organizations (NSOs). The NSO program pools the capabilities of the
industry's best support providers. NSOs have contractual agreements with Novell
that are designed to ensure quality service on a national or global level for
NetWare, UnixWare, and other Novell products.
 
     Novell Authorized Education Centers.  Novell offers education to end users
through nearly 1,300 independent Novell Authorized Education Centers (NAECs)
worldwide, which use Novell-developed courses to instruct students in the use
and maintenance of Novell products. Novell also offers self-paced training
products.
 
     Novell Labs.  Through its Independent Manufacturer Support Program (IMSP),
Novell works with third-party manufacturers to test and certify hardware and
software components designed to interoperate with the NetWare and UnixWare
operating systems. Novell distributes these test results to inform customers
about products that have formally demonstrated NetWare and UnixWare
compatibility. In effect, IMSP certifica-
 
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tion programs help vendors to market their products through Novell's
distribution channels. The primary goal of IMSP is to foster working
relationships between Novell and third-party hardware and software suppliers.
Secondary goals include promoting certified products to industry resellers,
anticipating industry products' direction through comarketing efforts, and
working with vendors to codevelop critical network components.
 
     DeveloperNet  Novell delivers products, software development kits,
information, and support services to software developers through the
DeveloperNet subscription program, its primary communications channel to the
developer community. Over 1,000 independent software vendors and corporate
developers now subscribe to the program. Novell launched DeveloperNet in
September 1995 as part of its renewed network focus and initiative code-named
Net2000 to provide developers with common interfaces to a rich set of network
services.
 
PARTNERSHIPS
 
     Development Partners.  When customers request a new service or function be
added to Novell products, Novell investigates the most effective way to deliver
that functionality to the user. Very often the best way is for Novell to partner
with a company who has expertise in that specific area. By partnering, the
combination of Novell's core expertise in networks and the partner's expertise
in the given product area combine to deliver a better solution faster than if
Novell would have attempted to develop it alone.
 
     Systems Partners.  Novell partners with companies who have complimentary
software and hardware. The resulting solution is a powerful combination of
products that deliver enterprise-wide connectivity solutions. These partners
include system suppliers like IBM, DEC and HP, as well as system integration
experts like Memorex Telex, Arthur Andersen, and EDS.
 
     Application Partners.  Novell works very closely with application
developers to provide integrated software products and support for end users. As
network applications grow in importance, this program will help assure broad
availability of well integrated multivendor applications.
 
     Enterprise Consulting Partners.  This select group of the industry's
leading systems integrators and consulting organizations work with Novell to
deliver distributed client/server solutions for customers with large
enterprise-wide networks.
 
     Multiple Channel Distribution Network.  The Company markets its products
through a broad range of distributors, dealers, value added resellers, systems
integrators, and OEMs as well as to major end users.
 
     Worldwide Service and Support.  The Company is committed to providing
service and support on a worldwide basis to its resellers and to their end-user
customers. The Company has established agreements with third party service
vendors to expand and complement the service provided directly by the Company's
service personnel and the Company's resellers.
 
NOVELL PRODUCTS
 
     The Company's products fall within three categories: systems software,
information access and management products, and groupware. Novell products work
together, interoperate with thousands of third-party solutions, and span data
networks from workgroup LANs to the Internet.
 
     Systems Products provide a foundation of network services that can be
extended across heterogeneous computing platforms and intelligent devices in the
Smart Global Network. These products include the NetWare 3 network operating
system, which provides users with access to data and resources controlled by a
single server, and the more advanced NetWare 4, which features NetWare Directory
Services and provides the user with access to the resources of the entire
enterprise or wide-area network. The Company also offers NetWare Symmetrical
Processing for use on cost-effective multiprocessor hardware that can be readily
scaled to meet the requirements of large and complex networks. Novell system
software also includes development kits to enable manufacturers to embed Novell
Embedded Systems Technology in microprocessor-based products. In addition, the
Company develops and markets the TUXEDO System for the development and
deployment of distributed client/server applications.
 
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     Information Access and Management Products extend and leverage NetWare
services to enable customers to access and manage data, applications and
resources distributed across enterprise networks and the Internet. These
products include the LAN Workplace TCP/IP solution for connecting personal
computer users to UNIX systems and the Internet ; the ManageWise strategic
management solution for end-to-end management of the Novell environment; the
LANalyzer monitoring and analysis tool for troubleshooting NetWare networks; the
NetWare Connect server product and NetWare Mobile client product for remote
access to network resources; the NetWare Navigator for centralized, automated
software and data distribution for Novell networks; the NetWare for SAA solution
for connecting NetWare and IBM mainframe environments, and other host
connectivity products. In addition, the Company's NetWare Telephony Services
platform and Telephony Services API (TSAPI) enable customers to connect computer
and telephone PBX systems in integrated network solutions.
 
     Novell information access and management products are also integral to the
NetWare Connect Service, the secure business Internet made available in the U.S.
by AT&T. The Company also offers PerfectWorks products that combine network
access technology with PC applications and thus bring networking to small-office
and home-office users.
 
     Groupware Products utilize NetWare network services to provide rich access
to network-based information. The Company's GroupWise family of groupware
products now serves over 5 million users with integrated E-Mail, group
calendaring, scheduling, online conferencing, forms and document management.
GroupWise integrates these capabilities along with Internet E-mail, fax and
voice messages in a "Universal In-Box" for network-based communication and
collaboration.
 
PRODUCT DEVELOPMENT
 
     Due to the rapid pace of technological change in its industry, the Company
believes that its future success will depend, in part, on its ability to enhance
and develop its software products to satisfactorily meet dynamic market needs.
 
     During fiscal 1995, 1994, and 1993, product development expenses were
approximately $368 million, $347 million, and $290 million, respectively. The
Company's product development effort consists primarily of work performed by
employees; however, the Company also utilizes third-party technology partners to
assist with product development.
 
SALES AND MARKETING
 
     Novell markets its NetWare family of network products, the UnixWare
operating system and its personal productivity applications products through
distributors, dealers, vertical market resellers, systems integrators, and OEMs
who meet the Company's criteria, as well as to major end users. In addition, the
Company conducts sales and marketing activities and provides technical support,
training, and field service to its customers from its offices in San Jose,
California; Summit, New Jersey; Provo and Orem, Utah; and from its 40 U.S. and
60 international sales offices.
 
     Distributors.  Novell has established a network of independent
distributors, which resell the Company's products to dealers, VARs, and computer
retail outlets. As of December 31, 1995, there were approximately 15 U.S.
distributors and approximately 80 international distributors.
 
     Dealers.  The Company also markets its products to large-volume dealers and
regional and national computer retail chains.
 
     VARs and Systems Integrators.  Novell also sells directly to value added
resellers and systems integrators who market data processing systems to vertical
markets, and whose volume of purchases warrants buying directly from the
Company.
 
     OEMs.  The Company licenses its systems software to domestic and
international OEMs for integration with their products. With the acquisition of
USL, the number of OEM agreements has increased significantly, both domestically
and internationally.
 
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     End Users.  Generally, the Company refers prospective end-user customers to
its resellers. However, the Company has the internal resources to work directly
with major end users and has developed U.S. and international master license
agreements with approximately 450 of them to date. Additionally, some upgrade
products are sold directly to end users.
 
     International Sales.  In fiscal 1995, 1994, and 1993, approximately 47%,
43%, and 43%, respectively, of the Company's net sales were to customers outside
the U.S. -- primarily distributors. To date, substantially all international
sales except Japanese sales, Indian sales, and certain European sales to
non-multinational distributors that were shipped from a new distribution center
in Dublin, Ireland have been invoiced by the Company in U.S. dollars. In fiscal
1996 the Company anticipates that a substantial portion of international
revenues will continue to be invoiced in U.S. dollars. The exceptions to the
U.S. dollar invoicing will be Japanese sales through the Company's joint venture
in Japan, Indian sales through the Company's joint venture in India and its
distribution center in Dublin, Ireland. No one foreign country accounted for
more than 10% of net sales in any period. In fiscal 1995 and 1994, the Company
had one multinational distributor, which accounted for 15% and 12% of revenue,
respectively. The Company had two multinational distributors, which accounted
for 15% and 11% of revenue in fiscal 1993. Otherwise, no customer accounted for
more than 10% of revenue in any period.
 
     Marketing.  The Company's marketing activities include distribution of
sales literature and press releases, advertising, periodic product
announcements, support of NetWare user groups, publication of technical and
other articles in the trade press, and participation in industry seminars,
conferences, and trade shows. The marketing departments of the Company employ
many technical laboratories which test and evaluate networked computer equipment
and individual devices. The knowledge derived from these laboratories is the
basis for the technical publications published by the Company. These activities
are designed to educate the market about local area networks in general, as well
as to promote the Company's products. Through the Professional Developers
Program, the Company strongly supports independent software and hardware vendors
in developing products that work on Novell networks. Thousands of multiuser
application software packages are now compatible with the NetWare operating
system. In March 1995, the eleventh annual BrainShare Conference (formerly
Developers' Conference) was held to inform and educate developers about Novell
product strategy, Novell open architecture programming interfaces, and Novell
third-party product certification programs.
 
SERVICE, SUPPORT, AND EDUCATION
 
     The purpose of any service program is to help users get the most out of the
products they buy. Novell offers a variety of support alternatives and
encourages users to select the services that best meet their needs. These
include the worldwide service and support organization, the Technical Support
Alliance, the Certified Novell Engineer program, Novell Authorized Education
Centers, the Independent Manaufacturer Support Program, and the Client-Server
Testing Program.
 
MANUFACTURING SUPPLIERS
 
     The Company's products, which consist primarily of software diskettes and
manuals, are duplicated by outside vendors. This allows the Company to minimize
the need for expensive capital equipment in an industry in which multiple
high-volume manufacturers are available.
 
BACKLOG
 
     Lead times for the Company's products are typically short. Consequently,
the Company does not believe that backlog is a reliable indicator of future
sales or earnings. The absence of significant backlog may contribute to
unpredictability in the Company's net income and to fluctuations in the
Company's stock price. See "Factors Affecting Earnings and Stock Price." The
Company's backlog of orders at January 20, 1996, was approximately $112 million,
compared with $51 million at January 20, 1995.
 
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COMPETITION
 
     Novell competes in the highly competitive market for computer software.
Novell believes that the principal competitive factors are technical innovation
to meet dynamic market needs, hardware independence and compatibility, marketing
strength, system/performance, customer service and support, reliability, ease of
use, price/performance, and connectivity with minicomputer and mainframe hosts.
 
     The market for computer software, has become increasingly competitive due
to Microsoft's growing presence in all sectors of the software business. The
Company does not have the product breadth and market power of Microsoft.
Microsoft's dominant position provides it with competitive advantages, including
the ability to unilaterally determine the direction of future operating systems
and to leverage its strength in one or more product areas to achieve a dominant
position in new markets. This position may enable Microsoft to increase its
market position even if the Company succeeds in introducing products with
performance and features superior to those offered by Microsoft.
 
     Microsoft's ability to offer networking functionality in future versions of
MS Windows and MS Windows NT and in any other Microsoft operating systems and
application software, or to provide 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 the
Company's ability to maintain its business. Moreover, Microsoft's ability to
offer products on a bundled basis can be expected to impair the Company's
competitive position with respect to particular products. In addition, as
Microsoft creates new operating systems and applications, there can be no
assurance that Novell will be able to ensure that its products will be
compatible with those of Microsoft.
 
     As the Company sharpened its focus, it decided to sell two lines of
business -- UnixWare and the WordPerfect personal productivity applications,
which did not contribute to Novell's network focus. Even with a sharpened focus,
the Company is aware of several new competitive operating systems currently
under development and scheduled for introduction within the next year and
beyond. If any of these competing products achieves market acceptance, Novell's
business and results of operations could be materially adversely affected.
 
LICENSES, PATENTS AND TRADEMARKS
 
     The Company relies on copyright, trade secret and trademark law, as well as
provisions in its license, distribution and other agreements in order to protect
its intellectual property rights. Additionally, the Company has numerous patents
pending. No assurance can be given that such patents pending will be issued or,
if issued, will provide protection for the Company's competitive position.
Although Novell intends to protect its patent rights vigorously, there can be no
assurance that these measures will be successful. Additionally, no assurance can
be given that the claims on any patents held by the Company will be sufficiently
broad to protect the Company's technology. In addition, no assurance can be
given that any patents issued to the Company will not be challenged, invalidated
or circumvented or that the rights granted thereunder will provide competitive
advantages to the Company. The loss of patent protection on the Company's
technology or the circumvention of its patent protection by competitors could
have a material adverse effect on the Company's ability to compete successfully
in its products business.
 
     The software industry is characterized by frequent litigation regarding
copyright, patent and other intellectual property rights. The Company has from
time to time had infringement claims asserted by third parties against it and
its products. While there are no known or pending threatened claims against the
Company, the unsatisfactory resolution of which would have a material adverse
effect on the Company's results of operations and financial condition, there can
be no assurance that such third party claims will not be asserted, or if
asserted, will be resolved in a satisfactory manner. In addition, there can be
no assurance that third parties will not assert other claims against the Company
with respect to any third-party technology. In the event of litigation to
determine the validity of any third-party claims, such litigation could result
in significant expense to the Company and divert the efforts of the Company's
technical and management personnel, whether or not such litigation is determined
in favor of the Company.
 
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     In the event of an adverse result in any such litigation, the Company could
be required to expend significant resources to develop non-infringing technology
or to obtain licenses to the technology which is the subject of the litigation.
There can be no assurance that the Company would be successful in such
development or that any such licenses would be available. In addition, the laws
of certain countries in which Novell's products are or may be developed,
manufactured or sold may not protect the Company's products and intellectual
property rights to the same extent as the laws of the United States.
 
EMPLOYEES
 
     As of December 31, 1995, the Company had 7,272 employees. The functional
distribution of its employees was: sales and marketing -- 2,004; product
development -- 2,556; general and administrative -- 972; service, support,
education, and operations -- 1,740. Of these, 404 employees are located in U.S.
field offices, and 1,733 employees are in offices outside the U.S. All other
Company personnel are based at the Company's facilities in Utah, California, and
New Jersey. None of the employees is represented by a labor union, and the
Company considers its employee relations to be excellent.
 
     Competition for qualified personnel in the computer industry is intense. To
make a long-term relationship with the Company rewarding, Novell endeavors to
give its employees and consultants challenging work, educational opportunities,
competitive wages, sales commission plans, bonuses, and through stock option and
purchase plans, opportunities to participate financially in the ownership and
success of the Company.
 
FACTORS AFFECTING EARNINGS AND STOCK PRICE
 
     In addition to factors described above under "Competition" which may
adversely affect the Company's earnings and stock price, other factors may also
adversely affect the Company's earnings and stock price. The ability of the
Company to maintain its competitive technological position will depend, in large
part, on its ability to attract and retain highly qualified development and
managerial personnel. Competition for such personnel is intense and there is a
risk of departure due to the competitive environment in the software industry.
The loss of a significant group of key personnel would adversely affect the
Company's product development efforts.
 
     The Company recently announced the sale of its UnixWare product line and
its intention to sell its personal productivity application product line. The
Company's ability to successfully transition out of these product lines in
fiscal 1996 is important to the success of the Company. The extent that
management can quickly devote most of its attention on its core business is
important to the ongoing success of the Company.
 
     A reason the Company is seeking to sell its personal productivity
applications product line is to reduce non-leveraged sales, marketing, and
customer support expenditures. Nevertheless, the Company will retain the
Groupware applications line and may incur relatively higher expenditures than
are incurred in the sale of network operating systems.
 
     As is common in the computer software industry, Novell has experienced
delays in the introduction of new products, due to 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 the Company.
 
     Moreover, the Company may experience delays in market acceptance of new
releases of its products as the Company engages in marketing and education of
the user base regarding the advantages and system requirements for the new
products and as customers evaluate the advantages and disadvantages of
upgrading. The Company has encountered these issues on each major new release of
its products, and expects that it will encounter such issues in the future.
Novell's ability to achieve desired levels of sales growth depends at least in
part on the successful completion, introduction and sale of new versions of its
products. There can be no assurance that the Company will be able to respond
effectively to technological changes or new product announcements by others, or
that the Company's research and development efforts will be successful. Should
 
                                        9
<PAGE>   10
 
Novell experience material delays or sales shortfalls with respect to new
product releases, the Company's sales and net income could be adversely
affected.
 
     A fundamental goal of the Company will be the delivery of groupware
application solutions combining network services and workgroup applications. The
future success of this strategy will depend in part on the Company's ability to
develop and market new competitive products for workgroup productivity and
information processing. Development of these products has already required and
will continue to require a substantial investment in research and development,
particularly as a result of the decision to offer products across multiple
operating environments. Although Novell's existing network of distributors
should assist in this transition, marketing and distribution of these products
may require developing new marketing and sales strategies and will entail
significant expense. The Company has had only limited experience in the market
for these products, and there can be no assurance that the Company will be
successful in developing and marketing these new products.
 
     The Company's future earnings and stock price could be subject to
significant volatility, particularly on a quarterly basis. The Company's
revenues and earnings may be unpredictable due to its shipment patterns. As is
typical in the software industry, a high percentage of the Company's revenues
are expected to be earned in the third month of each fiscal quarter and will
tend to be concentrated in the latter half of that month. Accordingly, quarterly
financial results will be difficult to predict and quarterly financial results
may fall short of anticipated levels. Because the Company's backlog early in a
quarter will not generally be large enough to assure that it will meet its
revenue targets for any particular quarter, quarterly results may be difficult
to predict until the end of the quarter. A shortfall in shipments at the end of
any particular quarter may cause the results of that quarter to fall
significantly short of anticipated levels. Due to analysts' expectations of
continued growth and the historically high price/earnings ratio at which
Novell's Common Stock trades, any such shortfall in earnings can be expected to
have an immediate and very significant adverse effect on the trading price of
Novell's Common Stock in any given period. The past pattern of new application
and operating system product introductions has caused revenues to fluctuate,
sometimes significantly, on a quarter-by-quarter basis. Such revenue
fluctuations may contribute to the volatility of the trading price of Novell
Common Stock in any given period.
 
     In addition, the market prices for securities of software companies have
been volatile in recent years. The market price of Novell 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 Novell's Common Stock may be subject to significant fluctuations within
a short period of time. These fluctuations may be due to factors specific to the
Company, to changes in analysts' earnings estimates, or to factors affecting the
computer industry or the securities markets in general.
 
                                       10
<PAGE>   11
 
ITEM 1A.  EXECUTIVE OFFICERS OF THE REGISTRANT
 
     Set forth below are the names, ages, titles with Novell, and present and
past positions of the persons currently serving as executive officers of Novell.
 
<TABLE>
<CAPTION>
                                       HAS BEEN
                                       OFFICER
             NAME                AGE    SINCE                   POSITION OR OFFICE
-------------------------------  ---   --------   ----------------------------------------------
<S>                              <C>   <C>        <C>
Robert J. Frankenberg..........  48      1994     Chairman of the Board, President, and Chief
                                                    Executive Officer
Mary M. Burnside...............  48      1989     Executive Vice President and Chief Operating
                                                  Officer
Richard W. King................  39      1993     Executive Vice President, NetWare Systems
                                                  Group
Joseph A. Marengi..............  42      1993     Executive Vice President, Worldwide Sales
Steven Markman.................  50      1994     Executive Vice President, Information Access &
                                                    Management Group
James R. Tolonen...............  46      1989     Executive Vice President and Chief Financial
                                                  Officer
Jeffrey H. Waxman..............  49      1995     Executive Vice President, Applications Group
David R. Bradford..............  45      1986     Senior Vice President, General Counsel, and
                                                    Corporate Secretary
Christine G. Hughes............  49      1994     Senior Vice President, Corporate Marketing
R. Duff Thompson...............  44      1994     Senior Vice President, Corporate Development
Stephen C. Wise................  41      1990     Senior Vice President, Finance
Darcy G. Mott..................  43      1989     Vice President and Treasurer
</TABLE>
 
     Robert J. Frankenberg joined the Company in April 1994 as President and
Chief Executive Officer. In August 1994 he became Chairman of the Board of
Directors. Prior to joining Novell, he was with Hewlett Packard, an
international computation and measurement company, for 25 years in various
engineering, management and marketing positions. Most recently he served as Vice
President and General Manager of the Personal Information Products Group.
 
     Mary M. Burnside joined the Company in January 1988 and in January 1989 she
became Senior Vice President, Operations and was elected a corporate officer. In
November 1991 she became Executive Vice President, Corporate Services Group. In
August 1993 she joined the Office of the President as Chief Operating Officer.
In April 1994 she became Executive Vice President and Chief Operating Officer.
 
     Richard W. King joined the Company in 1985 and became Vice President,
Software Development in April 1986. In September 1987 he became Vice President,
NetWare Products Division and in September 1991 he became Vice President,
Service and Support. In August 1993 he was promoted to Executive Vice President,
NetWare Systems Group and was elected a corporate officer.
 
     Joseph A. Marengi joined the Company in June 1989 through the Excelan
merger and held various sales positions with the Company until October 1992 when
he became Senior Vice President, Worldwide Sales. In August 1993 he was elected
a corporate officer. In April 1994 he became Executive Vice President, Worldwide
Sales.
 
     Steven Markman joined the Company in August 1994 as Executive Vice
President, Information Access & Management Group. From March 1994 to August 1994
he was with First Pacific Networks, Inc., a cable telephony company as Vice
President of Engineering. From April 1991 to February 1994 he was with Network
Equipment Technologies, Inc., a network systems company as Senior Vice President
and General Manager. From June 1988 to April 1991 he was with Hewlett Packard,
an international computation and measurement company, where he served most
recently as General Manager for the Information Networks Division.
 
     James R. Tolonen, a Certified Public Accountant, joined the Company in June
1989 through the Excelan merger and became a Senior Vice President and Chief
Financial Officer in August 1989 and was elected a corporate officer. In August
1993 he joined the Office of the President as Chief Financial Officer. In April
1994 he became Executive Vice President and Chief Financial Officer.
 
                                       11
<PAGE>   12
 
     Jeffrey H. Waxman joined the Company in June 1995 as Executive Vice
President, Applications Group. From December 1992 to June 1995 he was President
and Chief Executive Officer of ServiceSoft Corporation, a developer of customer
service software and hardware. From January 1992 to November 1992 he was an
independent consultant in the software industry. From June 1988 to January 1992
he was President and CEO of Uniplex, Inc. a developer and publisher of core
office technology for Open Systems.
 
     David R. Bradford joined the Company in October 1985 as Corporate Counsel.
He became Corporate Secretary in January 1986, Senior Corporate Counsel in April
1986, and Senior Vice President, General Counsel, and Corporate Secretary in
April 1989.
 
     Christine G. Hughes joined the Company in December 1994 as Senior Vice
President, Corporate Marketing. From July 1991 to November 1994 she was with
Xerox Corporation, a worldwide provider of document services, in various
positions, most recently as Vice President, Integrated Marketing -- U.S.
Operations. From January 1990 to July 1991 she was President of Myriad
Technologies, a market research and consulting company.
 
     R. Duff Thompson joined the Company in June 1994 through the WordPerfect
merger and became Senior Vice President, Corporate Development in October 1994
and was elected a corporate officer. He joined WordPerfect in December 1986 and
served most recently as Executive Vice President in the Office of the President
and General Counsel.
 
     Stephen C. Wise joined the Company in June 1989 through the Excelan merger
and became Vice President, Accounting and Planning in January 1990 and was
elected a corporate officer. In January 1991 he became Vice President and
Corporate Controller and in December 1993 he became Senior Vice President,
Finance.
 
     Darcy G. Mott, a Certified Public Accountant, joined the Company in
September 1986. He served in various finance positions and became Corporate
Controller in February 1989. He was elected a corporate officer in November 1989
and became Treasurer in January 1991. In December 1995 he became Vice President
and Treasurer.
 
ITEM 2.  PROPERTIES
 
     The Company owns and occupies a 1,000,000 square-foot office complex on 99
acres in Orem, Utah, which is used as corporate headquarters and a product
development center. It also owns and occupies a 550,000 square-foot office
complex on 46 acres in Provo, Utah, which is used as a product development
center. It also owns a 380,000 square-foot manufacturing and distribution
facility on 23 acres in Lindon, Utah, all of which is leased to a third party
manufacturer. The Company also owns a 100,000 square-foot office building in
Herndon, Virginia. The Company occupies approximately 1/3 of the space in this
building and leases the remainder to tenants. The Company also owns a 52,000
square foot building in San Jose, California, which it had previously leased. It
is used primarily for product development. Additionally, the Company owns
approximately 48 acres of undeveloped land in San Jose, California and has
capacity to expand on its land in Orem and Provo, Utah.
 
     The Company has subsidiaries in Argentina, Australia, Austria, Belgium,
Brazil, Canada, Colombia, Czech Republic, Denmark, Finland, France, Germany,
Hong Kong, Hungary, India, Ireland, Italy, Japan, Korea, Mexico, Netherlands,
Norway, Poland, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland,
United Kingdom, and Venezuela -- each of which leases its facilities.
 
     The Company leases offices for product development in San Jose and Scotts
Valley, California; Summit, New Jersey; and Hungerford, U.K.; and a distribution
facility in San Jose, California. The Company also leases sales and support
offices in Arizona, California (7), Colorado, Connecticut, District of Columbia,
Florida (2), Georgia, Illinois (2), Massachusetts, Michigan, Minnesota, Missouri
(2), New Jersey, New York (2), North Carolina, Ohio (3), Oregon, Pennsylvania
(2), Tennessee, Texas (2), Utah, Washington, Chile, China, New Zealand, Russia,
Taiwan, and United Arab Emirates.
 
     The terms of such leases vary from month to month to up to ten years.
 
                                       12
<PAGE>   13
 
ITEM 3.  LEGAL PROCEEDINGS
 
     In December of 1991, Roger Billings and his International Academy of
Science, (the Academy) filed suit against Novell alleging that the Company
infringes on a patent allegedly owned by the Academy. In June 1994, Novell filed
a petition with the U.S. Patent and Trademark Office (Patent Office) requesting
it invalidate the patent. In August 1994, the Patent Office granted Novell's
request for re-examination of the patent, finding a "substantial new question of
patentability." Also, in August 1994, the trial court issued a ruling, which
among other things, vacated the trial date which had been previously set in the
action. In June 1995, the Patent Office, upon re-examiniation, overturned the
Academy patent, stating that there was no patentable subject matter. In December
1995, the Academy filed a petition with the Patent Office seeking to amend its
patent. The Company believes that the ultimate resolution of this legal
proceeding will not have a material adverse effect on its financial position,
results of operation, or cash flows.
 
     The Company is a party to a number of additional legal claims arising in
the ordinary course of its business. The Company believes the ultimate
resolution of these claims will not have a material adverse effect on its
financial position, results of operations, or cash flows.
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
 
                                    PART II
 
ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
 
     The information required by Item 5 of Form 10-K is incorporated herein by
reference to the information contained in the section captioned "Selected
Consolidated Quarterly Financial Data" on page 39 of the Company's Annual Report
to Shareholders for the fiscal year ended October 28, 1995.
 
ITEM 6.  SELECTED FINANCIAL DATA
 
     The information required by Item 6 of Form 10-K is incorporated herein by
reference to the information contained in the section captioned "Selected
Consolidated Financial Data" on page 20 of the Company's Annual Report to
Shareholders for the fiscal year ended October 28, 1995.
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 
     The information required by Item 7 of Form 10-K is incorporated herein by
reference to the information contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 21 through 25 of the Company's Annual Report to Shareholders for the
fiscal year ended October 28, 1995.
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
     The information required by Item 8 of Form 10-K is incorporated herein by
reference to the Company's consolidated financial statements and related notes
thereto, together with the report of the independent auditors presented on pages
26 through 38 of the Company's Annual Report to Shareholders for the fiscal year
ended October 28, 1995, and to the information contained in the section
captioned "Selected Consolidated Quarterly Financial Data" on page 39 of the
Company's Annual Report to Shareholders for the fiscal year ended October 28,
1995.
 
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
 
     Not applicable.
 
                                       13
<PAGE>   14
 
                                    PART III
 
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
 
     The information required with respect to identification of directors is
incorporated herein by reference to the information contained in the section
captioned "Election of Directors" of the Registrant's definitive Proxy Statement
for the Annual Meeting of Shareholders to be held April 10, 1996, to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A under the
Securities and Exchange Act of 1934, as amended. Information regarding executive
officers of Novell is set forth under the caption "Executive Officers" in Item
1a hereof.
 
     Each director and each officer of the Company who is subject to Section 16
of the Securities Exchange Act of 1934 (the "Act") is required by Section 16(a)
of the Act to report to the Securities and Exchange Commission by a specified
date his or her transactions in the Company's securities. In fiscal 1995, there
were no compliance exceptions to this requirement.
 
ITEM 11.  EXECUTIVE COMPENSATION
 
     The information required by Item 11 of Form 10-K is incorporated by
reference to the information contained in the sections captioned "Executive
Compensation" of the Registrant's definitive Proxy Statement for the Annual
Meeting of Shareholders to be held April 10, 1996, to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended.
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     The information required by Item 12 of Form 10-K is incorporated by
reference to the information contained in the section captioned "Securities
Ownership of Certain Beneficial Owners and Management" of the Registrant's
definitive Proxy Statement for the Annual Meeting of Shareholders to be held
April 10, 1996, to be filed with the Securities and Exchange Commission pursuant
to Regulation 14A under the Securities Exchange Act of 1934, as amended.
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     The information required by Item 13 of Form 10-K is incorporated by
reference to the information contained in the section captioned "Certain
Transactions" of the Registrant's definitive Proxy Statement for the Annual
Meeting of Shareholders to be held on April 10, 1996, to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A under the
Securities Act of 1934, as amended.
 
                                       14
<PAGE>   15
 
                                    PART IV
 
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
     (a) The following documents are filed as a part of this annual report on
Form 10-K for Novell, Inc.:
 
        1. The Consolidated Financial Statements, the Notes to Consolidated
           Financial Statements and the Report of Ernst & Young LLP, Independent
           Auditors, listed below are incorporated herein by reference to pages
           26 through 38 of the Company's Annual Report to Shareholders for the
           fiscal year ended October 28, 1995.
 
           Consolidated Statements of Income for the fiscal years ended October
           28, 1995, October 29, 1994, and October 30, 1993.
 
           Consolidated Balance Sheets at October 28, 1995 and October 29, 1994.
 
           Consolidated Statements of Shareholders' Equity for the fiscal years
           ended October 28, 1995, October 29, 1994, and October 30, 1993.
 
           Consolidated Statements of Cash Flows for the fiscal years ended
           October 28, 1995, October 29, 1994, and October 30, 1993.
 
           Notes to Consolidated Financial Statements.
 
           Report of Ernst & Young LLP, Independent Auditors.
 
<TABLE>
<CAPTION>
                                                                                            PAGE
                                                                                            ----
        <S>   <C>                                                                           <C>
              Report of Price Waterhouse LLP, Independent Accountants                        17
        2.    Financial Statement Schedules:
                   Schedule II     Valuation and Qualifying Accounts                         18
              Schedules other than that listed above are omitted because they are not
              required, not applicable or because the required information is shown in
              the consolidated financial statements or notes thereto.
        3.    Exhibits:
              A list of the exhibits required to be filed as part of this report is set
              forth in the Exhibit Index, which immediately precedes such exhibits, and
              is incorporated herein by this reference thereto.                              19
</TABLE>
 
     (b) Reports on Form 8-K
 
        No reports on Form 8-K were filed by the Registrant during the quarter
        ended October 28, 1995.
 
                                       15
<PAGE>   16
 
                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) 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: January 22, 1996                    By   /s/  ROBERT J. FRANKENBERG
 
                                            ------------------------------------
                                                   (Robert J. Frankenberg
                                                   Chairman of the Board,
                                               President and Chief Executive
                                                          Officer)
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
 
<TABLE>
<CAPTION>
                   NAME                                  TITLE                      DATE
------------------------------------------  --------------------------------  -----------------
<C>                                         <S>                               <C>
        /s/  ROBERT J. FRANKENBERG          Chairman of the Board,            January 22, 1996
------------------------------------------  President, Chief Executive
         (Robert J. Frankenberg)            Officer and Director (Principal
                                            Executive Officer)

          /s/  JAMES R. TOLONEN             Executive Vice President and      January 22, 1996
------------------------------------------  Chief Financial Officer
            (James R. Tolonen)              (Principal Financial Officer)

           /s/  STEPHEN C. WISE             Senior Vice President, Finance    January 22, 1996
------------------------------------------  (Principal Accounting Officer)
            (Stephen C. Wise)

           /s/  ALAN C. ASHTON              Director                          January 22, 1996
------------------------------------------
         (Alan C. Ashton, Ph.D.)

           /s/  ELAINE R. BOND              Director                          January 22, 1996
------------------------------------------
             (Elaine R. Bond)

         /s/  HANS WERNER HECTOR            Director                          January 22, 1996
------------------------------------------
           (Hans Werner Hector)

           /s/  JACK L. MESSMAN             Director                          January 22, 1996
------------------------------------------
            (Jack L. Messman)

          /s/  LARRY W. SONSINI             Director                          January 22, 1996
------------------------------------------
            (Larry W. Sonsini)

            /s/  IAN R. WILSON              Director                          January 22, 1996
------------------------------------------
             (Ian R. Wilson)

            /s/  JOHN A. YOUNG              Director                          January 22, 1996
------------------------------------------
             (John A. Young)
</TABLE>
 
                                       16
<PAGE>   17
 
            REPORT OF PRICE WATERHOUSE LLP, INDEPENDENT ACCOUNTANTS
 
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
OF WORDPERFECT CORPORATION
 
     In our opinion, the consolidated balance sheet and the related consolidated
statements of income, shareholders' equity and of cash flows (not presented
separately herein) of WordPerfect Corporation present fairly, in all material
respects, the financial position of WordPerfect Corporation and its subsidiaries
at December 31, 1993 and the results of their operations and their cash flows
for the year ended December 31, 1993 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provide a reasonable
basis for the opinion expressed above.
 
/s/ Price Waterhouse LLP
 
Salt Lake City, Utah
March 22, 1994
 
                                       17
<PAGE>   18
 
                                  NOVELL, INC.
 
                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
 
<TABLE>
<CAPTION>
                                                               ACCOUNTS RECEIVABLE ALLOWANCE
                                                               -----------------------------
                                                BALANCE AT      ADDITIONS                         BALANCE
                                                BEGINNING      CHARGED TO                         AT END
                                                OF PERIOD      OPERATIONS      DEDUCTIONS(1)     OF PERIOD
                                                ----------     -----------     -------------     ---------
                                                                      (IN THOUSANDS)
<S>                                             <C>            <C>             <C>               <C>
Fiscal year ended October 30, 1993............    $38,499        $22,047          $10,344          $50,202
Fiscal year ended October 29, 1994............    $50,202        $43,037          $10,305          $82,934
Fiscal year ended October 28, 1995............    $82,934        $(4,596)         $ 3,481          $74,857
</TABLE>
 
---------------
(1) Write-off of uncollectible accounts
 
                                       18
<PAGE>   19
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                       DESCRIPTION
------   ------------------------------------------------------------------------------------
<S>      <C>
  3.1    Restated Certificate of Incorporation.(4)(Exhibit 3.1)
  3.2    By-Laws.(1)(Exhibit 3.1)
  4.1    Reference is made to Exhibit 3.1.
  4.2    Form of certificate representing the shares of Novell Common Stock.(1)(Exhibit 4.3)
  4.3    Rights Agreement dated December 7, 1988, between Novell, Inc. and Mellon Bank (East)
         N.A., as Rights Agent, relating to the Shareholder Rights Plan.(3)(Exhibit 1)
 10.1    Novell, Inc., Employee Retirement and Savings Plan dated December 8,
         1986.(2)(Exhibit 10.9)
 10.2    Agreement and Plan of Reorganization dated March 23, 1989, among Novell, Inc.;
         Lansub Corporation; and Excelan, Inc.(5)(Appendix A)
 10.3    Novell, Inc. 1989 Employee Stock Purchase Plan.(6)(Exhibit 4.1)
 10.4    Agreement and Plan of Reorganization dated July 16, 1991, among Novell, Inc.; MDAC
         Corp.; and Digital Research Inc.(7)(Appendix A)
 10.5    Novell, Inc. 1991 Stock Plan.(8)(Exhibit 10.1)
 10.6    Agreement and Plan of Reorganization and Merger dated February 12, 1993, among
         Novell, Inc.; Novell Acquisition Corp.; UNIX System Laboratories, Inc.; and American
         Telephone and Telegraph Company.(9)(Appendix A)
 10.7    UNIX System Laboratories, Inc. Stock Option Plan.(10)(Exhibit 4.3)
 10.8    Agreement and Plan of Reorganization dated March 21, 1994 and amended May 31, 1994,
         among Novell, Inc.; Novell Acquisition Corp.; WordPerfect Corporation, Alan C.
         Ashton, Bruce W. Bastian, and Melanie L. Bastian.(11)(Appendix A & Exhibit 1.1)
 10.9    Novell, Inc. Novell/WordPerfect Stock Plan.(12)(Exhibit 10.1)
 11      Statement regarding computation of per share earnings.(13)
 13      Company's Annual Report to Shareholders for the fiscal year ended October 28,
         1995.(13)
 21      Subsidiaries of the Registrant.(13)
 23.1    Consent of Ernst & Young LLP, independent auditors.(13)
 23.2    Consent of Price Waterhouse LLP, independent accountants.(13)
 27      Financial Data Schedule.(13)

 (1)     Incorporated by reference to the Exhibit identified in parentheses, filed as an
         exhibit in the Registrant's Registration Statement on Form S-1, filed November 30,
         1984, and amendments thereto(File No. 2-94613).
 (2)     Incorporated by reference to the Exhibit identified in parentheses, filed as an
         exhibit in the Registrant's Annual Report on Form 10-K, filed for the fiscal year
         ended October 25, 1986(File No. 0-13351).
 (3)     Incorporated by reference to the Exhibit identified in parentheses, filed as an
         exhibit in the Registrant's Current Report on Form 8-K, dated December 7, 1988(File
         No. 0-13351).
 (4)     Incorporated by reference to the Exhibit identified in parentheses, filed as an
         exhibit in the Registrant's Annual Report on Form 10-K, filed for the fiscal year
         ended October 29, 1988 (File No. 0-13351).
 (5)     Incorporated by reference to the Appendix identified in parentheses, filed as an
         appendix in the Registrant's Registration Statement on Form S-4, filed May 9, 1989
         (File No. 33-28470).
 (6)     Incorporated by reference to the Exhibit identified in parentheses, filed as an
         exhibit in the Registrant's Registration Statement on Form S-8, filed September 28,
         1989 (File No. 33-31299).
 (7)     Incorporated by reference to the Appendix identified in parentheses, filed as an
         appendix in the Registrant's Registration Statement on Form S-4, filed September 24,
         1991 (File No. 33-42254).
 (8)     Incorporated by reference to the Exhibit identified in parentheses, filed as an
         exhibit in the Registrant's Registration Statement on Form S-8, filed June 5, 1992
         (File No. 33-48395).
 (9)     Incorporated by reference to the Exhibit identified in parentheses, filed as an
         exhibit in the Registrant's Registration Statement of Form S-4, filed May 13, 1993
         (File No. 33-60120).
(10)     Incorporated by reference to the Exhibit identified in parentheses, filed as an
         exhibit in the Registrant's Registration Statement on Form S-8, filed July 2, 1993
         (File No. 33-65440).
(11)     Incorporated by reference to the Appendix and Exhibit identified in parentheses,
         filed as an appendix and exhibit in the Registrant's Registration Statement on Form
         S-4, filed June 13, 1994 (File No. 33-53215).
(12)     Incorporated by reference to the Exhibit identified in parentheses, filed as an
         exhibit in the Registrant's Registration Statement of Form S-8, filed July 8, 1994
         (File No. 33-54483).
(13)     Filed herewith.
</TABLE>
 
                                       19