##### Table of Contents





UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C. 20549
    Form 10-K
    þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended
    October 31, 2007ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period from
    
    to
    
    .   Commission File Number 0-13351
  NOVELL, INC.
 (Exact name of registrant as
    specified in its charter)
  Delaware

87-0393339(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)   404 Wyman Street, Suite 500
 Waltham, MA 02451
 (Address of principal executive
    offices including zip code)
  (781) 464-8000
 (Registrants telephone
    number, including area code)
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which
    RegisteredCommon Stock, par value $.10 per share

The NASDAQ Stock Market LLC
    (NASDAQ Global Select Market)   Securities registered pursuant to Section 12(g) of the
    Act: None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
    Rule 12b-2
  þ o o
  Rule 12b-2 o þ
    DOCUMENTS INCORPORATED BY REFERENCE




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##### 





NOVELL,
    INC.
  TABLE OF
    CONTENTS
  PagePART IItem 1.

Business


1Item 1A.

Risk Factors


13Item 1B.

Unresolved Staff Comments


19Item 2.

Properties


19Item 3.

Legal Proceedings


20Item 4.

Submission of Matters to a Vote of Security
    Holders


22PART IIItem 5.

Market for Registrants Common Equity,
    Related Stockholder Matters, and Issuer Purchases of Equity
    Securities


23Item 6.

Selected Financial Data


24Item 7.

Managements Discussion and Analysis of
    Financial Condition and Results of Operations


26Item 7A.

Quantitative and Qualitative Disclosures About
    Market Risk


52Item 8.

Financial Statements and Supplementary Data


54Item 9.

Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


120Item 9A.

Controls and Procedures


120Item 9B.

Other Information


121PART IIIItem 10.

Directors, Executive Officers and Corporate
    Governance


121Item 11.

Executive Compensation


122Item 12.

Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


122Item 13.

Certain Relationships and Related Transactions
    and Director Independence


122Item 14.

Principal Accountant Fees and Services


122PART IVItem 15.

Exhibits and Financial Statement Schedules


122EXHIBIT 21EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2   i




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NOVELL,
    INC.
  FORM 10-K
  This Annual Report on
    Form 10-K
    contains certain forward-looking statements within the meaning
    of Section 27A of the Securities Act of 1933, as amended,
    and Section 21E of the Securities Exchange Act of 1934, as
    amended. All statements, other than statements of historical
    fact, regarding our strategy, future operations, financial
    position, estimated revenue, projected costs, projected savings,
    prospects, plans, opportunities and objectives constitute
    forward-looking statements. The words
    may, will, expect,
    plan, anticipate, believe,
    estimate, potential, or
    continue and similar types of expressions identify
    forward-looking statements, although not all such statements
    contain these identifying words. These forward-looking
    statements are based upon information that is currently
    available to us
    and/or
    managements current expectations, speak only as of the
    date hereof, and are subject to risks and uncertainties. We
    expressly disclaim any obligation, except as required by law, or
    undertaking to update or revise any forward-looking statements
    contained or incorporated by reference herein to reflect any
    change or expectations with regard thereto or to reflect any
    change in events, conditions, or circumstances on which any such
    forward-looking statement is based, in whole or in part. Our
    actual results may differ materially from the results discussed
    in or implied by such forward-looking statements. We are subject
    to a number of risks, some of which may be similar to those of
    other companies of similar size in our industry, including
    pre-tax losses, rapid technological changes, competition,
    limited number of suppliers, customer concentration, failure to
    successfully integrate acquisitions, adverse government
    regulations, failure to manage international activities, and
    loss of key individuals. Risks that may affect our operating
    results include, but are not limited to, those discussed in
    Part I Item 1A, titled Risk Factors.
    Readers should carefully review the risk factors described in
    this document and in other documents that we file from time to
    time with the Securities and Exchange Commission.
  PART I
  Item 1.
    Business  The
    Company
      ® ® ®
     1




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Open Platform Solutions.
    
    SUSE Linux Enterprise Server is an enterprise-class, open source
    server operating system for professional deployment in
    heterogeneous IT environments of all sizes and sectors. This
    operating system integrates all server services relevant in
    Linux, including integrated virtualization, and constitutes a
    stable and secure platform for the cost-efficient operation of
    IT environments.
    SUSE Linux Enterprise Desktop is a business desktop product that
    brings together the Linux operating environment with a complete
    set of office applications. Included among the more significant
    business applications are OpenOffice (an office productivity
    suite), Mozillas Firefox browser, and Novell
    Evolutiontm,
    a collaboration client for Linux.    
    openSUSE®
    is a reliable and secure home computing product, which includes
    an easy-to-install Linux operating system that lets users browse
    the Web, send
    e-mail, chat
    with friends, organize digital photos, play movies and songs,
    and create documents and spreadsheets. It also allows users to
    host a Web site or blog, create a home network and develop their
    own applications.
    SUSE Engineering is product development work we perform for
    customers.  Identity and Security Management.
    
    Identity Manager is a powerful data-sharing and synchronization
    solution, often referred to as a meta-directory solution,
    which automatically distributes new and updated information
    across every designated application and directory on a network.
    This ensures that trusted customers, partners, and suppliers are
    accessing consistent information, regardless of the applications
    and directories to which they have access.
    Access
    Manager®
    helps customers maximize access without limiting security or
    control. It simplifies and safeguards online asset-sharing,
    allowing customers to control access to Web-based and
    traditional business applications. Trusted users gain secure
    authentication and access to portals, Web-based content and
    enterprise applications while IT administrators gain centralized
    policy-based management of authentication and access privileges
    for Web-based environments and enterprise applications. Access
    Manager supports a broad range of platforms and directory
    services.     2




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
    SecureLogin is a directory-integrated authentication solution
    that delivers reliable, single sign-on access across
    multi-platform networks, simplifying password management by
    eliminating the need for users to remember more than one
    password.
    Sentineltm
    automates the monitoring of IT for effectiveness allowing users
    to detect and resolve threats in real-time. Sentinel also
    provides documented evidence needed by some users to comply with
    regulatory and industry compliance requirements.    
    Novell® eDirectorytm
    is a full-service, platform-independent directory that
    significantly simplifies the complexities of managing users and
    resources in a mixed Linux, NetWare, UNIX, and Windows
    environment. It is a secure, scalable, directory service that
    allows organizations to centrally store and manage information
    across all networks and operating systems and leverage existing
    IT investments.  Systems and Resource Management.
    
    ZENworks Suite
    ZENworks Patch Management
    ZENworks Asset Management
    ZENworks Linux Management
    ZENworks Configuration Management
    ZENworks Orchestrator
    ZENworks Security Management  Workgroup.
  
    Open Enterprise Server (OES) is a secure, highly
    available suite of services that provides proven networking,
    communication, collaboration and application services in an
    open, easy-to-deploy environment. OES provides customers the
    choice of deploying on either NetWare or SUSE Linux Enterprise
    Server and provides common management tools, identity-based
    services and support backed by Novell.
    NetWare and other NetWare-related products:  
    NetWare is our proprietary operating system platform that offers
    secure continuous access to core network resources such as
    files, printers, directories,
    e-mail and
    databases seamlessly across all types of networks, storage
    platforms and client desktops.
    Novell Cluster
    Servicestm
    is a scalable, highly available Storage Area Network resource
    management tool that reduces administrative costs and complexity
    of delivering uninterrupted access to information and resources.     3




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
    Collaboration products:  
    GroupWise®
    collaboration products offer both traditional and mobile users
    solutions for communication over intranets, extranets and the
    Internet.
    Teaming + Conferencing allows for social networking within an
    enterprise where subject matter experts are easily identified
    and where new team workspaces can be easily formed.  
    Other workgroup products:  
    BorderManager®
    is a suite of network services used to connect a network
    securely to the Internet or any other network, allowing outside
    access to intranets and user access to the Internet.
    Novell Open Workgroup Suite provides organizations of all sizes
    with a secure, flexible and cost-effective IT infrastructure and
    a proven set of workgroup services. Unlike a proprietary,
    Windows-centric solution, the Novell Open Workgroup Suite is
    comprised of a package of open, standards-based software from
    all business segments. This suite offers a low-cost, open
    alternative to Microsoft and includes a complete infrastructure
    and productivity solution from the desktop to the server and
    includes the following components:
    Open Enterprise Server
    GroupWise
    ZENworks Suite
    SUSE Linux Enterprise Desktop  open source desktop
    OpenOffice.org for Linux and Windows  open source
    productivity suite    
    Professional services: We provide technical expertise to
    deliver world-class infrastructure solutions, based on an
    innovative approach focused on solving our customers
    business problems. We deliver services ranging from discovery
    workshops to strategy projects to solution implementations, all
    using a consistent, well-defined methodology. Our professional
    services approach is based on a strong commitment to open
    standards, interoperability, and the right blend of technology
    from Novell and other leading vendors.
    Technical support: We provide phone-based, web-based, and
    onsite technical support for our proprietary and open source
    products through our Premium Service program. Premium Service
    provides customers with the flexibility to select the
    appropriate level of technical support services, which may
    include stated response times, around-the-clock support, service
    account management, and dedicated resources, such as
    Novells most experienced engineers. The Dedicated Support
    Engineer, Primary Support Engineer, Advantage Support Engineer,
    and Account Management programs allow customers to build an
    ongoing support relationship with Novell at an appropriate level
    for their needs. We have committed a significant amount of
    technical support resources to the Linux open source platform.
    We also offer a full array of remote monitoring services and
    managed services. These services help customers increase system
    uptime, leveraging our experts to monitor and maintain the
    technologies our customers have employed.
    Training services: We accelerate the adoption and enable
    the effective use of our products and solutions through the
    delivery of timely and relevant instructor-led and
    technology-based training courses, assessments and performance
    consulting services. Programs are delivered directly to
    customers and through our global channel of authorized Novell
    training partners. Our courses provide customers with a thorough
    understanding of the implementation, configuration, and
    administration of our products and solutions. Additionally, we
    offer performance consulting services that provide clients and
    partners with an evaluation     4




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tm
  Strategy
      Product
    Strategy
            Professional
    Services Strategy
    Alliances
    and Partnership Strategy
       5




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
    Development of technologies to optimize SLES and Windows, each
    running as guests in a virtualized setting on the other
    operating system;
    Development of management tools for managing heterogeneous
    virtualization environments, to enable each partys
    management tools to command, control and configure the other
    partys operating system in a virtual machine environment;
    Development of translators to improve interoperability between
    Microsoft Office and OpenOffice document formats; and
    Collaboration on improving directory and identity
    interoperability and identity management between Microsoft
    Active Directory software and Novell eDirectory software.  tm
    ®
  Multi-channel
    Sales Strategy
    Personnel
    Development Strategy
       6




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Acquisitions
    and Dispositions
      Segment
    and Geographic Information
      
    Open platform solutions
    Identity and security management
    Systems and resource management
    Workgroup      
    Americas  included the United States, Canada and
    Latin America
    EMEA  included Eastern and Western Europe, Middle
    East, and Africa
    Asia Pacific  included China, Southeast Asia,
    Australia, New Zealand, Japan, and India           7




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Product
    Development
        Sales and
    Marketing
    Distributors.
  VARs and Systems Integrators.
  OEMs/Independent Hardware Vendors
    (IHVs)/Independent Software Vendors
    (ISVs). and/or
  End-User Customers.
  Marketing Strategy.
     8




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Marketing Initiatives. tm
  International Revenue.
  Major
    Customers
    Manufacturing
    Suppliers
    Backlog
      Competition
    
    our ability to preserve our traditional customer base;
    our ability to sell overall solutions comprised of products and
    services provided by us and our partners;
    the timing and market acceptance of new solutions developed by
    us and our competitors;
    brand and product awareness;
    the ability of Linux and open source solutions to provide a
    lower total cost of ownership;
    the completeness of our suite of product and solutions offerings
    to solve customer problems;
    our ability to establish and maintain key strategic
    relationships with distributors, resellers, independent software
    vendors, and other partners; and
    the pricing of our products and services and the pricing
    strategies of our competitors.     9




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Copyright,
    Licenses, Patents, and Trademarks
                 10




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Seasonality
    Corporate
    Information
  (781) 464-8000. (801) 861-7000.
  http://www.novell.com/ir. (800) 317-3195 Form 10-K
  Employees
      Executive
    Officers of the Registrant
    Name

Age

PositionRonald W. Hovsepian


46


President and Chief Executive OfficerDr. Jeffrey Jaffe


53


Executive Vice President and Chief Technology OfficerTom Francese


57


Executive Vice President, Worldwide SalesAlan J. Friedman


59


Senior Vice President, PeopleJoseph A. LaSala, Jr.


53


Senior Vice President, General Counsel and SecretaryColleen OKeefe


51


Senior Vice President of ServicesJohn Dragoon


47


Senior Vice President and Chief Marketing OfficerDana C. Russell


46


Senior Vice President and Chief Financial Officer   Ronald W.
    Hovsepian
       11




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17-year
  Dr. Jeffrey
    Jaffe
    Tom
    Francese
  30-year
  Alan J.
    Friedman
    Joseph A.
    LaSala, Jr.
    Colleen
    OKeefe
    John
    Dragoon
       12




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Dana C.
    Russell
    Item 1A.
    Risk
    Factors  Matters
    related to or arising out of our historical stock-based
    compensation practices, including government actions, litigation
    matters, and downgrades in our credit ratings, could have a
    material adverse effect on the Company.
        We may
    experience difficulties, delays or unexpected costs in
    completing our cost reduction and sales growth strategic
    initiatives and may not achieve the anticipated benefits of
    these initiatives.
       13




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Our shift
    to a sales strategy more focused on indirect sales may result in
    decreased or fluctuating revenue.
      Increasing
    our foreign research and development operations exposes us to
    risks that are beyond our control and could affect our ability
    to operate successfully.
  set-up,
         14




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Our
    NetWare revenue stream continues to decline.
    If our
    identity-driven computing solutions, systems and resource
    managements solutions, and Linux and platform services solutions
    do not grow at the rate we anticipate, our growth will be
    negatively impacted.
    
    the growth of these markets;
    our development of key product solutions and upgrades;
    the acceptance of our solutions particularly by enterprise
    companies, large industry partners and major accounts;
    the decisions by customers to upgrade from older versions of our
    products to newer versions; and
    the successful sale of technical support and other Novell
    solutions along with our products.  We may
    not be able to successfully compete in a challenging market for
    infrastructure software services.
    
    the pricing of our products and services and the pricing
    strategies of our competitors;
    the timing and market acceptance of new solutions developed by
    us and our competitors;
    brand and product awareness;
    the performance, reliability and security of our products;
    the ability to preserve our legacy customer base;
    our ability to establish and maintain key strategic
    relationships with distributors, resellers and other
    partners; and
    our ability to attract and retain highly qualified development,
    consulting and managerial personnel.     15




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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.
    In the
    event claims for indemnification are brought for intellectual
    property infringement, we could incur significant expenses,
    thereby adversely affecting our results of operations.
    Legal
    actions taken by claimants alleging intellectual property
    infringement could adversely affect our revenue and business
    plan if these legal actions cause a reduction in demand for our
    SUSE Linux and
    Ximian®
    products.
    We have
    experienced delays in the introduction of new products due to
    various factors, resulting in lost revenue.
       16




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We
    benefit from the open source contributions of third-party
    programmers and corporations, and if they cease to make these
    contributions, our product strategy could be adversely
    affected.
    We may
    not be able to attract and retain qualified personnel because of
    the intense competition for qualified personnel in the software
    industry.
    If our
    relationships with other IT services organizations become
    impaired, we could lose business.
    The
    success of our acquisitions is dependent on our ability to
    integrate personnel, operations and technology, and if we are
    not successful, our revenue will not grow at the rate we
    anticipate.
    
    obtaining synergies from the companies organizations;
    obtaining synergies from the companies service and product
    offerings effectively and quickly;
    bringing together marketing efforts so that the market receives
    useful information about the combined companies and their
    products;
    coordinating sales efforts so that customers can do business
    easily with the combined companies;
    integrating product offerings, technology, back office, human
    resources, accounting and financial systems;
    assimilating employees who come from diverse corporate cultural
    backgrounds into a common business culture revolving around our
    solutions offerings; and
    retaining key officers and employees who possess the necessary
    skills and experience to quickly and effectively transition and
    integrate the businesses.       17




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Our
    financial and operating results vary and may fall below
    estimates, which may cause the price of our
    common stock to decline.
    
    timing of orders from customers and shipments to customers;
    impact of foreign currency exchange rates on the price of our
    products in international locations;
    inability to respond to the decline in revenue through the
    distribution channel; and
    inability to deliver solutions as expected by our customers and
    systems integration partners.      We face
    increased risks in conducting a global business.
    
    costs and difficulties in staffing and managing international
    operations;
    unexpected changes in regulatory requirements;
    tariffs and other trade barriers;
    difficulties in enforcing contractual and intellectual property
    rights;
    longer payment cycles;
    local political and economic conditions;
    potentially adverse tax consequences, including restrictions on
    repatriating earnings and the threat of double
    taxation; and
    fluctuations in currency exchange rates, which can affect demand
    and increase our costs.  We may
    not be able to protect our confidential information, and this
    could adversely affect our business.
       18




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Our
    professional services contracts contain pricing risks and, if
    our estimates prove inaccurate, we could lose money.
    Our
    professional services clients may cancel or reduce the scope of
    their engagements with us on short notice.
    Conversion
    of our debentures into shares of our common stock will dilute
    the ownership interests of existing stockholders.
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties  and/or
         19




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Item 3.
    Legal
    Proceedings           20




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21




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Item 4.
    Submission
    of Matters to a Vote of Security Holders  2007
    Annual Meeting of Stockholders
    I.  Election
    of Directors
    Nominee

Votes For


Votes Against


Votes AbstainingAlbert Aiello


288,894,766



5,048,680



2,280,017Fred Corrado


287,977,744



5,855,285



2,390,434Richard L. Crandall


288,132,402



5,620,548



2,470,513Ronald W. Hovsepian


289,980,759



3,872,639



2,370,065Patrick S. Jones


289,292,286



4,513,171



2,418,006Claudine B. Malone


288,220,382



5,552,341



2,450,740Richard L. Nolan


280,025,023



13,797,033



2,401,407Thomas G. Plaskett


287,703,509



5,786,802



2,733,152John W. Poduska, Sr.


287,971,862



6,000,680



2,250,957James D. Robinson, III


276,536,755



17,369,912



2,316,796Kathy Brittain White


288,845,369



4,997,120



2,380,974   II.
    Ratification
    of Independent Public Accounting Firm    Votes For

Votes Against


Votes Abstaining291,186,752


2,903,501



2,133,210      22




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##### Table of Contents



PART II
  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder
    Matters, and Issuer Purchases of Equity Securities    First


Second


Third


FourthQuarter


Quarter


Quarter


QuarterFiscal 2007High

$
7.35


$
7.63


$
8.26


$
8.10Low

$
5.70


$
6.18


$
6.68


$
5.76Fiscal 2006High

$
9.81


$
9.83


$
8.56


$
6.98Low

$
7.17


$
7.00


$
5.73


$
5.75     Issuances
    of Unregistered Common Stock
    Issuer
    Purchases of Equity Securities
    (c)


(d)Total Number


Maximumof Shares


Dollar Value ofPurchased


Shares thatas Part of


May Yet Be(a)


(b)


Publicly


PurchasedTotal Number


Average


Announced


Under theof Shares


Price Paid


Plans or


Plans orPeriod

Purchased(1)


Per Share


Programs


Programs(In thousands, except per share amounts)August 1, 2007 through August 31, 2007


3


$
6.56






$
September 1, 2007 through September 30, 2007


11


$
7.24






$
October 1, 2007 through October 31, 2007


17


$
7.52






$
Total


31


$
7.34






$
     (1)
    
    The total number of shares purchased includes shares surrendered
    to Novell to satisfy tax withholding obligations in connection
    with the vesting of restricted stock units, restricted stock
    rights, and stock issued under a stock-based compensation plan
    totaling 31,365 shares in the months of August, September
    and October of fiscal 2007.     23




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Performance
    Graph
    COMPARISON
    OF 5 YEAR CUMULATIVE TOTAL RETURN
  
  Base


Indexed/Cumulative ReturnsPeriod


Fiscal Year Ended October 31,Company/Index Name

2002


2003


2004


2005


2006


2007Novell, Inc.

$
100



241.56



295.88



313.58



246.91



311.11S&P 500 Index

$
100



120.80



132.18



143.71



167.19



191.54Nasdaq Computer & Data Processing Index

$
100



119.39



130.58



144.23



164.99



209.38Dow Jones U.S. Software

$
100



115.49



122.46



129.61



148.37



183.06   Item 6.
    Selected
    Financial Data       24




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##### Table of Contents



Fiscal Year EndedOctober 31,


October 31,


October 31,


October 31,


October 31,2007


2006 (a)


2005 (b)


2004


2003(In thousands, except per share data)Statements of operationsNet revenue (c)

$
932,499


$
919,331


$
986,149


$
971,756


$
938,394Gross profit (c)


672,245



638,319



678,909



676,786



612,196Income (loss) from operations (c)


(55,768
)


(42,194
)


423,611



47,523



(35,477
)Income (loss) from continuing operations before taxes


8,415



27,180



457,423



57,398



(61,619
)Income tax expense


34,691



22,642



86,612



11,335



102,882Income (loss) from continuing operations


(26,276
)


4,538



370,811



46,063



(164,501
)Income (loss) from discontinued operations, net of taxes


(18,184
)


15,015



5,911



11,125



2,597Net income (loss) before accounting change


(44,460
)


19,553



376,722



57,188



(161,904
)Cumulative effect of accounting change, net of tax (d)






(897
)










Net income (loss)


(44,460
)


18,656



376,722



57,188



(161,904
)Net income (loss) from continuing operations, diluted

$
(26,276
)

$
4,332


$
372,708


$
19,789


$
(164,501
)Net income (loss) available to common stockholders, diluted

$
(44,460
)

$
18,220


$
378,159


$
30,818


$
(161,904
)Net income (loss) from continuing operations per common share,
    diluted

$
(0.08
)

$
0.01


$
0.85


$
0.05


$
(0.44
)Net income (loss) per common share, diluted

$
(0.13
)

$
0.05


$
0.86


$
0.08


$
(0.44
)Balance sheetCash, cash equivalents and short-term investments

$
1,857,637


$
1,466,287


$
1,654,904


$
1,211,467


$
751,852Working capital


1,332,218



1,075,580



1,284,901



843,930



406,014Total assets


2,854,394



2,449,723



2,761,858



2,293,358



1,569,572Senior convertible debentures


600,000



600,000



600,000



600,000



Series B Preferred Stock






9,350



9,350



25,000



Total stockholders equity (e)

$
1,158,326


$
1,104,650


$
1,386,486


$
963,364


$
934,470     (a)
    
    In the first quarter of fiscal 2006, we adopted FASB Statement
    No. 123(R), which required us to record compensation
    expenses related to stock awards. For fiscal 2007 and 2006,
    compensation expense totaled $34.3 million and
    $35.3 million, respectively. Prior years were not restated
    to include such expense.(b)
    
    In the first quarter of fiscal 2005, we recognized a gain of
    $447.6 million on a litigation settlement with Microsoft to
    settle potential anti-trust litigation.(c)
    
    Income (loss) from operations for all periods presented excludes
    the results of Celerant, Salmon, and CTP Switzerland, which have
    been classified as discontinued operations.(d)
    
    In May 2006, we adopted Financial Interpretation No. 47,
    Accounting for Conditional Asset Retirement
    Obligations (FIN 47), which required us
    to recognize the cumulative effect of initially applying
    FIN 47 as a change in accounting principle. In fiscal 2002,
    we adopted Statement of Financial Accounting Standards
    No. 142, Goodwill and Other Intangible Assets,
    resulting in a transitional goodwill impairment loss.(e)
    
    As discussed in Note C to the consolidated financial statements
    contained in this report, in accordance with the provisions of
    SAB 108, we decreased beginning retained earnings at November 1,
    2005 by approximately $19.2 million, from $984.1 million to
    $964.9 million with the offset to additional paid-in capital to
    record a cumulative after-tax stock-based compensation expense
    that should have been recognized in the consolidated financial
    statements during the period 1997 through 2005. Had the
    stock-based compensation expense been     25




---



##### Table of Contents



recognized during that period, net income would have been
    reduced by the following amounts: $2.9 million in fiscal 2003,
    $0.7 million in fiscal 2004, and $0.2 million in fiscal 2005.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Overview
        
    Within our open platform solutions business unit segment, Linux
    and open source products remain an important growth business.
    During the year we established and expanded relationships with
    several strategic partners to increase the reach of both our
    server and desktop products. Revenue from our Linux platform
    products increased 69% year-over-year in fiscal 2007. The
    strength of our revenue growth was due in part to our agreement
    with Microsoft which was signed in November 2006.
    We continue to expand our position in the identity and security
    management market by offering products that deliver a complete,
    integrated solution in the areas of security, compliance, and
    governance issues. Our unique role-based, policy-driven approach
    has received positive industry reviews. Revenue from our
    identity and access management products increased 7% in fiscal
    2007 as compared to the same period a year ago.
    Systems and resource management products continue to be an
    important part of our product offering. Our strategy is to
    provide a complete desktop to data center offering,
    with leadership in virtualization for both Linux and
    mixed-source environments. Earlier this year, we announced the
    general availability of two major products, ZENworks
    Configuration Management and ZENworks Orchestrator. We believe
    these products will become a new source of growth in the future.
    Revenue was relatively flat in fiscal 2007 as the market was
    anticipating a refreshed product offering.
    Our workgroup revenue base is an important source of cash flow
    and provides us with a potential opportunity to sell additional
    products and services. We continued efforts to stabilize the
    decline of revenue from our legacy products, such as Open
    Enterprise Server, NetWare and NetWare-related products. At the
    end of fiscal 2007, we announced the general availability of
    Open Enterprise Server 2, which completes the transition of
    delivering NetWare services on Linux. We also introduced Novell
    Teaming + Conferencing, which extends the value of our
    collaboration offering. Our Workgroup business declined 9% in
    fiscal 2007, excluding the impact of the Microsoft agreement, as
    compared to the same period a year ago.         26




---



##### Table of Contents



Critical
    Accounting Policies
    Revenue Recognition and Related Reserves. 30-day and/or
  97-2,
  
    Persuasive evidence of an arrangement exists  We
    require evidence of an agreement with a customer specifying the
    terms and conditions of the products or services to be delivered
    typically in the form of a signed contract or statement of work
    accompanied by a purchase order.
    Delivery has occurred  For software licenses,
    delivery takes place when the customer is given access to the
    software programs via access to a website or shipped medium. For
    services, delivery takes place as the services are provided.
    The fee is fixed or determinable  Fees are fixed or
    determinable if they are not subject to cancellation or other
    payment terms that exceed our standard payment terms. Typical
    payment terms are net 30 days.
    Collection is probable  We perform a credit review of
    all customers with significant transactions to determine whether
    a customer is creditworthy and collection is probable. Prior
    Novell-established credit history, credit reports, financial
    statements, and bank references are used to assess
    creditworthiness.    
    Software license fees for our SUSE Linux product are recognized
    when the product is sold through to an end customer;
    Software license fees for sales through OEMs are recognized upon
    receipt of license activity or royalty reports;
    All other software license fees are recognized upon delivery of
    the software;     27




---



##### Table of Contents




    Software maintenance, upgrade protection, technical support, and
    subscriptions of SLES are recognized ratably over the contract
    term; and
    Professional services, training and other similar services are
    recognized as the services are performed.            time-and-materials time-and-materials
     28




---



##### Table of Contents



Microsoft
    Agreements-related Revenue
        
    Development of technologies to optimize SLES and Windows, each
    running as guests in a virtualized setting on the other
    operating system;
    Development of management tools for managing heterogeneous
    virtualization environments, to enable each partys
    management tools to command, control and configure the other
    partys operating system in a virtual machine environment;
    Development of translators to improve interoperability between
    Microsoft Office and OpenOffice document formats; and
    Collaboration on improving directory and identity
    interoperability and identity management between Microsoft
    Active Directory software and Novell eDirectory software.      97-2,
     29




---



##### Table of Contents



Long-lived Assets.
        e-Security
     30




---



##### Table of Contents



Deferred Tax Assets.
  Loss Contingency Accruals and
    Restructurings.
  Share-based Payments.
         31




---



##### Table of Contents



SAB 108
             32




---



##### Table of Contents



Historical
    Stock-Based Compensation Practices
        Administrative Corrections
  Number of Shares Approved Not Specified
  Authorization Incomplete or Received Late
         33




---



##### Table of Contents



(In thousands)Cumulative prior to fiscal 2005

$
18,989Fiscal 2005


201Total adjustment at November 1, 2005

$
19,190   Acquisitions
    and Equity Investments
  Senforce
    RedMojo
    e-Security
  e-Security, e-Security e-Securitys e-Securitys
  Open
    Invention Network, LLC
       34




---



##### Table of Contents



Onward
    Novell
    Tally
    Systems Corp.
    Immunix,
    Inc.
    Divestitures
  CTP
    Switzerland
      Salmon
       35




---



##### Table of Contents



Celerant
      Fiscal Year Ended2007


2006


2005(In thousands)CTP Switzerland net revenue

$
25,625


$
26,877


$
29,268Salmon net revenue


7,351



21,069



23,806Celerant net revenue






83,341



158,472$
32,976


$
131,287


$
211,546CTP Switzerland income (loss) before taxes

$
739


$
1,936


$
(599
)Salmon income before taxes


83



1,740



1,127Celerant income before taxes






1,783



8,191Income before taxes


822



5,459



8,719Salmon impairment of long-lived assets


(10,848
)






Salmon gain on sale


628







CTP Switzerland impairment of goodwill


(3,903
)






CTP Switzerland impairment loss


(4,952
)






Celerant gain on sale






11,117



Gain (loss) on discontinued operations


(19,075
)


11,117



Income tax (expense) benefit


69



(1,561
)


(2,808
)Income (loss) from discontinued operations

$
(18,184
)

$
15,015


$
5,911      36




---



##### Table of Contents



Japan
    Consulting Group
  12-month
    Results
    of Operations
  Revenue
    Fiscal Year Ended October 31,


2007 vs


2006 vs2007


2006


2005


2006


2005(In thousands)


(Percentage change)Software licenses

$
175,877


$
173,678


$
213,803



1
%


(19
)%Maintenance and subscriptions


494,675



479,283



489,266



3
%


(2
)%Services


261,947



266,370



283,080



(2
)%


(6
)%Total net revenue

$
932,499


$
919,331


$
986,149



1
%


(7
)%              37




---



##### Table of Contents




    Open platform solutions
    Identity and security management
    Systems and resource management
    Workgroup
    Business consulting  Net revenue in the open platform solutions segment was as
    follows:
  Fiscal Year Ended October 31,


2007 vs


2006 vs2007


2006


2005


2006


2005(In thousands)





(Percentage change)Software licenses

$
197


$
605


$
268



(67
)%


126
%Maintenance and subscriptions


83,454



52,837



53,330



58
%


(1
)%Services


36,212



20,019



15,120



81
%


32
%Total net revenue

$
119,863


$
73,461


$
68,718



63
%


7
%       Net revenue in the identity and security management segment
    was as follows:
  Fiscal Year Ended October 31,


2007 vs


2006 vs2007


2006


2005


2006


2005(In thousands)





(Percentage change)Software licenses

$
50,419


$
46,190


$
39,364



9
%


17
%Maintenance and subscriptions


66,133



69,506



56,595



(5
)%


23
%Services


88,189



94,242



105,345



(6
)%


(11
)%Total net revenue

$
204,741


$
209,938


$
201,304



(2
)%


4
%        38




---



##### Table of Contents



Net revenue in the systems and resource management segment
    was as follows:
  Fiscal Year Ended October 31,


2007 vs


2006 vs2007


2006


2005


2006


2005(In thousands)


(Percentage change)Software licenses

$
35,196


$
30,839


$
46,539



14
%


(34
)%Maintenance and subscriptions


100,034



103,740



97,819



(4
)%


6
%Services


40,370



39,604



37,790



2
%


5
%Total net revenue

$
175,600


$
174,183


$
182,148



1
%


(4
)%       Net revenue in the workgroup segment was as follows:
  Fiscal Year Ended October 31,


2007 vs


2006 vs2007


2006


2005


2006


2005(In thousands)


(Percentage change)Software licenses

$
90,065


$
96,044


$
127,632



(6
)%


(25
)%Maintenance and subscriptions


245,054



253,200



281,522



(3
)%


(10
)%Services


97,176



108,289



113,174



(10
)%


(4
)%Total net revenue

$
432,295


$
457,533


$
522,328



(6
)%


(12
)%       Business
    consulting segment
    Deferred
    revenue
       39




---



##### Table of Contents



Gross
    profit
  Fiscal Year Ended October 31,


2007 vs


2006 vs2007


2006


2005


2006


2005($ in thousands)


(Percentage change)Software licenses gross profit

$
156,399


$
155,517


$
192,203



1
%


(19
)%percentage of related revenue


89
%


90
%


90
%Maintenance and subscriptions gross profit

$
446,403


$
429,603


$
440,233



4
%


(2
)%percentage of related revenue


90
%


90
%


90
%Services gross profit

$
69,443


$
53,199


$
46,473



31
%


14
%percentage of related revenue


27
%


20
%


16
%Total gross profit

$
672,245


$
638,319


$
678,909



5
%


(6
)%percentage of revenue


72
%


69
%


69
%         Fiscal Year Ended October 31,


2007 vs


2006 vs2007


2006


2005


2006


2005($ in thousands)


(Percentage change)Open platform solutions

$
79,779


$
41,237


$
38,953



93
%


6
%percentage of related revenue


67
%


56
%


57
%Identity and security management

$
98,459


$
91,513


$
73,305



8
%


25
%percentage of related revenue


48
%


44
%


36
%Systems and resource management

$
141,386


$
141,407


$
149,133




%


(5
)%percentage of related revenue


81
%


81
%


82
%Workgroup

$
357,046


$
366,507


$
415,092



(3
)%


(12
)%percentage of related revenue


83
%


80
%


79
%Business consulting

$



$
1,751


$
2,432




%


(28
)%percentage of related revenue



%


42
%


21
%Stock-based compensation expense

$
(4,425
)

$
(4,096
)

$
(6
)


8
%



%percentage of related revenue



%



%



%Total gross profit

$
672,245


$
638,319


$
678,909



5
%


(6
)%percentage of revenue


72
%


69
%


69
%     
    Open platform solutions  increased primarily due to
    higher related revenue and the related economies of scale, due
    in part to the impact of the Microsoft transaction.     40




---



##### Table of Contents




    Identity and security management  increased primarily
    due to improved profitability from related professional services
    engagements and lower royalty costs.
    Systems and resource management  remained flat.
    Workgroup  increased due primarily to lower
    professional services costs.
    Business consulting  eliminated with the sale of our
    Japan consulting group in fiscal 2006. As noted above, results
    of operations for CTP Switzerland and Salmon (previous
    components of business consulting) are classified as
    discontinued operations in our statements of operations.    
    Open platform solutions  remained relatively flat.
    Identity and security management  increased primarily
    due to improved profitability from related professional services
    engagements and lower royalty costs.
    Systems and resource management  decreased due to
    higher royalty costs.
    Workgroup  remained relatively flat.
    Business consulting  decreased due to the sale of our
    Japan consulting group in fiscal 2006. As noted above, results
    of operations for CTP Switzerland and Salmon (previous
    components of business consulting) are classified as
    discontinued operations in our statements of operations.  Operating
    expenses
  Fiscal Year Ended October 31,


2007 vs


2006 vs2007


2006


2005


2006


2005($ in thousands)


(Percentage change)Sales and marketing

$
346,777


$
353,750


$
355,527



(2
)%



%as a percent of net revenue


37
%


38
%


36
%Product development

$
208,370


$
180,380


$
199,971



16
%


(10
)%as a percent of net revenue


22
%


20
%


20
%General and administrative

$
127,118


$
126,924


$
90,405




%


40
%as a percent of net revenue


14
%


14
%


9
%Restructuring expenses

$
43,097


$
4,405


$
56,543




%


(92
)%as a percent of net revenue


5
%



%


6
%Purchased in-process research and development

$



$
2,110


$
480




%


340
%as a percent of net revenue



%



%



%Gain on sale of property, plant & equipment, net

$



$
(5,968
)

$
(1,589
)



%


276
%as a percent of net revenue



%


(1
)%



%Gain on settlement of potential litigation

$



$



$
(447,560
)



%



%as a percent of net revenue



%



%


45
%Impairment of intangible assets

$
3,851


$
1,230


$
1,521



213
%


(19
)%as a percent of net revenue



%



%



%(Gain) loss on sale of Japan consulting group

$
(1,200
)

$
8,273


$




(115
)%



%as a percent of net revenue



%


1
%



%Executive termination benefits

$



$
9,409


$





%



%as a percent of net revenue



%


1
%



%Total operating expenses

$
728,013


$
680,513


$
255,298



7
%


167
%as a percent of net revenue


78
%


74
%


26
%      41




---



##### Table of Contents



e-Security
  stock-based
        e-Security
       42




---



##### Table of Contents



e-Security e-Securitys e-Securitys e-Securitys
    Restructuring
    Expenses
  Fiscal
    2007
       43




---



##### Table of Contents



OtherSeverance and


Excess


Restructuring-Benefits


Facilities


Related Costs


Total(In thousands)Original reserve

$
38,796


$
4,238


$
289


$
43,323Cash payments


(17,383
)


(1,988
)


(273
)


(19,644
)Non-cash adjustments


(103
)


(149
)


(2
)


(254
)Balance at October 31, 2007

$
21,310


$
2,101


$
14


$
23,425     Fiscal
    2006
        OtherSeverance and


Excess


Restructuring-Benefits


Facilities


Related Costs


Total(In thousands)Original reserve

$
3,420


$
606


$
163


$
4,189Cash payments


(323
)


(591
)


(35
)


(949
)Balance at October 31, 2006


3,097



15



128



3,240Cash payments


(2,811
)


(15
)


(88
)


(2,914
)Non-cash adjustments


(286
)










(286
)Balance at October 31, 2007

$



$



$
40


$
40     Fiscal
    2005
       44




---



##### Table of Contents



OtherSeverance and


Excess


Restructuring-Benefits


Facilities


Related Costs


Total(In thousands)Original reserve

$
45,763


$
7,364


$
477


$
53,604Cash payments


(17,271
)


(913
)


(218
)


(18,402
)Balance at October 31, 2005


28,492



6,451



259



35,202Cash payments


(25,438
)


(4,022
)


(202
)


(29,662
)Non-cash adjustments


(1,721
)


1,437







(284
)Balance at October 31, 2006


1,333



3,866



57



5,256Cash payments


(479
)


(353
)


24



(808
)Non-cash adjustments


380



(106
)


14



288Balance at October 31, 2007

$
1,234


$
3,407


$
95


$
4,736     Income
    from operations
    Other
    income (expense), net
  Fiscal Year Ended October 31,


2007 vs


2006 vs2007


2006


2005


2006


2005($ in thousands)


(Percentage change)Impairment of investments

$



$
(1,480
)

$
(3,387
)



%


(56
)%as a percent of net revenue



%



%



%Investment income

$
86,531


$
60,899


$
45,850



42
%


33
%as a percent of net revenue


9
%


7
%


5
%Gain on sale of venture capital funds

$
3,591


$
17,953


$




(80
)%



%as a percent of net revenue



%


2
%



%Interest expense and other, net

$
(25,939
)

$
(7,998
)

$
(8,651
)


(224
)%


(8
)%as a percent of net revenue


(3
)%


(1
)%


(1
)%Total other income, net

$
64,183


$
69,374


$
33,812



(7
)%


105
%as a percent of net revenue


7
%


8
%


3
%            45




---



##### Table of Contents



Form 10-Q, Form 10-K, Form 10-Q Form 10-Q EITF 96-19, (EITF 96-19),
    Income
    tax expense on income from continuing operations
  Fiscal Year Ended October 31,

2007 vs

2006 vs2007

2006

2005

2006

2005($ in thousands)

(Percentage change)Income tax expense

$
34,691


$
22,642


$
86,612



53
%


(74
)%Effective tax rate


412
%


83
%


19
%          46




---



##### Table of Contents



2010-2014
       47




---



##### Table of Contents



non-U.S. foreign
  Dividends
    on Series B Preferred Stock
      Net
    income (loss) components
  Fiscal Year Ended October 31,2007


2006


2005(In thousands)Income (loss) from continuing operations

$
(26,276
)

$
4,538


$
370,811Discontinued operations, net of tax


(18,184
)


15,015



5,911Cumulative effect of a change in accounting principle






(897
)


Net income (loss)

$
(44,460
)

$
18,656


$
376,722       and/or
     48




---



##### Table of Contents



Forward-looking
    information
    Liquidity
    and Capital Resources
  October 31,

October 31,

Percentage2007

2006

Change($ in thousands)Cash, cash equivalents, and short-term investments

$
1,857,637


$
1,466,287



27
%Percentage of total assets


65
%


60
%     Fiscal 2007


Fiscal 2006


Fiscal 2005(In thousands)Net cash provided by operating activities

$
420,582


$
99,038


$
500,414Issuance of common stock, net

$
18,392


$
40,131


$
22,108Repurchases of common stock, 2006 retired, 2004 held in treasury

$



$
(400,000
)

$
Purchases of property, plant and equipment

$
(25,235
)

$
(26,668
)

$
(30,781
)Proceeds from the sale of property, plant and equipment

$



$
24,992


$
10,421Proceeds from sale of venture capital funds

$
4,964


$
71,298


$
Proceeds from repayment of note receivable

$



$
9,092


$
Proceeds from the sale of Celerant and the Japan consulting
    group, net of cash divested

$
3,949


$
39,372


$
Proceeds from sales of and distributions from long-term
    investments

$
2,917


$
10,972


$
Net cash paid for acquisitions

$
(29,704
)

$
(71,550
)

$
(33,829
)Purchase of intangible assets

$
(1,175
)

$
(1,159
)

$
(15,500
)Cash paid for equity share of OIN

$



$
(4,225
)

$
Restricted cash for acquisition of India joint venture

$



$



$
(7,500
)          49




---



##### Table of Contents



50




---



##### Table of Contents



Contractual
    Obligations as of October 31, 2007
  Payments Due by PeriodLess Than








More Than1 Year


1-3 Years


3-5 Years


5 YearsTotal


(2008)


(2009-2010)


(2011-2012)


(Beyond 2012)(In millions)Debentures

$
600.0


$



$



$



$
600.0Interest on Debentures(a)


64.0



16.9



6.0



6.0



35.1Purchase obligations(b)


0.6



0.4



0.2







Operating lease obligations


125.0



27.7



35.9



23.0



38.4Letters of credit


14.7



14.7











Total

$
804.3


$
59.7


$
42.1


$
29.0


$
673.5     (a)
    
    Interest on the Debentures assumes no conversions.(b)
    
    Purchase obligations represent future contracted payments under
    normal take or pay arrangements entered into as a part of the
    normal course of business that are not recorded as liabilities
    at October 31, 2007.      Recent
    Pronouncements
         51




---



##### Table of Contents



06-10, EITF 06-10 EITF 06-10 EITF 06-10
      Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk       52




---



##### Table of Contents



Interest
    Rate Risk
    Market
    Risk
    Foreign
    Currency Risk
           53




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  Novell,
    Inc.
  PageConsolidated Statements of Operations


55Consolidated Balance Sheets


56Consolidated Statements of Stockholders
    Equity


57Consolidated Statements of Cash Flows


58Notes to Consolidated Financial Statements


59Report of PricewaterhouseCoopers LLP, Independent
    Registered Public Accounting Firm


119Selected Consolidated Quarterly Financial
    Data  Unaudited


120      54




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##### Table of Contents



NOVELL,
    INC.
  CONSOLIDATED STATEMENTS OF OPERATIONS
 (Amounts
    in thousands, except per share data)
  Fiscal Year EndedOctober 31,


October 31,


October 31,2007


2006


2005Net revenue:Software licenses

$
175,877


$
173,678


$
213,803Maintenance and subscriptions


494,675



479,283



489,266Services


261,947



266,370



283,080Total net revenue


932,499



919,331



986,149Cost of revenue:Software licenses


19,478



18,161



21,600Maintenance and subscriptions


48,272



49,680



49,033Services


192,504



213,171



236,607Total cost of revenue


260,254



281,012



307,240Gross profit


672,245



638,319



678,909Operating expenses (income):Sales and marketing


346,777



353,750



355,527Product development


208,370



180,380



199,971General and administrative


127,118



126,924



90,405Restructuring expenses


43,097



4,405



56,543Purchased in-process research and development






2,110



480Gain on sale of property, plant and equipment, net






(5,968
)


(1,589
)Gain on settlement of potential litigation










(447,560
)Impairment of intangible assets


3,851



1,230



1,521(Gain) loss on sale of Japan consulting group


(1,200
)


8,273



Executive termination benefits






9,409



Total operating expenses


728,013



680,513



255,298Income (loss) from operations


(55,768
)


(42,194
)


423,611Other income (expense):Investment income


86,531



60,899



45,850Gain on sale of venture capital funds


3,591



17,953



Impairment of investments






(1,480
)


(3,387
)Interest expense and other, net


(25,939
)


(7,998
)


(8,651
)Other income, net


64,183



69,374



33,812Income from continuing operations before taxes


8,415



27,180



457,423Income tax expense


34,691



22,642



86,612Income (loss) from continuing operations


(26,276
)


4,538



370,811Income (loss) from discontinued operations before taxes
    (including(loss) gain on disposal of ($19,075) in fiscal 2007 and $11,117
    infiscal 2006)


(18,253
)


16,576



8,719Income tax expense (benefit) on discontinued operations


(69
)


1,561



2,808Income (loss) from discontinued operations


(18,184
)


15,015



5,911Income (loss) before cumulative effect of change in accounting
    principle


(44,460
)


19,553



376,722Cumulative effect of change in accounting principle






(897
)


Net income (loss)

$
(44,460
)

$
18,656


$
376,722Basic earnings per share:Income (loss) from continuing operations

$
(0.08
)

$
0.01


$
0.97Discontinued operations


(0.05
)


0.04



0.02Cumulative effect of change in accounting principle










Net income (loss) per share available to common stockholders

$
(0.13
)

$
0.05


$
0.98Diluted earnings per share:Income (loss) from continuing operations

$
(0.08
)

$
0.01


$
0.85Discontinued operations


(0.05
)


0.04



0.01Cumulative effect of change in accounting principle










Net income (loss) per share available to common stockholders

$
(0.13
)

$
0.05


$
0.86Weighted-average shares outstanding:Basic


347,552



361,174



379,499Diluted


347,552



365,659



440,585        55




---



##### Table of Contents



NOVELL,
    INC.
  CONSOLIDATED BALANCE SHEETS
 (Amounts
    in thousands, except share and per share data)
  October 31,


October 31,2007


2006ASSETSCurrent assets:Cash and cash equivalents

$
1,079,819


$
675,787Short-term investments


777,818



790,500Receivables (net of allowances of $3,897 and $5,574 at
    October 31, 2007 and 2006, respectively)


208,318



233,986Prepaid expenses


53,316



32,328Other current assets


35,065



28,524Total current assets


2,154,336



1,761,125Property, plant and equipment, net


180,537



184,084Long-term investments


37,304



2,263Goodwill


404,612



424,701Intangible assets, net


33,572



40,404Deferred income taxes


14,518



4,770Other assets


29,515



32,376Total assets

$
2,854,394


$
2,449,723LIABILITIES, REDEEMABLE SECURITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
45,135


$
44,419Accrued compensation


112,794



103,710Other accrued liabilities


122,850



106,837Income taxes payable


46,724



49,600Deferred revenue


494,615



380,979Total current liabilities


822,118



685,545Deferred income taxes


884



4,186Long-term deferred revenue


273,066



45,992Senior convertible debentures


600,000



600,000Total liabilities


1,696,068



1,335,723Redeemable securities:Series B Preferred Stock, $.10 par value,
    Authorized  1,000 shares;
    Outstanding  0 and 187 shares at
    October 31, 2007 and 2006 (at redemption value),
    respectively






9,350Stockholders equity:Series A preferred stock, $.10 par value,
    Authorized  499,000 shares; no shares issued






Common stock, par value $.10 per share, Authorized 
    600,000,000 shares; Issued  365,739,499 and
    358,512,471 shares at October 31, 2007 and 2006,
    respectively, Outstanding  350,610,468 and
    343,362,534 shares at October 31, 2007 and 2006,
    respectively


36,574



35,851Additional paid-in capital


413,182



338,954Treasury stock, at cost  15,129,031 and
    15,149,937 shares at October 31, 2007 and 2006,
    respectively


(124,512
)


(124,684
)Retained earnings


795,984



840,449Accumulated other comprehensive income


37,098



14,080Total stockholders equity


1,158,326



1,104,650Total liabilities, redeemable securities and stockholders
    equity

$
2,854,394


$
2,449,723        56




---



##### Table of Contents



NOVELL,
    INC.
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 (Amounts
    in thousands)
  AccumulatedCommon


Common


Treasury


Treasury


Additional





Other


UnearnedStock


Stock


Stock


Stock


Paid-In


Retained


Comprehensive


CompensationShares


Amount


Shares


Amount


Capital


Earnings


Income


and Other


TotalBalance at October 31, 2004


393,061


$
39,306



(15,187
)

$
(124,989
)

$
431,102


$
607,851


$
16,180


$
(6,086
)

$
963,364Stock issued from stock plans


5,678



567



14



114



26,843











(1,998
)


25,526Stock plans income tax benefit


















13,799















13,799Stock issued for conversion of Series B Preferred Stock


2,504



250











15,400















15,650Shares cancelled


(249
)


(24
)










(4,043
)










3,325



(742
)Amortization of unearned stock compensation






























1,313



1,313Dividends on Series B Preferred Stock






















(466
)










(466
)Change in unrealized gain on investments


















56







(7,767
)






(7,711
)Cumulative translation adjustment


























(1,592
)






(1,592
)Change in minimum pension liability


























623







623Net income






















376,722











376,722Comprehensive income


































368,042Balance at October 31, 2005


400,994



40,099



(15,173
)


(124,875
)


483,157



984,107



7,444



(3,446
)


1,386,486Cumulative effect of adoption of SAB 108


















19,190



(19,190
)










Revised balance at November 1, 2005


400,994



40,099



(15,173
)


(124,875
)


502,347



964,917



7,444



(3,446
)


1,386,486Stock issued from stock plans


9,549



955



23



191



40,482















41,628Stock compensation expense


















35,265















35,265Compensation expense related to executive termination benefits


















2,739















2,739Cumulative effect of adoption of SFAS No. 123R


















(3,446
)










3,446



Stock plans income tax benefit


















15,263















15,263Shares repurchased and retired


(51,515
)


(5,152
)










(251,911
)


(142,937
)










(400,000
)Shares cancelled


(516
)


(51
)










(1,804
)














(1,855
)Dividends on Series B Preferred Stock






















(187
)










(187
)Change in unrealized gain on investments


















19







4,053







4,072Cumulative translation adjustment


























1,950







1,950Change in minimum pension liability


























633







633Net income






















18,656











18,656Comprehensive income


































25,311Balance at October 31, 2006


358,512



35,851



(15,150
)


(124,684
)


338,954



840,449



14,080







1,104,650Stock issued from stock plans


6,112



577



21



172



21,008















21,757Stock compensation expense


















34,316















34,316Stock plans income tax benefit


















13,099















13,099Shares cancelled


(381
)


(4
)










(3,395
)














(3,399
)Stock issued for conversion of Series B Preferred Stock


1,496



150











9,200















9,350Dividends on Series B Preferred Stock






















(5
)










(5
)Adjustment to initially apply SFAS No. 158


























1,409







1,409Change in unrealized gain on investments


























4,385







4,385Cumulative translation adjustment


























17,224







17,224Net loss






















(44,460
)










(44,460
)Comprehensive loss


































(22,851
)Balance at October 31, 2007


365,739


$
36,574



(15,129
)

$
(124,512
)

$
413,182


$
795,984


$
37,098


$



$
1,158,326        57




---



##### Table of Contents



NOVELL,
    INC.
  CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Amounts
    in thousands)
  Fiscal Year EndedOctober 31,


October 31,


October 31,2007


2006


2005Cash flows from operating activitiesNet income (loss)

$
(44,460
)

$
18,656


$
376,722Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:Stock-based compensation expense


34,316



35,265



1,748Tax effects of stock-based compensation plans


13,099



15,263



13,799Excess tax benefits from stock-based compensation


(13,099
)


(15,263
)


Depreciation and amortization


40,438



46,976



54,513Decrease in accounts receivable allowances


(1,722
)


(6,888
)


(7,838
)Utilization of previously reserved acquired net operating losses


4,844



6,585



29,600SUSE purchase price tax adjustment


24,677







Purchased in-process research and development






2,110



480Deferred income taxes


(13,050
)


(4,317
)


(702
)Net gain on sale of property, plant and equipment






(5,968
)


(1,589
)(Gain) loss on sale of Japan consulting group


(1,200
)


8,273



Executive termination benefits, non-cash






9,409



Gain on sale of previously impaired long-term investments


(2,917
)


(2,225
)


(2,087
)Loss on impaired long-term investments






1,480



3,387Impairment of intangible assets


3,851



1,230



1,521(Gain) loss on discontinued operations, before taxes


19,075



(11,117
)


Gain on sale of venture capital funds


(3,591
)


(17,953
)


Cumulative effect of change in accounting principle






897



Changes in current assets and liabilities, excluding
    acquisitions and dispositions:Receivables


20,098



33,276



(15,087
)Prepaid expenses


(20,959
)


(4,102
)


(3,777
)Other current assets


(7,486
)


(88
)


(777
)Accounts payable


1,538



(1,235
)


(10,935
)Accrued liabilities


25,432



(32,731
)


30,290Deferred revenue


341,698



21,505



31,146Net cash provided by operating activities


420,582



99,038



500,414Cash flows from financing activitiesIssuance of common stock, net


18,392



40,131



22,108Excess tax benefits from stock-based compensation


13,099



15,263



Payment of cash dividends on Series B Preferred Stock


(5
)


(187
)


(591
)Repurchases of common stock (retired)






(400,000
)


Net cash provided by (used in) financing activities


31,486



(344,793
)


21,517Cash flows from investing activitiesPurchases of property, plant and equipment


(25,235
)


(26,668
)


(30,781
)Proceeds from the sale of property, plant and equipment






24,992



10,421Proceeds from repayment of note receivable






9,092



Proceeds from sale of venture capital funds


4,964



71,298



Purchases of short-term investments


(532,422
)


(503,584
)


(1,286,499
)Maturities of short-term investments


175,245



131,088



348,156Sales of short-term investments


336,940



429,715



863,973Purchases of long-term investments






(9,499
)


(11,407
)Proceeds from sales of and distributions from long-term
    investments


2,917



10,972



11,688Proceeds from the sale of Celerant, net of cash divested of
    $37,345


2,749



37,922



Proceeds from the sale of Japan consulting group, net of cash
    divested of $1,350


1,200



1,450



Cash paid for acquisition of Senforce and RedMojo, net of cash
    acquired


(29,704
)






Cash paid for acquisition of
    e-Security,
    net of cash acquired






(71,550
)


Cash paid for equity share of Open Invention Network, LLC






(4,225
)


Cash paid for acquisition of Tally and Immunix, net of cash
    acquired










(33,829
)Purchase of intangible assets


(1,175
)


(1,159
)


(15,500
)Restricted cash for the acquisition of India joint venture










(7,500
)Other


16,485



10,460



6,181Net cash provided by (used in) investing activities


(48,036
)


110,304



(145,097
)Total increase (decrease) in cash and cash equivalents


404,032



(135,451
)


376,834Cash and cash equivalents  beginning of period


675,787



811,238



434,404Cash and cash equivalents  end of period

$
1,079,819


$
675,787


$
811,238Supplemental disclosures of cash and non-cash financing and
    investing activities:Conversion of Series B Preferred Stock

$
9,350


$



$
15,650Contribution of patents to Open Invention Network, LLC






14,383



Release of restricted cash for the acquisition of India joint
    venture






7,500



        58




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  A.
    Summary
    of Business Operations          Open Platform Solutions.
    
    SUSE Linux Enterprise Server is an enterprise-class, open source
    server operating system for professional deployment in
    heterogeneous IT environments of all sizes and sectors. This
    operating system integrates all server services relevant in
    Linux, including integrated virtualization, and constitutes a
    stable and secure platform for the cost-efficient operation of
    IT environments.
    SUSE Linux Enterprise Desktop is a business desktop product that
    brings together the Linux operating environment with a complete
    set of office applications. Included among the more significant
    business applications are OpenOffice (an office productivity
    suite), Mozillas Firefox browser, and Novell Evolution, a
    collaboration client for Linux.     59




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     
    openSUSE is a reliable and secure home computing product, which
    includes an easy-to-install Linux operating system that lets
    users browse the Web, send
    e-mail, chat
    with friends, organize digital photos, play movies and songs,
    and create documents and spreadsheets. It also allows users to
    host a Web site or blog, create a home network and develop their
    own applications.
    SUSE Engineering is product development work we perform for
    customers.  Identity and Security Management.
    
    Identity Manager is a powerful data-sharing and synchronization
    solution, often referred to as a
    meta-directory
    solution, which automatically distributes new and updated
    information across every designated application and directory on
    a network. This ensures that trusted customers, partners, and
    suppliers are accessing consistent information, regardless of
    the applications and directories to which they have access.
    Access Manager helps customers maximize access without limiting
    security or control. It simplifies and safeguards online
    asset-sharing, allowing customers to control access to Web-based
    and traditional business applications. Trusted users gain secure
    authentication and access to portals, Web-based content and
    enterprise applications while IT administrators gain centralized
    policy-based management of authentication and access privileges
    for Web-based environments and enterprise applications. Access
    Manager supports a broad range of platforms and directory
    services.
    SecureLogin is a directory-integrated authentication solution
    that delivers reliable, single sign-on access across
    multi-platform networks, simplifying password management by
    eliminating the need for users to remember more than one
    password.
    Sentinel automates the monitoring of IT for effectiveness
    allowing users to detect and resolve threats in real-time.
    Sentinel also provides documented evidence needed by some users
    to comply with regulatory and industry compliance requirements.    
    eDirectory is a full-service, platform-independent directory
    that significantly simplifies the complexities of managing users
    and resources in a mixed Linux, NetWare, UNIX, and Windows
    environment. It is a secure, scalable, directory service that
    allows organizations to centrally store and manage information
    across all networks and operating systems and leverage existing
    IT investments.  Systems and Resource Management.
       60




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    
    ZENworks Suite
    ZENworks Patch Management
    ZENworks Asset Management
    ZENworks Linux Management
    ZENworks Configuration Management
    ZENworks Orchestrator
    ZENworks Security Management  Workgroup.
  
    Open Enterprise Server (OES) is a secure, highly
    available suite of services that provides proven networking,
    communication, collaboration and application services in an
    open, easy-to-deploy environment. OES provides customers the
    choice of deploying on either NetWare or SUSE Linux Enterprise
    Server and provides common management tools, identity-based
    services and support backed by Novell.
    NetWare and other NetWare-related products:  
    NetWare is our proprietary operating system platform that offers
    secure continuous access to core network resources such as
    files, printers, directories,
    e-mail and
    databases seamlessly across all types of networks, storage
    platforms and client desktops.
    Cluster Services is a scalable, highly available Storage Area
    Network resource management tool that reduces administrative
    costs and complexity of delivering uninterrupted access to
    information and resources.  
    Collaboration products:  
    GroupWise collaboration products offer both traditional and
    mobile users solutions for communication over intranets,
    extranets and the Internet.
    Teaming + Conferencing allows for social networking within an
    enterprise where subject matter experts are easily identified
    and where new team workspaces can be easily formed.  
    Other workgroup products:  
    BorderManager is a suite of network services used to connect a
    network securely to the Internet or any other network, allowing
    outside access to intranets and user access to the Internet.
    Novell Open Workgroup Suite provides organizations of all sizes
    with a secure, flexible and cost-effective IT infrastructure and
    a proven set of workgroup services. Unlike a proprietary,
    Windows-centric solution, the Novell Open Workgroup Suite is
    comprised of a package of open, standards-based software from
    all business segments. This suite offers a low-cost, open
    alternative to Microsoft and includes a complete infrastructure
    and productivity solution from the desktop to the server and
    includes the following components:  
    Open Enterprise Server     61




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   
    GroupWise
    ZENworks Suite
    SUSE Linux Enterprise Desktop  open source desktop
    OpenOffice.org for Linux and Windows  open source
    productivity suite    
    Professional services:  We provide technical
    expertise to deliver world-class infrastructure solutions, based
    on an innovative approach focused on solving our customers
    business problems. We deliver services ranging from discovery
    workshops to strategy projects to solution implementations, all
    using a consistent, well-defined methodology. Our professional
    services approach is based on a strong commitment to open
    standards, interoperability, and the right blend of technology
    from Novell and other leading vendors.
    Technical support:  We provide phone-based,
    web-based, and onsite technical support for our proprietary and
    open source products through our Premium Service program.
    Premium Service provides customers with the flexibility to
    select the appropriate level of technical support services,
    which may include stated response times, around-the-clock
    support, service account management, and dedicated resources,
    such as Novells most experienced engineers. The Dedicated
    Support Engineer, Primary Support Engineer, Advantage Support
    Engineer, and Account Management programs allow customers to
    build an ongoing support relationship with Novell at an
    appropriate level for their needs. We have committed a
    significant amount of technical support resources to the Linux
    open source platform. We also offer a full array of remote
    monitoring services and managed services. These services help
    customers increase system uptime, leveraging our experts to
    monitor and maintain the technologies our customers have
    employed.
    Training services:  We accelerate the adoption
    and enable the effective use of our products and solutions
    through the delivery of timely and relevant instructor-led and
    technology-based training courses, assessments and performance
    consulting services. Programs are delivered directly to
    customers and through our global channel of authorized Novell
    training partners. Our courses provide customers with a thorough
    understanding of the implementation, configuration, and
    administration of our products and solutions. Additionally, we
    offer performance consulting services that provide clients and
    partners with an evaluation of their proficiencies and their
    knowledge gaps. We also deliver Advanced Technical Training at
    an engineer level to customers and partners on a global basis.    B.
    Summary
    of Significant Accounting Policies    Principles
    of Consolidation
       62




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   Managements
    Estimates and Uncertainties
    Reclassifications
    Foreign
    Currency Translation
    Cash,
    Cash Equivalents and Short-Term Investments
    first-in
  Concentrations
    of Credit Risk
       63




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  auction-rate short-term
    Equity
    Investments
    Property,
    Plant and Equipment
    Asset Classification

Useful LivesBuildings


30 yearsFurniture and equipment


2  7 yearsLeasehold improvements and other


3  10 years
        64




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Goodwill
    and Intangible Assets
        Disclosure
    of Fair Value of Financial Instruments
    Revenue
    Recognition and Related Reserves.
  30-day
     65




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  and/or
  97-2,
  
    Persuasive evidence of an arrangement exists  We
    require evidence of an agreement with a customer specifying the
    terms and conditions of the products or services to be delivered
    typically in the form of a signed contract or statement of work
    accompanied by a purchase order.
    Delivery has occurred  For software licenses,
    delivery takes place when the customer is given access to the
    software programs via access to a website or shipped medium. For
    services, delivery takes place as the services are provided.
    The fee is fixed or determinable  Fees are fixed or
    determinable if they are not subject to cancellation or other
    payment terms that exceed our standard payment terms. Typical
    payment terms are net 30 days.
    Collection is probable  We perform a credit review of
    all customers with significant transactions to determine whether
    a customer is creditworthy and collection is probable. Prior
    Novell-established credit history, credit reports, financial
    statements, and bank references are used to assess
    creditworthiness.    
    Software license fees for our SUSE Linux product are recognized
    when the product is sold through to an end customer;
    Software license fees for sales through OEMs are recognized upon
    receipt of license activity or royalty reports;
    All other software license fees are recognized upon delivery of
    the software;
    Software maintenance, upgrade protection, technical support, and
    subscriptions of SLES are recognized ratably over the contract
    term; and
    Professional services, training and other similar services are
    recognized as the services are performed.         66




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
          time-and-materials time-and-materials
  Microsoft
    Agreements-related Revenue
         67




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      
    Development of technologies to optimize SLES and Windows, each
    running as guests in a virtualized setting on the other
    operating system;
    Development of management tools for managing heterogeneous
    virtualization environments, to enable each partys
    management tools to command, control and configure the other
    partys operating system in a virtual machine environment;
    Development of translators to improve interoperability between
    Microsoft Office and OpenOffice document formats; and
    Collaboration on improving directory and identity
    interoperability and identity management between Microsoft
    Active Directory software and Novell eDirectory software.      97-2,
     68




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
   Cost of
    Revenue
    Expenses
      Share-based
    Payments
             69




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      Net
    Income (Loss) Per Share
  No. 03-06,
  Derivative
    Instruments
      Recent
    Pronouncements
       70




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
        06-10, EITF 06-10 EITF 06-10 EITF 06-10
       71




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
     C.
    Staff
    Accounting Bulletin No. 108          Historical
    Stock-Based Compensation Practices
         72




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      Administrative Corrections
  Number of Shares Approved Not Specified
  Authorization Incomplete or Received Late
        (In thousands)Cumulative prior to fiscal 2005

$
18,989Fiscal 2005


201Total adjustment at November 1, 2005

$
19,190      73




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  D.
    Acquisitions
    and Equity Investments  Senforce
      Estimated


EstimatedFair Value


Useful Life(In thousands)Fair value of net tangible liabilities assumed

$
(8
)


N/AIdentifiable intangible assets:Developed technology


2,000



3 yearsCustomer relationships


500



3 yearsGoodwill


17,728



IndefiniteTotal net assets acquired

$
20,220           Fiscal Year Ended(Amounts in thousands, except per share amounts)

2007


2006Net revenue

$
934,069


$
920,503Net income (loss) available to common stockholders 
    diluted

$
(49,345
)

$
11,879Net income (loss) per share available to common
    stockholders  diluted

$
(0.14
)

$
0.03   RedMojo
       74




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      Estimated


EstimatedFair Value


Useful Life(In thousands)Identifiable intangible assets:Developed technology

$
2,370



3 yearsGoodwill


7,554



IndefiniteTotal net assets acquired

$
9,924           e-Security
  e-Security, e-Security e-Securitys e-Securitys
    Estimated


EstimatedFair Value


Useful Life(In thousands)Fair value of net tangible liabilities assumed

$
(1,135
)


N/AIn-process research and development


2,110



N/AIdentifiable intangible assets:Developed technology


6,920



3 yearsCustomer relationships


3,640



3 yearsTrademarks/trade names


390



3 yearsGoodwill


60,908



IndefiniteTotal net assets acquired

$
72,833      75




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    e-Security
  e-Security e-Security
  e-Security
    e-Security e-Security
  e-Security
  Fiscal Year Ended(In thousands, except per share amounts)

2006


2005Net revenue

$
923,827


$
997,313Net income available to common stockholders  diluted

$
13,261


$
372,201Net income per share available to common
    stockholders  diluted

$
0.04


$
0.84   e-Securitys e-Securitys e-Securitys
     76




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Open
    Invention Network, LLC
    Onward
    Novell
    Tally
    Systems Corp.
        Estimated


EstimatedFair Value


Useful Life(In thousands)Fair value of net tangible assets acquired

$
587



N/AIdentifiable intangible assets:Developed technology


3,200



4 yearsContractual relationships


1,700



3 yearsCustomer relationships


280



3 yearsInternal use software


90



3 yearsGoodwill


16,308



IndefiniteTotal net assets acquired

$
22,165      77




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
            Immunix,
    Inc.
        Estimated


EstimatedFair Value


Useful Life(In thousands)Fair value of net tangible liabilities assumed

$
(112
)


N/AIn-process research and development


480



N/AIdentifiable intangible assets:Developed technology


2,400



3 yearsTrademarks/trade names


120



3 yearsCustomer relationships


80



1 yearInternal use software


10



3 yearsGoodwill


14,676



IndefiniteTotal net assets acquired

$
17,654        78




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      tm
        Fiscal Year Ended(In thousands, except per share amounts)

October 31, 2005Net revenue

$
989,215Net income available to common stockholders  diluted

$
376,049Net income per share available to common
    stockholders  diluted

$
0.85   E.
    Divestitures  CTP
    Switzerland
         79




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Salmon
          (In thousands)Sales price

$
4,914Costs to sell


(102
)4,812Net book value of Salmon:Cash


2,165Other current assets


4,089Goodwill


2,177Other long-term assets


139Liabilities


(4,386
)4,184Gain on sale of Salmon before income taxes

$
628   Celerant
       80




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
        (In thousands)Sales price

$
77,014Costs to sell


(3,248
)73,766Net book value of Celerant:Cash


37,344Accounts receivable, net


35,185Other current assets


2,418Goodwill


24,452Other long-term assets


1,978Current liabilities


(26,878
)Minority interest


(2,993
)Foreign exchange and other


(8,857
)62,649Gain on sale of Celerant before income taxes

$
11,117      81




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Fiscal Year Ended2007


2006


2005(In thousands)CTP Switzerland net revenue

$
25,625


$
26,877


$
29,268Salmon net revenue


7,351



21,069



23,806Celerant net revenue






83,341



158,472$
32,976


$
131,287


$
211,546CTP Switzerland income (loss) before taxes

$
739


$
1,936


$
(599
)Salmon income before taxes


83



1,740



1,127Celerant income before taxes






1,783



8,191Income before taxes


822



5,459



8,719Salmon impairment of long-lived assets


(10,848
)






Salmon gain on sale


628







CTP Switzerland impairment of goodwill


(3,903
)






CTP Switzerland impairment loss


(4,952
)






Celerant gain on sale






11,117



Gain (loss) on discontinued operations


(19,075
)


11,117



Income tax (expense) benefit


69



(1,561
)


(2,808
)Income (loss) from discontinued operations

$
(18,184
)

$
15,015


$
5,911   Japan
    Consulting Group
       82




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (In thousands)Fair value of JCG (including contingent selling price)

$
2,800Costs to sell


(393
)2,407Net book value of JCG:Current assets


2,935Goodwill


7,106Current liabilities


(619
)Foreign exchange and other


1,25810,680Loss on sale of JCG before income taxes in fiscal 2006

$
(8,273
)Contingent consideration received in fiscal 2007

$
1,200Loss on sale of JCG before income taxes, net

$
(7,073
)     F.
    Microsoft
    Agreements         83




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  G.
    Cash and
    Short-Term Investments    FairMarketCost at


Gross


Gross


Value atOctober 31,


Unrealized


Unrealized


October 31,2007


Gains


Losses


2007(In thousands)Short-term investments:Auction market securities

$
5,000


$



$



$
5,000U.S. government and agency securities


338,338



1,976



(218
)


340,096Corporate notes and bonds


313,284



801



(331
)


313,754Asset-backed securities


110,821



339



(105
)


111,055Equity securities


7,060



853







7,913Total short-term investments

$
774,503


$
3,969


$
(654
)

$
777,818   FairMarketCost at


Gross


Gross


Value atOctober 31,


Unrealized


Unrealized


October 31,2006


Gains


Losses


2006(In thousands)Short-term investments:Auction market securities

$
86,577


$
26


$



$
86,603U.S. government and agency securities


335,761



424



(2,709
)


333,476Corporate notes and bonds


262,706



176



(1,533
)


261,349Asset-backed securities


102,718



113



(575
)


102,256Equity securities


6,305



511







6,816Total short-term investments

$
794,067


$
1,250


$
(4,817
)

$
790,500       Cost


Fair Market Value(In thousands)Less than one year

$
166,088


$
165,938Due in one to two years


113,223



113,622Due in two to three years


261,905



263,238Due in more than three years


150,313



151,193No contractual maturity


82,974



83,827Total short-term investments

$
774,503


$
777,818        84




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    H.
    Long-Term
    Investments  year-end.
    I.
    Property,
    Plant and Equipment    October 31,


October 31,2007


2006(In thousands)Buildings and land

$
199,686


$
193,648Furniture and equipment


217,037



214,167Leasehold improvements and other


47,943



48,360Property, plant and equipment, at cost


464,666



456,175Accumulated depreciation


(284,129
)


(272,091
)Property, plant and equipment, net

$
180,537


$
184,084      85




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
        J.
    Goodwill
    and Intangible Assets  Goodwill
    
    Open platform solutions
    Identity and security management
    Systems and resource management
    Workgroup
    Business consulting      
    Americas  included the United States, Canada and
    Latin America
    EMEA  included Eastern and Western Europe, Middle
    East, and Africa
    Asia Pacific  included China, Southeast Asia,
    Australia, New Zealand, Japan, and India    Americas


EMEA


Asia Pacific


Total(In thousands)Open platform solutions

$
35,565


$
32,394


$
7,960


$
75,919Identity and security management


14,120



62,576



10,640



87,336Systems and resource management


72,688



30,023



525



103,236Workgroup


104,766



29,075



8,513



142,354Business consulting






15,856







15,856Balance as of November 1, 2006

$
227,139


$
169,924


$
27,638


$
424,701      86




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Identity and


Systems andOpen Platform


Security


Resource





BusinessSolutions


Management


Management


Workgroup


Consulting


Total(In thousands)Balance as of October 31, 2006

$
75,919


$
87,336


$
103,236


$
142,354


$
15,856


$
424,701Senforce acquisition










17,728











17,728RedMojo acquisition










7,554











7,554Salmon impairment


















(10,207
)


(10,207
)Salmon disposition


















(2,177
)


(2,177
)CTP Switzerland impairment


















(3,903
)


(3,903
)SUSE purchase price tax adjustment


(4,442
)


(5,182
)


(6,416
)


(8,637
)






(24,677
)Adjustments


(878
)


(1,012
)


(1,300
)


(1,648
)


431



(4,407
)Balance as of October 31, 2007

$
70,599


$
81,142


$
120,802


$
132,069


$



$
404,612                87




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Intangible
    Assets
    October 31, 2007


October 31, 2006Gross


Accumulated


Net Book


Gross


Accumulated


Net BookAmount


Amortization


Value


Amount


Amortization


Value


Asset Lives(In thousands)Developed technology

$
34,033


$
(26,203
)

$
7,830


$
30,929


$
(21,128
)

$
9,801



3  4 yearsTrademarks and trade names


24,731



(419
)


24,312



24,731



(131
)


24,600



3 years 
    indefiniteCustomer/contractual relationships


18,811



(17,393
)


1,418



23,002



(17,381
)


5,621



3 yearsInternal use software


5,057



(5,045
)


12



5,193



(4,921
)


272



3 yearsNon-compete agreement














422



(312
)


110



3 yearsTotal intangible assets

$
82,632


$
(49,060
)

$
33,572


$
84,277


$
(43,873
)

$
40,404       e-Security.
  e-Security e-Security e-Security, e-Security.
  e-Securitys e-Securitys e-Securitys
     88




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
          K.  Income
    Taxes
       89




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Fiscal Year EndedOctober 31,


October 31,


October 31,2007


2006


2005(In thousands)Income tax expenseCurrent:Federal

$
18,652


$
14,846


$
52,439State


1,175



1,612



3,200Foreign


7,857



10,525



30,306Total current income tax expense


27,684



26,983



85,945Deferred:Federal


276



133



475State










Foreign


6,731



(4,474
)


192Total deferred income tax expense (benefit)


7,007



(4,341
)


667Total income tax expense from continuing operations

$
34,691


$
22,642


$
86,612     Fiscal Year EndedOctober 31,


October 31,


October 31,2007


2006


2005U.S. statutory rate


35.0
%


35.0
%


35.0
%State income taxes, net of federal tax effect


4.2



0.8



3.9Research and development tax credits


(66.6
)


(4.9
)


(1.0
)Foreign income taxed at different rates than U.S. statutory rate


80.5



(9.8
)


6.6Valuation allowances


324.6



58.9



(26.2
)Stock-based compensation


35.9



11.9



Adjustments to prior year tax provisions






(6.5
)


Loss on sale of foreign subsidiaries






9.3



Non-recurring tax benefit






(15.5
)


Other, net


(1.4
)


4.1



0.6Effective tax rate on continuing operations


412.2
%


83.3
%


18.9
%      90




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Fiscal Year EndedOctober 31,


October 31,


October 31,2007


2006


2005(In thousands)Domestic

$
(15,278
)

$
6,098


$
450,491Foreign


23,693



21,082



6,932Total income from continuing operations, before taxes

$
8,415


$
27,180


$
457,423Cash paid for income taxes

$
10,272


$
14,829


$
20,918     October 31,


October 31,2007


2006(In thousands)Deferred income taxes:Deferred tax assets:Accruals

$
38,822


$
26,631Capital loss carryforward


42,881



54,526Credit carryforwards


168,140



149,718Net operating loss carryforwards


155,808



162,047Investment impairments


21,792



23,035Receivable valuation accounts


984



1,478Stock-based compensation expense


14,970



9,872Other items


11,225



9,015Gross deferred tax assets


454,622



436,322Valuation allowance


(408,422
)


(391,998
)Total deferred tax assets


46,200



44,324Deferred tax liabilities:Depreciation


(3,944
)


(4,037
)Foreign earnings


(25,352
)


(36,125
)Intangibles from acquisitions


(3,269
)


(3,578
)Total deferred tax liabilities


(32,565
)


(43,740
)Net deferred tax assets (liabilities)

$
13,635


$
584        91




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    2010-2014
      non-U.S. foreign
     92




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    L.  Other
    Accrued Liabilities
    October 31,


October 31,2007


2006(In thousands)Restructuring reserves

$
30,685


$
13,821Accrued property and other taxes


16,170



14,920Other accrued expenses


43,640



50,440Merger liabilities


13,050



14,644Accrued marketing expenses


10,514



6,348Accrued royalties


8,791



5,781Accrued interest and dividends






883Total other accrued liabilities

$
122,850


$
106,837   M.  Restructuring
    Expenses
  Fiscal
    2007
      OtherSeverance and


Excess


Restructuring-Benefits


Facilities


Related Costs


Total(In thousands)Original reserve

$
38,796


$
4,238


$
289


$
43,323Cash payments


(17,383
)


(1,988
)


(273
)


(19,644
)Non-cash adjustments


(103
)


(149
)


(2
)


(254
)Balance at October 31, 2007

$
21,310


$
2,101


$
14


$
23,425        93




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Fiscal
    2006
        OtherSeverance and


Excess


Restructuring-Benefits


Facilities


Related Costs


Total(In thousands)Original reserve

$
3,420


$
606


$
163


$
4,189Cash payments


(323
)


(591
)


(35
)


(949
)Balance at October 31, 2006


3,097



15



128



3,240Cash payments


(2,811
)


(15
)


(88
)


(2,914
)Non-cash adjustments


(286
)










(286
)Balance at October 31, 2007

$



$



$
40


$
40     Fiscal
    2005
       94




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    OtherSeverance and


Excess


Restructuring-Benefits


Facilities


Related Costs


Total(In thousands)Original reserve

$
45,763


$
7,364


$
477


$
53,604Cash payments


(17,271
)


(913
)


(218
)


(18,402
)Balance at October 31, 2005


28,492



6,451



259



35,202Cash payments


(25,438
)


(4,022
)


(202
)


(29,662
)Non-cash adjustments


(1,721
)


1,437







(284
)Balance at October 31, 2006


1,333



3,866



57



5,256Cash payments


(479
)


(353
)


24



(808
)Non-cash adjustments


380



(106
)


14



288Balance at October 31, 2007

$
1,234


$
3,407


$
95


$
4,736     Fiscal
    2004
       95




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Severance and


ExcessBenefits


Facilities


Total(In thousands)Original reserve

$
12,910


$
6,152


$
19,062Cash payments


(8,252
)


(3,645
)


(11,897
)Balance at October 31, 2004


4,658



2,507



7,165Cash payments


(2,716
)


(1,109
)


(3,825
)Non-cash adjustments


(699
)


59



(640
)Balance at October 31, 2005


1,243



1,457



2,700Cash payments


(1,012
)


(1,067
)


(2,079
)Non-cash adjustments


(231
)


487



256Balance at October 31, 2006






877



877Cash payments






(482
)


(482
)Non-cash adjustments






(100
)


(100
)Balance at October 31, 2007

$



$
295


$
295     Fiscal
    2003
         96




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    ExcessFacilities,


OtherSeverance and


Property and


Restructuring-Benefits


Equipment


Related Costs


Total(In thousands)Original reserve

$
20,287


$
5,778


$
1,729


$
27,794Cash payments


(17,163
)


(3,079
)


(423
)


(20,665
)Non-cash adjustments


3,755



5,735



536



10,026Balance at October 31, 2003


6,879



8,434



1,842



17,155Cash payments


(7,462
)


(5,911
)






(13,373
)Non-cash adjustments


876











876Balance at October 31, 2004


293



2,523



1,842



4,658Cash payments


(75
)


(1,458
)


(6
)


(1,539
)Non-cash adjustments


(218
)


2,056



(1,826
)


12Balance at October 31, 2005






3,121



10



3,131Cash payments






(1,343
)


(10
)


(1,353
)Non-cash adjustments






434







434Balance at October 31, 2006






2,212







2,212Cash payments






(1,160
)






(1,160
)Non-cash adjustments






(60
)






(60
)Balance at October 31, 2007

$



$
992


$



$
992         Fiscal
    2002
       97




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    ExcessFacilities,


OtherSeverance and


Property and


Restructuring-Benefits


Equipment


Related Costs


Total(In thousands)Original reserve

$
14,748


$
5,146


$
492


$
20,386Cash payments


(9,172
)


(925
)


(42
)


(10,139
)Non-cash adjustments


(1,318
)






(150
)


(1,468
)Balance at October 31, 2002


4,258



4,221



300



8,779Cash payments


(3,152
)


(4,460
)






(7,612
)Non-cash adjustments


(100
)


4,381







4,281Balance at October 31, 2003


1,006



4,142



300



5,448Cash payments


(1,006
)


(2,216
)


(41
)


(3,263
)Non-cash adjustments






1,597



817



2,414Balance at October 31, 2004






3,523



1,076



4,599Cash payments






(1,261
)


(262
)


(1,523
)Non-cash adjustments






1,398



(777
)


621Balance at October 31, 2005






3,660



37



3,697Cash payments






(1,424
)


(37
)


(1,461
)Non-cash adjustments














Balance at October 31, 2006






2,236







2,236Cash payments






(937
)






(937
)Non-cash adjustments






(102
)






(102
)Balance at October 31, 2007

$



$
1,197


$



$
1,197       Balance at


Additions





Balance atOctober 31,


from


Payments/


October 31,2006


Acquisitions


Adjustments


2007(In thousands)Facilities related

$
14,457


$



$
(1,732
)

$
12,725Employee related


85







(85
)


Other


102



216



7



325Total merger liabilities

$
14,644


$
216


$
(1,810
)

$
13,050   N.  Line
    of Credit
       98




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    O.  Asset
    Retirement Obligations
  and/or
      P.  Senior
    Convertible Debentures
    agreed-upon
     99




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  EITF 00-19,
    Form 10-Q, Form 10-K, Form 10-Q Form 10-Q EITF 96-19, (EITF 96-19),
     100




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Q.  Guarantees
    and/or and/or
    R.  Commitments
    and Contingencies
      S.  Legal
    Proceedings
       101




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
           102




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
        T.  Redeemable
    Preferred Stock
       103




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    U.  Stockholders
    Equity
  Preferred
    Share Rights Agreement
    Stock
    Repurchase
    Stock
    Award Plans
    The 2000
    Stock Plan and the 1991 Stock Plan
       104




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    The 2000
    Nonqualified Stock Option Plan
    The
    Novell/SilverStream 1997 Stock Option Plan
    The
    Novell/SilverStream 2001 Stock Option Plan
       105




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    The Stock
    Option Plan for Non-Employee Directors
    Additional
    Stock Option Plans
      Fiscal 2007


Fiscal 2006


Fiscal 2005Weighted-





Weighted-





Weighted-Number of


Average


Number of


Average


Number of


AverageAwards


Exercise Price


Awards


Exercise Price


Awards


Exercise Price(Number of awards in thousands)Outstanding at beginning of year


42,657


$
6.28



49,530


$
6.72



46,126


$
6.76Granted:Price at fair value


3,614



6.59



3,232



8.29



13,053



5.98Price at less than fair value


5,730



0.00



5,706



0.10



520



0.10Exercised


(5,839
)


3.32



(9,406
)


4.28



(4,431
)


3.31Cancelled:Forfeited


(2,266
)


3.38



(4,081
)


7.10



(5,625
)


7.37Expired


(4,826
)


8.59



(2,324
)


9.79



(113
)


6.92Outstanding at end of year


39,070


$
5.71



42,657


$
6.28



49,530


$
6.72Exercisable at end of year


23,552


$
7.35



29,181


$
7.17



28,560


$
6.51      106




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Awards OutstandingWeighted-





Awards ExercisableNumber of


Average


Weighted-


Number of


Weighted-Awards


Remaining


Average


Awards


AverageRange of Exercise Prices

Outstanding


Contractual Life


Exercise Price


Exercisable


Exercise Price(Number of awards in thousands)$0.00  $3.72


10,391



2.08


$
0.63



2,193


$
2.97$3.75  $5.02


4,730



3.62



4.53



4,730



4.53$5.08  $5.55


4,117



5.15



5.55



2,544



5.54$5.62  $6.35


3,519



6.11



6.13



1,322



6.16$6.42  $8.00


3,222



6.03



7.24



1,035



7.23$8.02  $9.06


1,586



6.00



8.44



627



8.41$9.13  $9.14


5,507



0.13



9.14



5,507



9.14$9.19  $10.63


3,333



2.48



9.67



3,071



9.69$10.68  $38.88


2,665



3.66



11.85



2,523



11.90$0.00  $38.88


39,070



3.30


$
5.71



23,552


$
7.35     Fiscal 2007


Fiscal 2006(Number of shares and awards in thousands)Awards available for future grants


33,714



35,970Shares of common stock outstanding


350,610



343,363Awards granted during the year as a percentage of outstanding
    common stock


3
%


3
%     Employee
    Stock Purchase Plan
         107




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Shares
    Reserved for Future Issuance
    V.
    Stock-Based
    Compensation    Fiscal Year Ended


Fiscal Year Ended


Fiscal Year EndedOctober 31,


October 31,


October 31,2007


2006


2005(In thousands)Cost of revenue

$
4,425


$
4,096


$
6Sales and marketing


9,722



11,533



998Product development


9,965



8,226



1,172General and administrative


10,204



11,147



(428
)Income (loss) from operations


34,316



35,002



1,748Discontinued operations






263



Tax benefit










Effect on net income (loss)

$
34,316


$
35,265


$
1,748         Stock
    Plans
       108




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Time-Based
    Stock Awards
    Fiscal Year Ended


Fiscal Year EndedOctober 31,2007


October 31, 2006Expected volatility


44
%


50
%Expected dividends


0
%


0
%Expected term


4 years



4 yearsRisk-free interest rate


3.7  4.8
%


4.3  5.1
%         Weighted-Weighted-


AverageAverage


Remaining


AggregateExercise


Contractual


IntrinsicShares


Price


Term


Value(In thousands)





(Years)


(In thousands)Stock AwardsOutstanding at November 1, 2006


40,368


$
6.23Granted:Price equal to fair market value


2,885



6.70Price less than fair market value


4,627



0.00Exercised or released


(5,785
)


3.30Forfeited or expired


(6,126
)


7.04Outstanding at October 31, 2007


35,969


$
5.80



3.22


$
88,402Exercisable at October 31, 2007


23,093


$
7.36



2.92


$
29,852        109




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Weighted-AverageGrant DateShares


Fair Value(In thousands)Unvested Restricted StockUnvested at November 1, 2006


324


$
7.71Granted






Vested


(125
)


7.54Forfeited






Unvested at October 31, 2007


199


$
7.81     Performance-Based
    and Market-Condition Awards
           110




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Weighted-Weighted-


AverageAverage


Remaining


AggregateExercise


Contractual


IntrinsicAwards


Price


Term


Value(In thousands)





(Years)


(In thousands)Stock AwardsOutstanding at November 1, 2006 (fair value determined)


1,963


$
7.10Fair value determined during year


59



6.78Granted


1,468



1.53Exercised


(54
)


6.35Forfeited or expired


(965
)


6.18Outstanding at October 31, 2007


2,471


$
4.16



3.65


$
8,704Exercisable at October 31, 2007


459


$
6.57



4.71


$
397       Weighted-AverageGrant DateShares


Fair Value(In thousands)Unvested Restricted StockUnvested at November 1, 2006 (fair value determined)


127


$
6.44Fair value determined during year


102



7.41Granted






Vested






Forfeited






Unvested at October 31, 2007


229


$
6.87          111




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Fiscal
    2005
    Fiscal Year EndedOctober 31,2005(In thousands, exceptper share amounts)Net income:As reported

$
376,722Less: total stock-based compensation expense determined under
    fair
    value-based
    method for all awards, net of related tax effects


(50,420
)Add: total stock-based compensation expense recorded in the
    statement of operations


2,653Pro forma

$
328,955Net income per common share:As reported basic

$
0.98Pro forma basic

$
0.86As reported diluted

$
0.86Pro forma diluted

$
0.75     Employee
    Stock Purchase Plan
    W.
    Employee
    Savings and Retirement Plans  12-month
       112




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      Fiscal 2007


Fiscal 2006


Fiscal 2005(In thousands)Change in benefit obligationBenefit obligation at beginning of fiscal year

$
12,001


$
12,217


$
9,076Service cost


814



857



751Interest cost


646



539



473Actuarial (gain) loss


(2,801
)


(1,299
)


2,318Benefits paid


(17
)


(7
)


(7
)Foreign exchange


2,561



(306
)


(394
)Benefit obligation at end of fiscal year

$
13,204


$
12,001


$
12,217Funded status (benefit obligation)

$
(13,204
)

$
(12,001
)

$
(12,217
)Unrecognized net actuarial (gain) loss






620



1,917Unrecognized net obligation






640



729Accrued benefit cost

$
(13,204
)

$
(10,741
)

$
(9,571
)Components of accumulated other comprehensive incomeSFAS No. 87 transition obligation

$
(691
)Actuarial gain


2,100Accumulated other comprehensive income related to implementation
    of SFAS No. 158

$
1,409   October 31,


October 31,2007


2006(Dollars in thousands)Weighted-average assumptionsDiscount rate


5.5
%


4.5
%Rate of salary increase


3.0
%


3.0
%Post-retirement pension increases


2.0
%


1.8
%Net periodic pension cost

$
1,415


$
1,412        113




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      X.
    Net
    Income (Loss) Per Share Attributable to Common
    Stockholders    Fiscal Year EndedOctober 31,


October 31,


October 31,2007


2006


2005(In thousands, except per share data)Basic net income from continuing operations per share
    computation:Net income (loss) from continuing operations

$
(26,276
)

$
4,538


$
370,811Dividends on Series B Preferred Stock






(187
)


(466
)Allocation of earnings to stockholders of Series B
    Preferred Stock






(19
)


(3,609
)Net income (loss) attributable to common stockholders

$
(26,276
)

$
4,332


$
366,736Weighted-average common shares outstanding, excluding unvested
    restricted stock


347,552



361,174



379,499Basic net income (loss) from continuing operations per share
    attributable to common stockholders

$
(0.08
)

$
0.01


$
0.97Diluted net income from continuing operations per share
    computation:Net income (loss) from continuing operations

$
(26,276
)

$
4,538


$
370,811Dividends on Series B Preferred Stock






(187
)


(466
)Allocation of earnings to the holders of Series B Preferred
    Stock






(19
)


(3,609
)Interest expense on the Debentures










5,972Diluted net income (loss) from continuing operations
    attributable to common stockholders

$
(26,276
)

$
4,332


$
372,708Weighted-average common shares outstanding


347,552



361,174



379,499Incremental shares attributable to the assumed exercise of
    outstanding options, unvested restricted stock, and other stock
    plans






4,485



9,012Incremental shares attributable to the assumed conversion of the
    Debentures










52,074Total adjusted weighted average common shares


347,552



365,659



440,585Diluted net income (loss) from continuing operations per share
    attributable to common stockholders

$
(0.08
)

$
0.01


$
0.85      114




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      Y.
    Comprehensive
    Income    Fiscal Year EndedOctober 31,


October 31,2007


2006(In thousands)Net unrealized gain (loss) on investments

$
818


$
(3,567
)SFAS No. 87 transition obligation


(691
)


Actuarial gain


2,100



Cumulative translation adjustment


34,871



17,647Total accumulated other comprehensive income

$
37,098


$
14,080     Fiscal Year EndedOctober 31,


October 31,


October 31,2007


2006


2005(In thousands)Total change in gross unrealized gain (loss) on investments
    during the year

$
2,961


$
3,558


$
(8,550
)Adjustment for net realized gains on investments included in net
    income (loss)


1,424



495



783Net unrealized gain (loss) on investments


4,385



4,053



(7,767
)Minimum pension liability






633



623Adjustment to initially apply SFAS No. 158


1,409







Cumulative translation adjustments


17,224



1,950



(1,592
)Other comprehensive income (loss)

$
23,018


$
6,636


$
(8,736
)     Z.
    Related
    Party Transactions       115




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  AA.
    Segment
    Information    
    Open platform solutions
    Identity and security management
    Systems and resource management
    Workgroup
    Business consulting        
    Americas  included the United States, Canada and
    Latin America
    EMEA  included Eastern and Western Europe, Middle
    East, and Africa
    Asia Pacific  included China, Southeast Asia,
    Australia, New Zealand, Japan, and India    Fiscal 2007OperatingNet Revenue


Gross Profit


Income (Loss)(In thousands)Open platform solutions

$
119,863


$
79,779


$
26,796Identity and security management


204,741



98,459



38,060Systems and resource management


175,600



141,386



105,140Workgroup


432,295



357,046



308,269Business consulting










Stock-based compensation expense






(4,425
)


(34,316
)Common unallocated operating costs










(499,717
)Total per statements of operations

$
932,499


$
672,245


$
(55,768
)       116




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Fiscal 2006OperatingNet Revenue


Gross Profit


Income (Loss)(In thousands)Open platform solutions

$
73,461


$
41,237


$
(5,220
)Identity and security management


209,938



91,513



36,890Systems and resource management


174,183



141,407



115,887Workgroup


457,533



366,507



320,953Business consulting


4,216



1,751



1,751Stock-based compensation expense






(4,096
)


(35,002
)Common unallocated operating costs










(477,453
)Total per statements of operations

$
919,331


$
638,319


$
(42,194
)   Fiscal 2005OperatingNet Revenue


Gross Profit


Income (Loss)(In thousands)Open platform solutions

$
68,718


$
38,953


$
(3,624
)Identity and security management


201,304



73,305



8,952Systems and resource management


182,148



149,133



121,359Workgroup


522,328



415,092



351,024Business consulting


11,651



2,432



2,432Stock-based compensation expense






(6
)


(1,748
)Common unallocated operating costs










(54,784
)Total per statements of operations

$
986,149


$
678,909


$
423,611     Geographic
    Information
        117




---



##### Table of Contents



NOVELL,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Fiscal Year EndedOctober 31,


October 31,


October 31,2007


2006


2005(In thousands)Net revenue:U.S. operations

$
611,080


$
596,259


$
606,600Irish operations


296,398



299,568



349,959Other international operations


110,047



98,631



108,616Eliminations


(85,026
)


(75,127
)


(79,026
)Total net revenue

$
932,499


$
919,331


$
986,149Long-lived assets at year end:U.S. operations

$
694,959


$
653,562


$
715,192Irish operations


291,912



233,830



295,708Other international operations


274,486



382,322



329,579Eliminations


(605,332
)


(618,262
)


(621,832
)Total long-lived assets at year end

$
656,025


$
651,452


$
718,647     October 31,


October 31,2007


2006(In thousands)Long-lived assets

$
656,025


$
651,452Other long-term assets


44,033



37,146Current assets


2,154,336



1,761,125Total assets

$
2,854,394


$
2,449,723     AB.
    Executive
    Termination Benefits       118




---



##### Table of Contents



Report
    of Independent Registered Public Accounting Firm
    Internal Control  Integrated Framework
        PricewaterhouseCoopers
    LLP
        119




---



##### Table of Contents



NOVELL,
    INC.
  SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA
 Unaudited
  First


Second


Third


FourthQuarter


Quarter


Quarter


Quarter


Fiscal Year(In thousands, except per share data)Fiscal Year Ended October 31, 2007Net revenue

$
218,386


$
232,387


$
236,790


$
244,936


$
932,499Gross profit


153,939



167,817



170,267



180,222



672,245Income (loss) from continuing operations before taxes


(2,583
)


2,014



5,338



3,646



8,415Income (loss) from continuing operations


(12,169
)


(1,312
)


(3,632
)


(9,163
)


(26,276
)Net loss


(19,945
)


(2,888
)


(3,679
)


(17,948
)


(44,460
)Income (loss) from continuing operations per share, basic

$
(0.04
)

$
0.00


$
(0.01
)

$
(0.03
)

$
(0.08
)Income (loss) from continuing operations per share, diluted

$
(0.04
)

$
0.00


$
(0.01
)

$
(0.03
)

$
(0.08
)Net loss per common share, basic

$
(0.06
)

$
(0.01
)

$
(0.01
)

$
(0.05
)

$
(0.13
)Net loss per common share, diluted

$
(0.06
)

$
(0.01
)

$
(0.01
)

$
(0.05
)

$
(0.13
)Fiscal Year Ended October 31, 2006Net revenue

$
229,892


$
226,248


$
229,409


$
233,782


$
919,331Gross profit


158,644



154,764



158,321



166,590



638,319Income (loss) from continuing operations before taxes


13,124



7,005



(29,405
)


36,456



27,180Income (loss) from continuing operations


1,521



1,398



(17,722
)


19,341



4,538Income (loss) before cumulative effect of a change in accounting
    principle


1,865



3,342



(5,524
)


19,870



19,553Net income (loss)


1,865



3,342



(6,421
)


19,870



18,656Income (loss) from continuing operations per share, basic

$
0.00


$
0.00


$
(0.05
)

$
0.06


$
0.01Income (loss) from continuing operations per share, diluted

$
0.00


$
0.00


$
(0.05
)

$
0.05


$
0.01Net income (loss) per common share, basic

$
0.00


$
0.01


$
(0.02
)

$
0.06


$
0.05Net income (loss) per common share, diluted

$
0.00


$
0.01


$
(0.02
)

$
0.05


$
0.05   Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Effectiveness
    of Disclosure Controls and Procedures.
       120




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##### Table of Contents



Managements
    Annual Report on Internal Control over Financial
    Reporting.
  Rules 13a-15(f) 15d-15(f)
  
    pertain to the maintenance of records that in reasonable detail
    accurately and fairly reflect transactions and dispositions of
    our assets;
    provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that our receipts and expenditures are being made only in
    accordance with authorizations of our management and
    directors; and
    provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of our
    assets that could have a material effect on the financial
    statements.      Changes
    in Internal Control Over Financial Reporting.
    Item 9B.
    Other
    Information    PART III
  Item 10.
    Directors,
    Executive Officers, and Corporate Governance       121




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##### Table of Contents



Form 10-K.
  http://www.novell.com/company/ir/cg/
  Item 11.
    Executive
    Compensation  Form 10-K
  Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters  Form 10-K
  Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence  Form 10-K Change-in-Control
  Item 14.
    Principal
    Accountant Fees and Services  Form 10-K
  PART IV
  Item 15.
    Exhibits
    and Financial Statement Schedules  (a)  (1.)
    Financial
    Statements:  10-K
              Financial Statement Schedules:
  Form 10-K:
       122




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##### Table of Contents



Exhibits:
  Form 10-K,
  (b)  Exhibits
    (c)  Financial
    Statement Schedules
       123




---



##### Table of Contents



SIGNATURES
       By:
    /s/  Ronald
    W. Hovsepian   President and Chief Executive Officer
       124




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##### Table of Contents



SIGNATURES
    Name

Title

Date/s/  Ronald
    W. Hovsepian(Ronald
    W. Hovsepian)

President and Chief Executive Officer (Principal Executive
    Officer)

December 21, 2007/s/  Dana
    C. Russell(Dana
    C. Russell)

Senior Vice President,
    Chief Financial Officer
    (Principal Financial and
    Accounting Officer)

December 21, 2007/s/  Albert
    Aiello(Albert
    Aiello)

Director

December 21, 2007/s/  Fred
    Corrado(Fred
    Corrado)

Director

December 21, 2007/s/  Richard
    L. Crandall(Richard
    L. Crandall)

Director

December 21, 2007/s/  Patrick
    S. Jones(Patrick
    S. Jones)

Director

December 21, 2007/s/  Claudine
    B. Malone(Claudine
    B. Malone)

Director

December 21, 2007/s/  Richard
    L. Nolan(Richard
    L. Nolan)

Director

December 21, 2007/s/  Thomas
    G. Plaskett(Thomas
    G. Plaskett)

Director

December 21, 2007/s/  John
    W. Poduska, Sr.(John
    W. Poduska, Sr.)

Director

December 21, 2007/s/  James
    D. Robinson, III(James
    D. Robinson, III)

Director

December 21, 2007/s/  Kathy
    Brittain White(Kathy
    Brittain White)

Director

December 21, 2007      125




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##### Table of Contents



NOVELL,
    INC.
    SCHEDULE II  VALUATION AND QUALIFYING
    ACCOUNTS
 Accounts Receivable Allowance
  Additions


Additions





Deductions


DeductionsBalance at


Charged to


Charged to


Additions


from


from Bad





BalanceBeginning


Return


Bad Debt


from


Return


Debt


Deductions from


at Endof Period


Allowances


Allowances


Acquisition


Allowances


Allowances


Disposition


of Period(In thousands)Fiscal year endedOctober 31, 2005

$
24,396


$
6,466


$
329


$
12


$
9,983


$
4,582


$



$
16,638October 31, 2006

$
16,638


$
1,202


$
51


$
320


$
7,103


$
1,273


$
4,261


$
5,574October 31, 2007

$
5,574


$
1,385


$
79


$
45


$
2,723


$
463


$



$
3,897      126




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber

Description2.1

Amendment No. 1 to Agreement and Plan of Reorganization, dated
    as of May 24, 2001, by and among Novell, Inc., Ceres Neptune
    Acquisition Corp. and Cambridge Technology Partners
    (Massachusetts), Inc. (1) (Annex A)3.1

Certificate of Incorporation. (3) (Exhibit 3.1)3.2

By-Laws, as amended and restated April 10, 2007. (4) (Exhibit
    3.2)4.1

Reference is made to Exhibit 3.14.2

Form of certificate representing the shares of Novell common
    stock. (5) (Exhibit 4.3)4.3

Preferred Shares Rights Agreement, dated as of December 7, 1988,
    as amended and restated effective September 20, 1999, by and
    between Novell, Inc. and Chase Mellon Shareholder Services,
    L.L.C. (6) (Exhibit 1)4.4

Indenture dated as of July 2, 2004 between the Registrant and
    Wells Fargo Bank, National Association, as Trustee. (7) (Exhibit
    4.1)4.5

First Supplemental Indenture dated as of November 9, 2006
    between the Registrant and Wells Fargo Bank, National
    Association, as Trustee. (8) (Exhibit 99.2)10.1

Registration Rights Agreement dated July 2, 2004 between the
    Registrant and Citigroup Global Markets Inc., for itself and on
    behalf of certain purchasers. (7) (Exhibit 10.1)10.2*

Novell, Inc. 1989 Employee Stock Purchase Plan. (9) (Exhibit 4.1)10.3*

Novell, Inc. 1991 Stock Plan. (10) (Exhibit 4.1)10.4*

Novell, Inc. 2000 Stock Plan. (11) (Exhibit 4.2)10.5*

Novell, Inc. 2000 Stock Option Plan. (11) (Exhibit 4.1)10.6*

UNIX System Laboratories, Inc. Stock Option Plan. (12) (Exhibit
    4.3)10.7*

Novell, Inc. Stock Option Plan for Non-Employee Directors. (13)
    (Exhibit 4.1)10.8*

Novell, Inc./SilverStream Software, Inc. 1997 Stock Incentive
    Plan. (14) (Exhibit 4.2)10.9*

Novell, Inc./SilverStream Software, Inc. 2001 Stock Incentive
    Plan. (14) (Exhibit 4.3)10.10*

Novell, Inc./SilverStream Software, Inc./eObject, Inc. 2000
    Stock Plan. (14) (Exhibit 4.4)10.11*

Novell, Inc./SilverStream Software, Inc./Bondi Software, Inc.
    Employee Stock Option Plan. (14) (Exhibit 4.5)10.12*

Novell, Inc. Stock Based Deferred Compensation Plan. (15)
    (Appendix E)10.13*

Novell, Inc. Stock-Based Deferred Compensation Plan -- Stock
    Purchase Assistance Subplan. (16) (Exhibit 10.13)10.14*

Key Employment Agreement dated as of May 22, 2001 between the
    Registrant and Jack L. Messman. (1) (Exhibit C to Annex A)10.15*

Severance Agreement dated as of January 7, 2005 between the
    Registrant and Jack L. Messman. (16) (Exhibit 10.15)10.16*

Severance Agreement dated as of March 25, 2003 between the
    Registrant and Alan J. Friedman. (17) (Exhibit 10.16)10.17*

Severance Agreement dated as of May 29, 2003 between the
    Registrant and Ronald W. Hovsepian. (17) (Exhibit 10.17)10.18*

Amendment 2005-1 to Severance Agreement dated as of October 31,
    2005 between the Registrant and Ronald W. Hovsepian. (18)
    (Exhibit 10.18)10.19*

Severance Agreement dated as of March 25, 2003 between the
    Registrant and Joseph A. LaSala, Jr. (17) (Exhibit 10.18)10.20*

Severance Agreement dated as of February 10, 2003 between the
    Registrant and Joseph S. Tibbetts, Jr. (17) (Exhibit 10.20)10.21*

Severance Agreement dated as of September 7, 2005 between the
    Registrant and Susan Heystee. (18) (Exhibit 10.21)     127




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##### Table of Contents



ExhibitNumber

Description10.22*

Severance Agreement dated as of October 3, 2005 between the
    Registrant and Thomas Francese. (18) (Exhibit 10.22)10.23*

Severance Agreement dated as of November 28, 2005 between the
    Registrant and Jeffrey M. Jaffe. (18) (Exhibit 10.23)10.24*

Severance Agreement dated as of April 24, 2007 between
    Registrant and Dana C. Russell. (20) (Exhibit 10.1)10.25*

Letter Agreement dated December 15, 1995 between Novell, Inc.
    and RRE Advisors, LLC. (19) (Exhibit 10.2)10.26*

Novell, Inc. Non-employee Director Compensation Summary. (18)
    (Exhibit 10.25)10.27*

Novell, Inc. Deferred Compensation Plan. (16)10.28*

Offer letter dated and countersigned May 27, 2003 between the
    Registrant and Ron Hovsepian. (21)10.29*

Offer letter countersigned February 14, 2004 between the
    Registrant and Susan Heystee. (21)10.30*

Offer letter dated August 31, 2005 and countersigned September
    2, 2005 between the Registrant and Thomas Francese. (21)10.31*

Letter of Understanding dated August 1, 2006 between the
    Registrant and Thomas Francese. (21)10.32*

Offer letter dated and countersigned November 7, 2005 between
    the Registrant and Jeffrey M. Jaffe. (21)10.33

Second Amended and Restated Technical Collaboration Agreement
    effective November 2, 2006 between the Registrant and Microsoft
    Corporation. (21)(22)10.34

First Amended and Restated Business Collaboration Agreement
    effective November 2, 2006 between the Registrant and Microsoft
    Corporation. (21)(22)10.35

Patent Cooperation Agreement effective November 2, 2006 between
    the Registrant and Microsoft Corporation (21)(22)10.36

Side Letter Agreement, dated November 7, 2006, to the Patent
    Cooperation Agreement between the Registrant and Microsoft
    Corporation. (21)21

Subsidiaries of the Registrant. (23)23.1

Consent of PricewaterhouseCoopers, LLP, Independent Registered
    Public Accounting Firm. (23)31.1

Rule 13a-14(a) Certification (23)31.2

Rule 13a-14(a) Certification (23)32.1

18 U.S.C. Section 1350 Certification. (23)32.2

18 U.S.C. Section 1350 Certification. (23)     *
    
    Indicates management contracts or compensatory plans(1)
    
    Incorporated by reference to the Annex or Exhibit identified in
    parentheses, filed as an annex or exhibit to the Proxy
    Statement-Prospectus forming a part of the Registration
    Statement on
    Form S-4
    (Reg.
    No. 333-59326)
    of the Registrant, filed April 20, 2001 and amended
    May 25, 2001.(2)
    
    Incorporated by reference to the Exhibit identified in the
    parentheses, filed as an exhibit to the Registrants
    Current Report on
    Form 8-K,
    filed June 10, 2002 (File
    No. 0-13351).(3)
    
    Incorporated by reference to the Exhibit identified in
    parentheses, filed as an exhibit to the Registrants
    Quarterly Report on
    Form 10-Q,
    filed for the fiscal quarter ended April 30, 2004 (File
    No. 0-13351).(4)
    
    Incorporated by reference to the Exhibit identified in
    parentheses, filed as an exhibit to the Registrants
    Current Report on
    Form 8-K,
    filed April 16, 2007 (File
    No. 0-13351).(5)
    
    Incorporated by reference to the Exhibit identified in
    parentheses, filed as an exhibit to the Registrants
    Registration Statement on
    Form S-1,
    filed November 30, 1984, and amendments thereto (File
    No. 2-
    94613).(6)
    
    Incorporated by reference to the Exhibit identified in
    parentheses, filed as an exhibit to the Registrants
    Registration Statement on
    Form 8-A,
    dated December 13, 1999 (File
    No. 0-13351).     128




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##### Table of Contents



(7)
    
    Incorporated by reference to the Exhibit identified in
    parentheses, filed as an exhibit to the Registrants
    Quarterly Report on
    Form 10-Q,
    filed for the fiscal quarter ended July 31, 2004 (File
    No. 0-13351).(8)
    
    Incorporated by reference to the Exhibit identified in
    parentheses, filed as an exhibit to the Registrants
    Current Report on
    Form 8-K,
    filed November 15, 2006 (File
    No. 0-13351).(9)
    
    Incorporated by reference to the Exhibit identified in
    parentheses, filed as an exhibit to the Registrants
    Registration Statement on
    Form S-8,
    filed October 12, 2001 (File
    No. 333-62087).(10)
    
    Incorporated by reference to the Exhibit identified in
    parentheses, filed as an exhibit to the Registrants
    Registration Statement on
    Form S-8,
    filed May 29, 1996 (File
    No. 333-04775).(11)
    
    Incorporated by reference to the Exhibit identified in
    parentheses, filed as an exhibit to the Registrants
    Registration Statement on
    Form S-8,
    filed July 13, 2000 (File
    No. 333-41328).(12)
    
    Incorporated by reference to the Exhibit identified in
    parentheses, filed as an exhibit to the Registrants
    Registration Statement on
    Form S-8,
    filed July 2, 1993 (File
    No. 33-65440).(13)
    
    Incorporated by reference to the Exhibit identified in
    parentheses, filed as an exhibit to the Registrants
    Registration Statement on
    Form S-8,
    filed May 30, 1996 (File
    No. 333-04823).(14)
    
    Incorporated by reference to the Exhibit identified in
    parentheses, filed as an exhibit to the Registrants
    Registration Statement on
    Form S-8,
    filed August 6, 2002 (File
    No. 333-97713).(15)
    
    Incorporated by reference to the Appendix identified in
    parentheses, filed as an exhibit to the Proxy Statement of the
    Registrant filed March 17, 2003.(16)
    
    Incorporated by reference to the Exhibit identified in
    parentheses, filed as an exhibit to the Registrants Annual
    Report on
    Form 10-K,
    filed for the fiscal year ended October 31, 2004 (File
    No. 0-13351).(17)
    
    Incorporated by reference to the Exhibit identified in
    parentheses, filed as an exhibit to the Registrants Annual
    Report on
    Form 10-K,
    filed for the fiscal year ended October 31, 2003 (File
    No. 0-13351).(18)
    
    Incorporated by reference to the Exhibit identified in
    parentheses, filed as an exhibit to the Registrants Annual
    Report on
    Form 10-K,
    filed for the fiscal year ended October 31, 2005 (File
    No. 0-13351).(19)
    
    Incorporated by reference to the Exhibit identified in
    parentheses, filed as an exhibit to the Registrants Annual
    Report on
    Form 10-K,
    filed for the fiscal year ended October 31, 2001 (File
    No. 0-13351).(20)
    
    Incorporated by reference to the Exhibit identified in
    parentheses, filed as an exhibit to the Registrants
    Current Report on
    Form 8-K,
    filed April 27, 2007 (File
    No. 0-13351).(21)
    
    Incorporated by reference to the Exhibit identified in
    parentheses, filed as an exhibit to the Registrants Annual
    Report on
    Form 10-K,
    filed for the fiscal year ended October 31, 2006 (File
    No. 0-13351).(22)
    
    Portions of this exhibit have been omitted and filed separately
    with the Securities and Exchange Commission pursuant to a
    request for confidential treatment.(23)
    
    Filed herewith.     129