Novell signs Letter of Intent with AT&T to Acquire Unix System Laboratories

Summit, N.J. -- December 21,1992 -- Novell, Inc. (NASDAQ:NOVL) and AT&T jointly announced today they have signed a letter of intent for Novell to acquire UNIX System Laboratories. USL is a subsidiary of AT&T that provides computer vendors with the UNIX operating system and related software and services based on open, international standards for computing and communications.

Under the terms of the letter of intent, existing shares of USL common stock would be exchanged for up to 12.3 million newly issued shares of Novell common stock in a tax-free merger accounted for as a purchase.  Novell would issue approximately 11.1 million shares of common stock to the current non-Novell USL shareholders.  In addition the outstanding USL stock options and other equity incentives would be exchanged for Novell stock, or options, or rights to acquire shares of Novell stock, all in accordance with the terms of USL employee plans and the definitive agreement.

AT&T owns approximately 77 percent of the outstanding shares of USL.  Novell currently holds approximately 5 percent of USL's outstanding stock, and 11 other investors hold approximately 18 percent.

The signing of the letter of intent has been approved by the boards of directors of Novell and AT&T, but the merger remains subject to the approval of USL stockholders, regulatory approvals, the signing of a definitive merger agreement and other normal conditions to closing.  The acquisition is expected to be completed during the first calendar quarter of 1993.

"Our support of UNIX systems, as evidenced by our earlier investment in USL and the joint creation of Univel, has been driven by the widespread use of UNIX at our customer sites and by our desire to work closely with our industry partners,"  said Raymond J. Noorda, president and chief executive officer of Novell.  "This acquisition is being done at the urging of customers who have asked us to support the UNIX system directly and integrate it more fully within the NetWare environment.  This reflects the growing importance of UNIX systems which are increasingly being used for rightsizing business applications on computer networks."

Novell recognizes and values the importance of UNIX as an open accessible technology to OEM partners and customers around the world.  As part of Novell, USL's commitment to fair and neutral access to UNIX technology will not change.

Robert M. Kavner, AT&T group executive for communications products, reiterated what the company has said since 1991 that AT&T intended to reduce its ownership in USL, but that AT&T remains firmly committed to the UNIX system.  "Associating USL with Novell, another strong company, will allow USL to be an even more effective and flourishing force in the software industry," Kavner said.

Roel Pieper president and chief executive officer of USL said, "The two best technologies for open systems and interoperability are coming together within one company.  The UNIX system provides reliable, secure sophisticated capabilities for network computing applications.  The NetWare environment provides integrated cross-platform system services.  The combination of the two enables distributed computing solutions to be deployed simply and cost effectively from desktops to mainframes."

USL will become a wholly owned subsidiary of Novell, maintaining its operations in Summit, New Jersey.  USL was formed in 1991 around AT&T's UNIX Software Operation which had its roots in AT&T Bell Laboratories.  Annual revenues are in excess of $80 million.

In April 1991, AT&T sold a portion of its total interest in USL to a number of computer industry concerns.  AT&T said then it took that action to ensure the growth of UNIX System V and open operating systems by establishing an independent unit with business oversight by investors who would ensure that USL was operated for the good of the industry as a whole, along with technical input on product directions by other industry groups.

Other USL investors are:  Amdahl Corporation, FUJITSU, Limited, ICL Plc., Institute for Information Industry, Motorola, Inc., NEC Corporation, OKI Electric Industry Co., Ltd., Ing. C. Olivetti & Co. S.p.A., Sun Microsystems, TATA Consultancy Services and Toshiba Corporation.

The proposed transaction would be accounted for as a purchase.  On this basis, the acquisition could result in a one-time write-off by Novell of up to $250 million in the fiscal quarter in which the transaction closes.  Most of the remaining cost of the purchase would be amortized over five to fifteen years.  The Novell shares required for the transaction will represent approximately 4 percent of the outstanding shares of Novell common stock.

For AT&T and other USL shareholders the exchange of shares within the proposed transaction will be tax free.  Based on current Novell stock price, AT&T would expect to recognize a gain at the time of closing in excess of $100 million in net income.

When the acquisition is completed, AT&T would hold approximately 3 percent of Novell's common stock.  Kavner emphasized that AT&T viewed its holdings in Novell as an investment and that AT&T had no plans to be involved in USL or Novell's operations or business decisions.

USL develops and markets the UNIX System V operating system, the TUXEDO Enterprise Transaction Processing System and other standards-based system software products to open systems computer vendors worldwide.  USL also provides education and management consulting for UNIX systems and related technologies.

AT&T is a global communications and computer company, with total 1991 revenues of $63.1 billion.  It operates the world's biggest and most advanced long distance network and provides communications services and products, as well as network equipment and computer systems, to businesses, consumers, telecommunications service providers and government agencies.

Novell, Inc. is an operating system software company and developer of network services and specialized and general purpose operating system products, including NetWare and UnixWare products.  Novell's NetWare network computing products manage and control the sharing of services, data and applications among computer workgroups, departmental networks and across business-wide information systems.

Novell, Inc
Peter Troop  408-473-8361

Dick Gray 908-221-5057

UNIX System Laboratories
Larry Lytle 908-522-5186