Is Microsoft Treading on Novell's Turf? (2/5)
Individual Investor Online Analysis
Tell us what you think in NOVL's Board.
In mid-January Microsoft (NASDAQ: MSFT) and Banyan Systems (NASDAQ: BNYN) announced a global alliance to deliver messaging, enterprise networking, and Internet solutions. Those with tech memories that extend to the pre-Internet days will recall that Banyan was once a formidable competitor to Novell in the Networking software arena.
While the fruits of this relationship have yet to bear any tangible fruit, it looks as if Microsoft will soon be treading on Novell's active directory turf. A directory is a tool used by a network administrator to control certain data and functions of a network at the server level as opposed to the PC level.
Novell has had a virtual lock on the active directory market with its Network Directory Services (NDS) software products. Under the terms of the agreement, Banyan will provide tools and services to assist customers that want to migrate to a Windows NT Server-based directory. This relationship will likely allow Microsoft to access as many as 8 million "seats". One seat may be defined as one log-on or one individual.
Estelle Stephens, Novell spokesperson said of the deal that "while Microsoft may be getting a foothold in active directory, Novell with NDS has over 40 million seats and a strong market position". Preferred Capital Markets analyst, Joel Achramowicz said of the relationship "that the deal will have no immediate impact on Novell and their position with NDS in the active directory market. By that same token though, it is Novell's to lose".
J.P. Morgan analyst, William Epifanio, who rates Microsoft a "buy", thinks that this deal with Banyan is "not an immediate threat to Novell." Ultimately though, he sees Microsoft's expanding presence in active directory, and their access to Banyan's customers as being an issue for which Novell must address.
While it is far too early to say for certain, we do not think that this move by Microsoft will stymie what Novell has worked so hard for. Novell has an excellent management team headed by Eric Schmidt, and enormous growth potential.
Despite the fact that Novell's share price, along with others in the technology sector have been under pressure over the last several days, we see the company easily generating $0.08 per share, in line with consensus estimates for the first quarter ended January 31, 1999. Results are expected to be released the week of February 22, 1999. Stay tuned.
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