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Technology Stocks : Novell (NOVL) dirt cheap, good buy?

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To: Jack L. Dlugach who wrote (3908)9/27/1996 12:38:00 AM
From: Eddie Kim   of 42771
 
Will Novell's Green River Project Be Dammed?

By Joel Shore

The CRN Test Center published, in late May, an in-depth review of Novell's next-generation NetWare platform, currently
code-named "Green River." We extolled the virtues of dozens of new features, most notably a total scrapping of the old
method of doing system administration. We were impressed.

The question, of course, is whether anyone will care. Green River, likely to be marketed under the name NetWare 4.11,
faces monumental obstacles.

A software company based in the Pacific Northwest is selling a server platform that, after years of failure, finally is making
inroads into Novell's long-held territory. Windows NT Server, regardless of whether it is on a performance par with
NetWare, is on a roll.

The first step in NT's success was incremental business. As additional servers were installed on existing NetWare
networks, some of them ran NT instead of NetWare. That was to be expected, by both Microsoft and Novell.

More recently-especially with the advent of NT 3.51 a while back-an alarming trend has surfaced: Servers that for years
have run NetWare are being converted to NT. Tearing out fully debugged and reliable networking infrastructure, only to
replace it with something else, is never done lightly. But it is being done.

NetWare 4.1, according to some market research data, is not selling well. Sites have chosen to remain with NetWare 3.12, a
platform known to be solid and rooted in the familiar territory of the bindery rather than the newer directory service. While
3.12 is like an old friend, 4.1 was very different territory that was unfamiliar to all who entered. With the very different
Green River, resellers may be even more reluctant to leave the familiar surroundings of 3.12.

Further complicating the network operating system issue are questions regarding the long-term viability of Novell as an
ongoing concern. This is a company in deep, deep trouble, quite a change from its 1989 glory days when NetWare 386 was
introduced.

Then-chairman Ray Noorda's acquisitions of Unix System Laboratories, Digital Research and WordPerfect have become
disasters of titanic proportions. Not only have they cost the company billions, but they diluted company management and
resources to the point where NetWare itself was not getting the attention it so desperately required-especially in the face of
competition from Microsoft.

NetWare no longer is the computing industry's darling; DR DOS is long forgotten, except in an ongoing, seemingly
ridiculous lawsuit; and WordPerfect, which once enjoyed market share exceeding 90 percent, had to be deported, kicked out
or the United States to Canada, to get one last chance for survival.

The irony in all this is that Noorda himself came to Novell as a turnaround artist, hired to save the then-struggling maker of
network terminals from oblivion. It was Noorda who transformed Novell from a hardware company into the software giant
that nearly merged with Lotus in 1990. Today, the picture is very different. The company is now struggling, this time to
turn around the turnaround.

What does this mean for resellers? First, Novell is not going away. This is not like a small, 10-person vendor of
motherboards that is in business one month and gone the next. Novell is a multibillion-dollar company with thousands of
employees and an installed base that Microsoft can only envy. Whichever version of NetWare resellers recommend-3.12,
4.1 or 4.11-they can do so with reasonable confidence.

Years ago, product managers from Novell and Microsoft put on a series of road-show debates, arguing the virtues of
NetWare 386 against OS/2 LAN Manager. It was great theater. Flying epithets, lasting for an hour, were always followed
by handshakes and then a question-and-answer session from the audience.

Do you think the first audience question was about technology? Think again. At PC Expo in New York, the first question
was: "Will I make more money selling NetWare or LAN Manager?"

In those days, the answer was, without a doubt, NetWare. That isn't the case anymore, but NetWare remains viable. With
version 4, NT is finally solid. But resellers should not be too quick to dismiss NetWare and Novell.

Copyright * 1996 CMP Media Inc.
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