Novell (NOVL) dirt cheap, good buy? Message Board

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

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To: Gus Risberg who wrote (826)	5/29/1996 1:48:00 AM
From: E_K_S	of 42771

Excellent overview and analysis... Looking forward I believe Novell will change their current marketing program and associated expenses. We know Frankenburg is now focused on the balance sheet and specifically the Income Statement. If you look at the Sales and Marketing expenses for 1995, 28% of revenue was expensed in this area. With the major re-channeling of inventory and the recent resignation of the marketing VP, what would you think is this whole department was changed! Here is my thought....I have been studying the HWP balance sheet and income statement to try to get a hint as to what Frankenburg might have in mind. We all know that the 'old' style of marketing will no longer be effective, especially with the idea of the 'software in a box' solution. The system configuration options are way too complicated. We have discussed this on the board as to the 'optimal' configuration with Windows NT vs Netware and other 3rd party applications. You mentioned that there probably will be a 'hybred' solution with Netware and NT and Unix applications being used. It is all dependent on the customer and their required end-user applications and internal controls and their budget. HWP has established a separate Business Enterprise Consulting department (a separate profit center) and presently obtain 17% of their revenues from "Services" with a net profit margin from this division of 33%. Their consulting service division also performs another major function...marketing the HWP hardware products and providing total customer solutions. HWP consolidates their selling, general and adminstrative functions into one unit which represent between 22% and 24% of total revenues. Research and Development make up about 8% of their revenues. I propose that NOVELL may look at a reorganization where Sales & Marketing will be merged with their general and administrative units which provides support services to other departments and end-users (ie. back office function). The main marketing will be consolidated into a separate department called "Consulting Services" which will be its own profit center. The company will subsidize this function with overhead support and direct R&D support BUT in the final analysis it will eventually turn a profit BUT more importantly provide the customer the hands on support to provide end-user customer solutions! This will involve 3rd party applications and perhaps a marketing alliance with major hardware providers. New product integration will be coordinated with this group and R&D and a simple ROI analysis will be completed to see if new proposed products should be developed in house or by 3rd party joint ventures. For the company to stay focused on main line product upgrades, new products and applications deemed necessary will be developed through joint ventures with seed money provided by NOVELL (similar to GeoWorks, INTS, On-Technologies and many more). This limits the risk for Novell BUT also allocates their limited in-house resources to focus ontheir main line networking products (ie. Netware 4.1 and GreenRiver). Therefore, IMO I think this may be the model Frankenburg is targeting the company toward for 1997-2000. The customer will be No. 1 and will be serviced better. Think of it as the HWP way but with a Novell twist. EKS Good analysis and I hope those 3rd and 4th quarters earnings come in as you predict.

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