Novell Selects Internet Guru to Lead Company (from New York Times)
March 19, 1997
Novell Selects Internet Guru to Lead
Company
By LAWRENCE M. FISHER
AN FRANCISCO -- Novell Inc., the struggling network software
company, tapped one of the best known visionaries of the Internet
to be its new leader Tuesday. Eric Schmidt, chief technology officer of
Sun Microsystems Inc., was named Novell's chairman and chief
executive, ending a seven-month search.
Schmidt, 41, was the primary strategist behind turning a stillborn project
for hand-held computers into the now highly acclaimed Java, which has
rapidly emerged as the Internet's dominant programming language. He
joined Sun in 1983 from the Xerox Palo Alto Research Center as
director of software.
Novell has been without a permanent chief executive since Robert
Frankenberg left in August. Analysts said Frankenberg, a former
executive of Hewlett-Packard, where he was credited with turning around
the personal computer division, cleaned up Novell's operations, but failed
to articulate a strategy.
Novell shares gained 87.5 cents Tuesday, closing at $9.4375, in Nasdaq
trading; Sun shares lost 75 cents, closing at $28.125.
Analysts said that Schmidt would be a plus for Novell, although they did
not expect an immediate impact on the company's bottom line, and that
while his departure was a loss for Sun, that company had no shortage of
proficient managers.
At Novell, Schmidt faces the challenge of transforming the company that
once dominated computer networking, only to fumble the Internet
opportunity. Novell's core product, the Netware operating system, is still
pervasive in corporate America, but it has been losing market share to
Microsoft Corp.'s Windows NT, for managing the flow of data within an
organization, and to various Internet-based technologies for more
far-flung networks.
Schmidt said in a telephone interview that although the challenges facing
Novell were well known, the company's assets were under appreciated.
"Novell has a huge user base, and more people devoted to networking
protocols than anyone in the industry," he said. "They are also moving to
the Internet and Java as fast as they can, which was a big selling point for
me because I didn't want to go to a place that didn't have the same
strategic vision I have."
Since Java's introduction, Schmidt has been highly visible within the
industry, making frequent appearances at conferences, testifying today
before Congress on data encryption. Analysts said Novell's choice of
Schmidt was a bid to regain technical leadership.
"When Bob Frankenberg left, we said they needed either an Internet guru
or a marketing guru; they just got the Internet guru," said Jon Oltsik, an
analyst with Forrester Research. "Novell has to reposition itself as an
Internet leader, and Eric brings a lot of credibility to that," he continued.
"If you look at Novell historically, they should have been an Internet
leader, but they sort of missed the boat. The good news for Eric is the
boat is still in the dock."
But Schmidt was evidently not Novell's first choice. According to
executives close to the company, it first approached Ray Lane, president
of the OracleCorp., and went as far as offering a multimillion-dollar
signing bonus. But Lane, who is credited with turning Oracle around when
it was on even shakier ground than Novell, negotiated a substantial option
package to remain, according to these executives.
Without Lane's experience or track record, Schmidt was presumably
offered a smaller package, which Novell said it would disclose in a March
21 proxy statement. Novell officials declined to comment on negotiations
with any other candidates.
Lane declined to comment on any negotiations with Novell, but said that
Schmidt's appointment was good for the company, which is an important
strategic ally to Oracle. "I know Eric very well, we're good friends, and I
think it will make working with Novell much easier," he said in a
telephone interview.
Analysts and former Novell executives said they believed Schmidt could
help Novell form strategic alliances with companies like Oracle, Netscape
Communications, and of course, Sun. These companies all compete
against Microsoft, and if they can convince customers to standardize on
Novell technologies for core networking tasks, they will all benefit. They
expect Schmidt to work to make Novell succeed as an independent entity
rather than cleaning it up for an acquisition.
"They really went with the guy with industry vision, for re-energizing the
company," said Sheldon Laube, chief technology officer of U.S. Web
Inc., who previously held the same position at Novell. "He's not a
breakup sort of a guy," he said. "He's well respected by everyone in the
industry."
John Thompson, vice chairman of Heidrick & Struggles, a leading
executive search firm for the technology industry, said, "I think he's got to
partner with some key people, Sun and others, to really hold off the
Windows NT locomotive." He added, "He's not going to stop it, but
maybe he can get it to jump tracks." Noting that Schmidt's strengths were
as a thought leader, he said he would need to add operational talent to
Novell, particularly since Mary Burnside, an executive vice president, left
last week.
Schmidt said he had more operational experience than most people
realized, including 10 years of operating jobs at Sun before he was named
chief technology officer. And he said he was planning to form strategic
alliances. "Of course, I'll be partnering pretty closely with Sun," he said.
Novell's chairman, John Young, the former chairman and chief executive
of Hewlett-Packard, will become vice chairman of the company. Joseph
A. Marengi, the former executive vice president of sales who has been
Novell's president and chief operating officer since Frankenberg's
departure, will take on a new position to be determined by Schmidt,
Marengi said.
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