Novell's CEO Talks Turnaround
Tuesday October 26, 1999 - 01:50PM
Eric Schmidt , CEO of Novell (NOVL) ,holds a computer- science Ph.D. and
spent some time at Sun Microsystems (SUNW), where he was the chief
technology officer and a key developer of the Java software language.
Schmidt left Sun two years ago to take the reins at a Novell, a networking-
software firm experiencing depressed revenues, an unfocused product line,
and a disheartened workforce. Schmidt has staged an impressive
turnaround: Novell is profitable, its stock price doubled, and the company is
once again viewed as a worthy competitor to Microsoft (MSFT). He talked
to money.net?s columnist Mandy Walmac about how investors may spot
similar turnarounds before Wall Street takes note, and throws in a few plugs
for some of Novell?s new products that will improve internet navigation.
money.net: For our members?who are avid investors?are there clues you
use to spot a firm that has been struggling and is now turning things
around? Are there signs other than a rising stock price, at which point it
might be too late to make big profits, to look for?
Eric Schmidt: I think it's important to consider if a company is part of the
conversation that defines the direction of its particular part of the
marketplace. Has the company again become relevant to the most
important technology and market trends? A big factor in the renewed
growth of Novell, for example, was our ability to move our directory
technology and server platform to center stage in the Internet.
m.n: Novell has a history of identifying companies that help its business
grow. Your partners include such familiar names as AT&T (T) , IBM,
Lotus, Oracle (ORCL), and Texas Instruments (TXN), and recently Novell
invested in Whittman-Hart (WHIT). What kind of criteria, in addition to the
fact that they have a product or service you need, do you use to identify a
firm Novell is interested in that can help money.net?s members find good
companies to invest in? Do you look for a strong management team? A
company that?s leading its field?
E.S.: Both of those factors are important. In addition, at Novell we seek out
partners with compatible software and hardware solutions, or expertise
such as systems integration and consulting.
m.n: You're credited with engineering an impressive turnaround at Novell.
We're guessing it was a more complicated affair than has been generally
reported. What were the key ingredients?
E.S.: We faced three main challenges. First, we had to realign our business
to meet the realities of the marketplace. Second, we needed to focus our
strategy and product development on the company's core strengths in
directory- based networking. Third, we needed to establish a disciplined,
fast-moving and results-oriented culture that would allow us to bring new
products to market in an accelerated time frame. Our solid financial
performance, with eight straight profitable quarters, reflects our progress in
all these areas.
m.n: Define "meBusiness," a concept of Novell's that's been in the news
recently.
E.S.: In the first wave of online growth, people focused on the basics of
learning how to access and navigate the Internet. Novell is ushering in the
next wave, where relationships between online businesses and consumers
are paramount and the consumer is in control of his or her personal
information. This new consumer-focused era on the Internet is what we call
meBusiness.
m.n: What are other products or types of products can help us go about our
"meBusiness?"
E.S.: Directory technology allows e-businesses to manage where you can
go, what you can do, and who you are on the Internet. With a directory
infrastructure in place, there is opportunity for all kinds of Internet services
and applications that can be personalized for every user. An example would
be a retail site or travel service that can make recommendations based on
your past preferences and affinity with other customers, or an rental service
that requires no downloads and charges you only for your precise period of
usage.
m.n: How does your new product digitalme fit in?
E.S.: digitalme (www.digitalme.com) is a new identity management service
that brings a greater level of convenience, freedom and control to the
Internet. digitalme makes life easier on the Internet for consumers and
allows them to take control of how their personal information is shared,
used and maintained on the Internet.
m.n: What characteristics do you look for in your technology staff?
E.S.: We look for very smart people who are happiest when working hard on
challenging projects and achieving measurable results. There is no
substitute for talent, nor for strong commitment.
m.n: Is there a word or phrase you hate to hear your technicians use? A
word or phrase you love?
E.S.: The words we love to hear are "directory," or "directory- enabled,"
because they describe the basis for a whole spectrum of creative new
networking applications that originate with our teams at Novell. The words
we abhor are "the old way" or "the old days," as they recall a time before
the Internet changed everything and Novell became a growth company
again.
m.n: Our readers are always on the lookout for a good book about the tech
biz. Is there a book you've read recently that you recommend?
E.S.: Patrick Lencioni's The Five Tempations of a CEO is an excellent book
that provides insight into the challenges leaders face in managing for
results. The model it proposes is required reading for my staff.
m.n: Do you think there were some investing lessons we learned in the 90's
that can help us in the year 2000 and beyond?
E.S.: No doubt we will look back on the 1990s as the time when the Internet
first made its impact on financial markets and every other area of business
and society. This revolution is still in its early stages, however, and it's
extremely difficult to predict exactly how they Internet will continue to
grow. The challenge for the investor is to identify those companies with
strategies and business models designed for long-term viability and growth.
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