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: Paul Fiondella who wrote (30690)	3/14/2000 11:59:00 AM
From: Paul Fiondella	Read Replies (3) of 42771

An open letter to Eric Schmidt from a shareholder Dear Eric, At about minute 38:22 of your recent teleconference with Schwab investors, you were asked by Robert of Croyden (sounds wonderfully medieval) whether splitting up Novell into separate companies would enable the leaders and the talent within Novell to put their creativity to fuller use. The questioner asked whether this would attract new people and new talent to the company, presumably by giving these people more of a start-up like than corporate like atmosphere in which to work out their ideas. Your answer to this question was that Novell's business is "highly integrated" and that Novell doesn't have "separate businesses". Further you indicated that you wanted to use the cash generated by Novell (rather than divide it up) to get Novell's net services message out effectively to the business community and grow earnings and revenues as well as use the cash flow to achieve the objectives of the questioner through possible future acquisitions and current investments in other companies. I can understand your concern to preserve Novell's cash flow for investments and the objectives of Novell as an integrated company. However that does not preclude a restructuring of Novell without breaking up the company. Why spend money acquiring the products of the talent of smaller start-up companies if one can create an internal atmosphere that grows similar talent? What the caller was really asking about was a perception among shareholders and other observers of Novell's business that creativity cannot find expression within Novell's current corporate structure. To date Novell has been unable to develop a directory based application that captures the imagination and enthusiasms of the internet community. In fact many people within Novell regard anything that appeals to end users of Novell's technology as being anathema to the corporate strategy of providing infrastructure. Meanwhile observers of the marketplace have noted that other companies have been using inferior infrastructure technology to build out directory based applications for the internet. Most notably I-Planet and Sun Microcomputers have been seeking to use their internet market share to leverage their own directory solutions for corporate customers. These efforts have even met with some spectacular failures as most recently with Bell Atlantic and yet not even these failures prevent adoption of such inferior systems. Clearly the internet has become a playground of "good enough" solutions, not best solutions. Therefore the end user directory based application strategy assumes even greater importance. Corporate customers are indeed impressed by the efforts of inernet start-ups and are looking to internet expertise amongst relatively new companies rather than to proven technology from companies like Novell when they contemplate building out to the internet. They reason that since a new company understands the internet "better" it will have better success in putting together the pieces or a successful solution. THe reputations of these newer companies are based upon the end user appeal of their internet applications. Thus an infrastructure strategy premised upon the adoption of Novell's superior technology lacks an impetus. This is not the 1970's where corporations take the best technology from the most reliable company over the what the flashy start-up is offering. It is just the reverse where one takes a chance on Amazon to sell ones products over WalMart. The obvious impetus, to the adoption of infrastructure technologies, proven by the whole history of personal computing technology and internet technology is creativity. Microsoft is where it is today because a number of creative companies built their solutions on top of Microsoft's operating system technology. Was Microsoft's OS the best? No. But it was the easiest for creative people to build upon. While it is possible for Novell to purchase other companies that have come up with creative solutions and directory based applications the question remains whether Novell has the internal mechanism in place structurally to nurture the atmosphere of creativity it takes to embrace the best examples and demonstrations of externally developed directory applications. Do people within Novell understand the internet, the applications level of directory technology, and how to nurture these external developers. Robert of Croyden asked you whether Novell has the corporate mindset to attract creative people who will develop within Novell and recognize outside of Novell the best of directory based applications and other internet applications and be able to use these applications to drive the acceptance of Novell's infrastructure technology. I think the shareholders of Novell need a better answer than you gave. We have in front of us the example of digitalme. In some respects digitalme was a success, in that it opened up an exciting period for Novell's recognition as a leader in internet space and it stimulated the development of state of the art Novell infrastructure for further directory based applications. But on the other hand digitalme was a miserable corporate failure. No successful product was developed. The same handwringing about "consumer" products was heard again and again as an explanation of what was a failure to develop an exciting end user product demonstrating Novells underlying technology. Your questioner on the Schwab conference call asked you whether Novell has a corporate structure that nurtures creativity. It seems to me that Novell hasn't demonstrated by any measure of product or market share that it can attract creative people who can make a difference with regard to the application level of internet technology. Certainly Novell has systems level people who are quite creative as witness the whole caching appliance phenomena. Novell may be a fine systems house but I don't see any applications division. I don't see any creative applications people --- people who understand how to USE the underlying technologies to capture the imagination of the internet. Similarly people who understand the internet and can apply its lessons to Novell are not visible within the company. Why? And what will you do to nurture creativity within Novell? I think it is a reasonable question, one which deserves an answer. Sincerely, Paul Fiondella Shareholder (Current holdings 20,000 shares)

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