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: ToySoldier who wrote (31005)	4/11/2000 10:37:00 PM
From: Paul Fiondella	Read Replies (1) of 42771

I made the following statement at the annual meeting today "Three years ago the management of Novell promised the shareholders that Novell would become a leading internet company. More recently we were told that this would be done by Novell providing the infrastructure for the internet. I would like to ask some questions about the revenue model the company has adopted to meet these objectives. If I understand the company's current revenue strategy, it is to use the company's installed base of Netware customers to generate modest revenue growth from legacy products while generating more significant growth from directory based applications. I believe you have promised the investment community 20% plus revenue growth from directory based applications. Implicit in this revenue strategy is the assumption that Novell's directory will become an internet standard at some point. Unfortunately there are several flaws in this strategy. First, it is evident that from Q4 to Q1 there was a decline in revenue growth not only in Netware, which was seasonal and expected, but also in directory based applications. Now my experience with companies representing themselves as growth companies and not meeting revenue growth objectives is that the shareholders of the company suffer a substantial decline in the value of their shares. And we have. From $43 to $22 a share. If Q2 produces more bad news then the analysts may begin to downgrade this company and lose confidence in what you are telling them. I want to suggest to you that there is another revenue model that more closely aligns with the objective of being an internet leader and an internet infrastructure company. I recently attended Brainshare. My impression was that Novell has a vast wealth of technology and engineering expertise. The company has tremendous technology resources. In particular I was struck by the work of Drew Major. It appears that Drew has started to develop an internet operating system --- a series of internet specific applications that address problems with the delivery of information over the internet through the use of plug-in appliances. These run the gamut from data flow control applications, to filtering, caching, and network attached storage. They leverage the fundamental strength of Novell's special purpose operating system core in ways which general purpose operating systems cannot match. They scale and outperform. I want to know why management hasn't shifted its revenue strategy away from directory based applications to an internet operating system strategy along the lines Drew has proposed?" =============================== Schmidts response was positive. After the meeting Steve Adams and I talked and then Eric came up and we had a much longer talk. =============================== My impression is that Eric had a serious interest in these remarks and that something may happen soon to consider what Drew has proposed to the company. If that does happen then Novell will be into the next phase of its development as an internet company. Eric repeated at the meeting that he considers it his primary job to protect shareholder value and that it is reasonable for shareholders to expect revenue growth since the company COO and management have promised to deliver this.

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