I am not sure what price you have in mind....but would you care to elaborate?
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==Roger Mariner: more memories: from redherring march 2000
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Novell services the Internet
For historians of massive tech-company implosions, Novell serves as the
model. Its misguided purchase of Wordperfect in 1994 remains one of the
colossal business mistakes in modern times. After all, how many
companies can you recall that paid $1.5 billion for a company, only to sell
it a couple of years later for just $185 million?
Although the Wordperfect boondoggle can't be blamed completely for
Novell's decline throughout the mid-1990s, it certainly didn't help. You
could argue that the Wordperfect acquisition may have been former Novell
chief Ray Noorda's somewhat panicky reaction to mounting competitive
pressure from Microsoft (Nasdaq: MSFT), which had already eaten into
Novell's bottom line in 1993. But Mr. Noorda, who successfully had turned
the company around in the early 1990s, was perhaps feeling a little too
competitive when he decided to compete with Microsoft in the front-office
applications market. As a result, Novell's growth and profits evaporated,
and the stock declined 75 percent between March 1993 and June 1997.
When we talk about stock-ticker brand damage, Novell
had plenty of it. After Mr. Noorda's successor, Bob
Frankenberg, stepped down in 1996, the company
embarked on a search for somebody that could
completely revitalize the company. In stepped Eric
Schmidt, the former Sun Microsystems (Nasdaq: SUNW)
technical wizard. When Mr. Schmidt took the job in
1997, you could hear a collective gasp in Silicon Valley.
He left a job as chief technology officer of a
high-growth Silicon Valley stalwart to accept the job as
chief executive of the flailing Orem, Utah-based Novell.
PATIENCE PAYS OFF
"Is he crazy?" wondered many. But with his "what, me
worry?" attitude, Mr. Schmidt has patiently guided
Novell into an Internet services model, in which he has
extracted the crown jewels of Novell's networking
technology, including Novell Directory Services (NDS),
and transferred them to the Internet.
Investors obviously have had confidence in Mr.
Schmidt. Since he took over in April 1997, shares had
risen 263 percent by the end of January, and they also
had hit a six-year high in that month. So, you might say
a bet on Novell is largely a bet that Eric Schmidt can
continue to revitalize the company with a technical
focus.
The company has a stable platform from which to grow,
as Netware's installed base of 3.8 million servers and
79 million network nodes doesn't appear to be going
away any time soon. For the full fiscal year 1999,
Novell's revenue increased 17 percent year-over-year
to $1.27 billion, from $1.16 billion in fiscal 1998. Net income for fiscal 1999
increased 87 percent to $191 million or 55 cents per share, up from $102
million or 29 cents per share for the same period the year before.
Novell's next step is to translate its recent deals to distribute NDS into
revenue and profits. Novell has agreements with Internet-focused
companies such as America Online (NYSE: AOL), British Telecom (NYSE:
BTY) (BT), CMGI (Nasdaq: CMGI)'s Altavista, Red Hat (Nasdaq: RHAT),
enCommerce, Time Warner (NYSE: TWX)'s CNN, and Eprise to use NDS.
The America Online partnership, in particular, seems to engender
opportunity, when you think of the need for directory services in
community-based access models such as those offered by AOL.
Analysts seem to concur that these deals are a starting point but that
many challenges remain for the company.
"NDS will drive the company going forward," says Bob Lam, an analyst at
Bear Stearns He believes that Novell has a head start on Microsoft, which
is marketing its own Active Directory product.
DETRACTORS
Not everyone is optimistic. Peter Ausnit, an analyst at Prudential
Securities, has Novell rated as a Hold and sees Microsoft as a serious
threat. "Novell faces serious competition from Microsoft Active Directory, a
part of Windows 2000, as well as others," wrote Mr. Ausnit in a January
11 report.
Mr. Ausnit also concludes that the partnerships with AOL may be a
measurement of Novell's recent success in the directory space. He does
see strength in other Novell Internet initiatives, including its firewall and
caching products.
The company also has expressed some
interest in entering the applications
service provider (ASP) market. Earlier
this month, the company agreed to
acquire JustOn, an ASP, for an
undisclosed amount.
As for Mr. Schmidt, he hopes that he can
put the dark days of Microsoft-bashing behind him.
"We don't have any competitors in this space right now. Microsoft will
eventually have an offering in this space, but not for a few years, and a
few years is a very long time in this industry," says Mr. Schmidt. "I'm trying
very hard to live in the post-Microsoft world. We are in the best possible
situation -- a big market in front of us where we are the putative leader." |
