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: Joe Antol who wrote (16158)	8/23/1997 10:59:00 PM
From: Jim McCormack	of 42771

Who's customers are they Anyway? Joe - thanks for reading and commenting. Sometimes my posts are justs shouts in the windy storm of this BBS....I don't often know if they are read or not. I do not think that Novell can use its existing structure for a consulting model. They are not used to interacting with the customer as the resellers have always insolated them and preventing them from dealing directly with the customers. If I understand you correctly what you suggest is that someone with a consulting expertise could use Novell as an "In" to the customer base they enjoy. That makes some sense intuitively but in reality they do not enjoy a "relationship" with all but the largest of the customers they have. Chances are any buyer would already have "relationships" with these "large" folks. So it has to be the large numbers of smaller companies in the installed base we want to explore for services cross selling. How many companies can name the marketing rep from Novell for them? They have no direct sales. Novell means as much to them a Microsoft. Both are vendors of shrink wrapped products you buy from a local computer consultant (VAR) or mail order house. Now if they use a VAR they all could name them as they probably still do business quite frequently. So its the VAR with the relationship not Novell. And it is these very VARS that are steering new customers to NT and not Novell anymore. (43% new servers are NT to 33% being Netware). The VARS would never let you touch the customer if they could help it. Any attempt would backfire as they would use a competing product to ensure they retain the relationship and the consulting dollars from the customer. You have to remember there is little money in selling Netware for the VAR. The customers get catalogs daily with the lowest price for Netware so the VAR matches that just to get the installation consulting dollars and the add on service contracts etc... the actual Novell margin dollars for the VAR are tiny. In fact many VARs choose NT over Novell because the consulting dollars and add ons during an install or conversion keep them in the money. Most folks who use Novell do not need VAR services to install the product any longer as they have used it for years and now can service themselves. How is that for Irony! Thats a big problem - Netware is now a commodity. It used to require a VAR to install it. People have mastered 3.12. Now they buy it mail order. The VAR model now hurts Novell. Vars are now doing NT because it requires a VAR as it is new and complicated. The dollars from the conversions, planning, and installs all come from introducing the new product. VARs love NT. They love to sell it. It out earns a Novell job 10 to 1 in profits. This is a huge problem for Novell. Who has data on the average profit value of a Netware job vs. an NT job for a VAR? I bet it would shock Novell. A complicated product builds consulting revenues. Notes, Exchange, Oracle, Solaris, Pathworks, AIX. Netware is well understood now and end users are all CNEs now so they don't need VARS and consultants as much. Novell needs a new product that is complicated and required so the VARs can learn it sell it and make dollars on the installation, planning and follow up consulting. BorderManager fits the bill. I'll be watching it closely. Novell has to do something positive for the VARS. Any talk of selling services to the customers without them in the picture will strain an already weakened relationship. Schmidt should make it job one to keep the VARS happy. If they start to lose them then the Netware franchise is in big trouble. The VARS are the cutomer for Novell. Get products that thier customers want and that they (VARS) can make money installing. No - I still feel that you have to have a product that the VARS can sell to want Novell and the dealer network. If that product is consulting I think you will be competing with the VARS and they will not like that at all..... JM

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