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Technology Stocks : Novell (NOVL) dirt cheap, good buy?

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To: Jack L. Dlugach who wrote (3817)9/22/1996 6:08:00 PM
From: Joe Antol   of 42771
 
Read it once (then again) before you form any conclusions...

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HARD BYTES
By Joel Shore

Will Novell's Green River Project Be Damned?

The CRN Test Center published, in late May, an in-depth review of Novell's next-generation NetWare platform, currently code-named "Green River." We extolled the virtues of dozens of new features, most
notably a total scrapping of the old method of doing system administration. We were impressed.

The question, of course, is whether anyone will care. Green River, likely to be marketed under the name NetWare 4.11, faces monumental obstacles.

A software company based in the Pacific Northwest is selling a server platform that, after years of failure, finally is making inroads into Novell's long-held territory. Windows NT Server, regardless of
whether it is on a performance par with NetWare, is on a roll.

The first step in NT's success was incremental business. As additional servers were installed on existing NetWare networks, some of them ran NT instead of NetWare. That was to be expected, by both Microsoft and Novell.

More recently--especially with the advent of NT 3.51 a while back--an alarming trend has surfaced: Servers that for years have run NetWare are being converted to NT. Tearing out fully debugged and reliable networking infrastructure, only to replace it with something else, is never done lightly. But it is being done.

NetWare 4.1, according to some market research data, is not selling well. Sites have chosen to remain with NetWare 3.12, a platform known to be solid and rooted in the familiar territory of the bindery rather
than the newer directory service. While 3.12 is like an old friend, 4.1 was very different territory that was unfamiliar to all who entered. With the very different Green River, resellers may be even more reluctant to leave the familiar surroundings of 3.12.

Further complicating the network operating system issue are questions regarding the long-term viability of Novell as an ongoing concern. This is a company in deep, deep trouble, quite a change from its 1989
glory days when NetWare 386 was introduced.

Then-chairman Ray Noorda's acquisitions of Unix System Laboratories, Digital Research and WordPerfect have become disasters of titanic proportions. Not only have they cost the company billions, but they diluted company management and resources to the point where NetWare itself was not getting the attention it so desperately required--especially in the face of competition from Microsoft.

NetWare no longer is the computing industry's darling; DR DOS is long forgotten, except in an ongoing, seemingly ridiculous lawsuit; and WordPerfect, which once enjoyed market share exceeding 90 percent, had to be deported, kicked out or the United States to Canada, to get one last chance forsurvival.

The irony in all this is that Noorda himself came to Novell as a turnaround artist, hired to save the then-struggling maker of network terminals from oblivion. It was Noorda who transformed Novell from a
hardware company into the software giant that nearly merged with Lotus in 1990. Today, the picture is very different. The company is now struggling, this time to turn around the turnaround.

What does this mean for resellers? First, Novell is not going away. This is not like a small, 10-person vendor of motherboards that is in business one month and gone the next. Novell is a multibillion-dollar
company with thousands of employees and an installed base that Microsoft can only envy. Whichever version of NetWare resellers recommend--3.12, 4.1 or 4.11--they can do so with reasonable confidence.

Years ago, product managers from Novell and Microsoft put on a series of road-show debates, arguing the virtues of NetWare 386 against OS/2 LAN Manager. It was great theater. Flying epithets, lasting for
an hour, were always followed by handshakes and then a question-and-answer session from the audience.

Do you think the first audience question was about technology? Think again. At PC Expo in New York, the first question was: "Will I make more money selling NetWare or LAN Manager?"

In those days, the answer was, without a doubt, NetWare. That isn't the case anymore, but NetWare remains viable. With version 4, NT is finally solid. But resellers should not be too quick to dismiss
NetWare and Novell.

JOEL SHORE can be reached via telephone at (516) 733-8625; MCI:595-6687 or Internet:
jshore@cmp.com.
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Joe ...
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