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Technology Stocks : Novell (NOVL) dirt cheap, good buy? -- Ignore unavailable to you. Want to Upgrade?

To: DJBEINO who wrote (28805)	11/5/1999 12:35:00 PM
From: Spartex	Respond to of 42771

Company Focus September 27, 1999 Volume 1, Number 16 Novell and Microsoft: 1+1=3 - Novell Inc. By Tad Trantum, CFA Novell has been plagued with a disease called market misperception. As most people have heard, Microsoft is due to release its much-talked about Windows 2000 operating system at the end of 1999/beginning of 2000. Apparently, the anticipation has diverted attention away from the energy and innovation exuding from within the walls of Novell. Recently, we had the privilege of experiencing this energy and innovation first hand in a conversation with some of Novell's management team that is closely tied to the roll out and development of Novell Directory Services [NDS]. There is a vast misperception that Microsoft's Active Directory and NDS are direct competitors and have identical functionality. This is just plain wrong. NDS is a directory that was designed with the purpose of providing cross-platform administration of everything within a network from printers to routers to Internet access to most importantly, the users. In relation to Microsoft, NDS's scalability and interoperability treats Active Directory as another object within the network by actually enhancing the functionality and value of Active Directory to the user. Therefore, NDS works as a complement to Microsoft rather than a competitor. You may ask what NDS can add to Active Directory? Active Directory was designed to administer objects within the NT platform only. NDS essentially allows a user within Microsoft's operating system to interact with foreign operating systems, while at the same time reduce the complexity of Active Directory for the user. This is crucial in an increasingly open platform environment, where the Internet is connecting more people in supplier-customer relationships. Companies will need to have a directory capable of letting their user base interact with multiple operating systems if they are going to effectively and efficiently harness the power and value of the Internet as it grows to be a dominant force in business operations. Microsoft's engineering team recognizes the importance of NDS to the Active Directory. In fact, Microsoft and Novell's engineering teams have been under a joint development effort for some time to optimize the functionality between Active Directory and NDS. Thanks to Eric Schmidt, the old days of cutthroat competition between Microsoft and Novell are long gone. Windows 2000 will actually contain Novell's client software in order to enhance in NDS's functionality on the Windows operating system. The release of Windows 2000 will actually benefit Novell by driving an increase in the importance of the directory and the need for NDS. In addition to NDS, Novell has many exciting opportunities for growth. Novell has already developed some applications that interact with NDS to create a more efficient network. Moreover, the pace of new application development has accelerated. They are on target to release 10 new applications in the near future that should supplement revenue growth substantially. An existing application called Zenworks currently has $100 million revenue run rate. Assuming these exciting new applications achieve at least the level of Zenworks, the incremental revenue to Novell could be significant, approximately $1 billion. In addition to adding application revenue, these new products will increase the value of NDS to its current customers as well as potential customers desiring the features of these new applications. In essence, Novell is using new applications to build on their existing product line not replace it. Novell's caching technology is another area of growth. Caching provides a way to access information on the network more efficiently. For example, if there is a particular website a user goes to frequently, caching allows the user to access the site more quickly by storing it to avoid re-downloading the entire site. In a nutshell, Novell's caching appliances increase the value of the Internet through easier and more efficient access to important resources. Novell is the market leader in this technology segment. Partnership agreements have been established with companies like Compaq, Dell, and NEC to bundle Novell's caching technology? expect more partnerships in the future. Novell has significantly ramped up its consulting business over the past couple of years. There are now 400 Novell consultants with close to 50 per month coming on board. Although the growth in consultants will begin to level out, Novell has the personnel in place to meet their customer's increasing needs for efficient network solutions. Novell's consultants help clients integrate their old applications with NDS using Novell's DirXML solution. For every dollar customers spend on Novell's new DirXML application, they will spend $5 on consulting. Novell is committed to providing their clients with quality service to help them capture the full value of Novell's products for their network. As the Internet proliferates as a backbone to the global economy and the complexity of the network increases, the need for tools to create more efficient and user friendly operating systems will also grow. Eric Schmidt has transformed Novell's corporate culture over the past few years to create an energetic, innovative, and intense work environment that is producing the solutions to empower the user. The market will not ignore the value of Novell's superior technology and vision amidst the Internet Revolution. ¸ 1999 Mastrapasqua & Associates. All rights reserved. mastrapasqua.com