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

To: Scott C. Lemon who wrote (30810)	3/25/2000 1:41:00 PM
From: WE89	Read Replies (1) \| Respond to of 42771

Forbes.com Marketing, A New Concept For Novell By John Shinal Steve Adams, senior vice president of marketing at Novell, has given hundreds of sales presentations since he joined the software company six months ago. But most of those pitches haven't been to customers. Instead, Adams has spent his time trying to sell Novell's 5,800 employees on a new idea: that focusing on technology isn't always the best thing. Adams' plan is based on a grim (for Novell) but accurate assumption: that a lot of the customers who now buy Novell's (Nasdaq: NOVL - news) NetWare operating system won't be buying it three to five years down the road. One reason is that many large corporations, which make up the bulk of Novell's customers, are farming out the management of their networks to service providers. Thanks to some smart product development decisions by Chief Executive Eric Schmidt two years ago, Novell has new products to sell. Those include a suite of Internet-based management applications and its shining star: Novell Directory Services (NDS), which makes it easy to add new users, applications and equipment to a network. ``Selling this stuff will be very different from selling an operating system,' Adams says. The challenge ``won't be about technology. It's about sales execution.' Now that he's drummed that message into Novell's troops, he's going to deliver it to the software developers at Brainshare, Novell's annual developers conference that begins March 27 in Salt Lake City. ``If people come away with nothing else, I want them to know we will have a clear, consistent marketing plan,' he says. The idea is to convince Internet service providers (ISPs), Web hosting companies and application service providers to use Novell's products to manage and secure their networks. Adams considers those companies to be Novell's most important distribution channel. The plan makes sense, but the question is whether it will be enough to save Novell from another losing battle with Microsoft. ``He's got the right idea, but Novell should have done this three years ago,' says Dan Kusnetzky, vice president of systems software research for International Data Corp. Kusnetzky says the window of opportunity to establish NDS as the dominant directory platform to manage Web applications has closed, now that Microsoft (Nasdaq: MSFT - news) is shipping Windows 2000. That product has a directory feature called Active Directory, which is likely to be adequate for most small and midsized businesses. That means Microsoft should be able to maintain or extend the lead it captured in those markets with Windows NT, the predecessor to Windows 2000. Another problem is that Novell has to pull off a delicate balancing act. While selling its new software, it can't neglect customers who buy NetWare, which still accounts for the majority of Novell's sales. For its fiscal quarter ended Jan. 31, Novell's sales rose to $316 million from $285 million in the year-earlier quarter. That's a respectable growth rate of 11%. Although its sales are growing, Novell is losing market share. According to IDC, in fact, NetWare's market share has shrunk for four straight years. In 1999, Novell's NetWare product had a 19% share, down from 33% in 1995. Novell became the leading seller of network operating systems early in the 1990s by giving systems managers the technology they needed to manage filing and printing on their networks. When Microsoft rolled out Windows NT, however, which did those things reasonably well at a much lower price, the software giant ate Novell's lunch. Sound familiar? Adams says Novell's customers are buying NetWare 5.0 to manage networks that extend from local area networks into the Internet. ``They want it so they can easily fill out their service offerings,' he says, adding that ``ISPs can't make money off providing basic service, but they may be able to make money offering secured Internet service.' Novell wants to make NDS the base on which people develop security applications and other network functions like caching and network management. One opportunity that plays to Novell's ability to work in large networks is in the market for dedicated Internet appliances. A growing number of those appliances are being run with Linux, which is part of the reason why Novell made NDS compatible with Linux. It also runs on Unix operating systems from Sun Microsystems (Nasdaq: SUNW - news) and Hewlett-Packard (NYSE: HWP - news). However, Sun has a respected directory offering of its own. Novell also is re-engineering NetWare to make it more friendly for applications that are becoming critical to corporate success, such as customer relationship management and enterprise resource planning software. That's another step that was overdue. ``I'm glad to hear that, but they've said it before. I hope to see results,' says Kusnetzky.