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Regards, QuadK
Novell Beating Microsoft To The Year 2000 Punch
Date: 8/3/98
Author: Lisa Wirthman
Helped by hard work and lucky timing, the stars finally might be aligning for Novell Inc.
The question is whether the onetime software industry leader is ready and able to seize a second chance for success.
After a yearlong turnaround, analysts cautiously agree that Novell is back on track. Within a week, the company plans to reveal the
capstone of its recovery: NetWare 5.0. Set to ship next month, it's a major new release of its flagship networking software.
''NetWare 5.0 is the realization of all the things that have happened over the last 12 months,'' said Stewart Nelson, vice president of
Novell Products Group in Orem, Utah.
Novell's NetWare once ruled the market for network operating software the way rival Microsoft Corp.'s Windows dominates PC
operating software.
Then Microsoft came charging into networking. At the same time, Novell lost its focus by venturing into businesses such as Unix
servers and word-processing programs. The result was a long slide. In only three of the past 15 quarters have Novell's sales risen
from the year-earlier period.
When Eric Schmidt took over as chief executive in early '97, he cut the work force 18%, halted product oversupply and refocused
research and development on networking.
''The biggest problem was to get the sound bite 'struggling' out of all the (press) articles,'' Schmidt said. ''Customers don't buy
from 'struggling' companies.''
The company has posted profits its last three quarters. Its stock hit a 52-week high of 13 5/8 on July 16. A year earlier, the stock
sunk below 7, its lowest point since '90.
Ironically, helping Novell is an unexpected boost from Microsoft.
Microsoft's competing Windows NT 5.0 software has been delayed several times, and now is expected next summer. The delay will
put it about nine months behind NetWare 5.0. And that'll put Windows NT 5.0 on the market just six months before the year 2000.
Most corporate users won't be installing any major new products that close to '00, says Novell's Nelson, because many companies
will have to be sure their systems can accurately read the year 2000.
''We're looking at a major possibility that (NT 5.0) will not see any major deployments until mid-2000,'' Nelson said.
One NetWare 5.0 tester, who also considered NT 5.0, says the Year 2000 issue will make a difference in his choice of software.
''Anybody who is trying anything new in the last half of '99 is a far braver person than I am,'' said Peter Cruikshank, a systems
engineer for the U.S. Navy in San Diego.
Microsoft President Steve Ballmer dismisses the idea that his company is handing Novell a big opportunity.
''I don't think it's going to make much of a difference in terms of market share if they have something out in September and we have
something out . . . whenever after that,'' he said. ''There's a problem with the year 2000, but that's a problem for everybody.''
But Novell executives say they'll beat the Year 2000 lockdown. That's because they gave 250,000 major users test versions of
NetWare 5.0, so they'd be ready to start installing it right away in September.
Novell's biggest problem has never been with its products, but with execution and marketing, says Bruce Sakakeeney, analyst with
Boston's Aberdeen Group Inc.
NetWare server shipments fell 7% in '97, says market researcher International Data Corp. in Framingham, Mass. But NetWare still
has 79 million users and 81% of Fortune 500 companies, Schmidt says.
''We don't have an adoption problem; we have a retention problem,'' he said.
To keep customers, Novell must prove to them that NetWare and Microsoft NT can coexist.
''We expect customers to have mixed environments,'' said Brian Faustyn, product line manager for NetWare. People can use NT to
run their Windows programs and NetWare to manage their servers, he says.
''Our customers understand where to use NetWare and where to use NT,'' Schmidt said.
One of the big changes in NetWare 5.0 is that it's based on the Internet's so-called TCP/IP protocol rather than on a proprietary
NetWare protocol, Nelson says. That means NetWare users can work much faster between their corporate networks and the Internet.
NetWare 5.0 also will include a 64-bit storage system to hold large files, and two-way communication between users and printers.
The most important feature in NetWare 5.0 may be its ''directory'' of users. Microsoft won't have this feature until NT 5.0 ships.
But explaining the feature is a big marketing challenge, Schmidt says.
''One of my biggest criticisms of myself is that I still don't have a pithy two sentences to describe what we're doing here,'' he said.
Basically, the directory offers an easy way to manage users, files, printers and databases across networks.
A new product called Z.E.N.works, also a feature of NetWare, will make Novell's directory message clearer, says Faustyn. It uses
the directory to distribute new software to multiple users from a single location.
Programs that use the directory will become a much higher percentage of Novell's revenue, Schmidt says. ''You'll see Z.E.N.works
on steroids with (versions) 2.0, 3.0 and 4.0,'' he said.
The company also is adding Internet security standards to its NetWare 5.0 directory to help users with electronic commerce.
''Part of our strategy is to have constant momentum from products, deals and partnerships,'' Schmidt said. ''It's all part of being in
people's faces.''
Once it gets people's attention, Novell's message is clear, says John Slitz, Novell's senior vice president of corporate marketing.
What does he tell customers choosing between NetWare 5.0 and NT 5.0? ''We're here today.''
(C) Copyright 1998 Investors Business Daily, Inc.
Metadata: NOVL MSFT I/3574 I/3270 E/IBD E/SN1 E/TECH
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