Novell's new internet partnerships and investments (read on Gary)
NOVELL BUYS INTO
NETOBJECTS
By Georgie Raik-Allen
Red Herring Online
October 23, 1998
Novell's new venture arm has made its most high-profile
investment in a startup to date, acquiring a minority stake
in NetObjects.
Both parties claim the investment is more a strategic than
financial decision. It helps network software company
Novell move into the Internet space and gives Web
authoring startup NetObjects a channel into the small-
and medium-size business market, where it hopes to
makes its future fortune.
The terms of the deal were not disclosed, but
NetObjects CEO Samir Arora said IBM (IBM)
remained the startup's majority shareholder.
NetObjects already claims a strong position in
Web-design product markets, but is hoping to expand
into the small-business market, where less than 20
percent of companies currently have their own sites.
"The most important reason to get money from Novell
was for the partnership," says Mr. Arora. "That was
more significant than the funding."
"We were looking for an investor that had strong
customers in the small-business space."
Novell had been accused of lacking a strategic focus until
the new CEO, Eric Schmidt, came on board last year.
Since then it has refocused its network software
products for businesses on the Web.
Novell's $50 million Internet Equity Fund was
established early this year. The fund has since invested in
six companies that Novell says will help to ramp up its
Java-based applications.
Novell director of strategic investments Blake Modrsitzki
says the NetObjects investment is a perfect example of
the company's "new strategy to evolve into an Internet
company."
Strategic fusion
As part of the deal, Novell's Christopher Stone is taking
an observer's seat on the NetObjects board, and
NetObjects Fusion will be bundled into Novell's
NetWare for Small Business.
NetWare will also include Netscape's FastTrack Web
server and is supposed to provide an end-to-end
solution for small businesses that want to get onto the
Internet.
Fusion combines basic Web-page design with
sophisticated site-management tools that reduce the need
to write code when building a Web site.
NetObjects's biggest competition comes from
Microsoft's FrontPage software. Research company
International Data Corporation estimates that the Web
editor industry will grow at an annual rate of 22.5
percent to $189 million by year 2002, with Microsoft
continuing to enjoy a dominant market share.
While many people wondered whether NetObjects
would be able to remain independent while under the
tutelage of Big Blue, Mr. Arora says the investement
from Novell proves the company has retained the
autonomy a startup needs to remain innovative and
entrepreneurial.
"The real significance of this deal is that it shows we can
have a majority stakeholder like IBM and still have the
excitement and energy of a startup," Mr. Arora says.
He declined to comment on recent rumors that IBM was
looking for investment bankers to help take NetObjects
public.
Novell's venture arm has been busy. Read about its other
recent investments.
Can any company beat Microsoft? What do you think?
NOVELL FUNDS FOUR NET
FIRMS
By Owen Thomas
Red Herring Online
August 5, 1998
Novell (NOVL) has doled out $10 million of its Internet
Equity Fund to four private companies. The networking
company took minority stakes in NetPro Computing,
which offers software to monitor network directory
performance; NetVision, which integrates various
software vendors' network directories; GlobalCast,
which provides audio and video multicasting on the Net;
and Evergreen Internet, a maker of high-end
e-commerce software.
What's the common thread? Support for two
technologies Novell has identified as key to its rebound:
network directories, which ease the management of large
networks of PC desktops and servers, and Java, Sun
Microsystem's cross-platform programming language.
Novell hopes that offering Novell Directory Services
(NDS) on Windows NT and Unix, as well as on its own
NetWare platform, will expand its customer base.
NetWare's Java support, meanwhile, will make more
enterprise software available for the still-popular
networking OS, which has been hit hard in recent years
by the growth of Windows NT.
Rob Hicks, a Novell veteran who had formerly managed
Novell founder Ray Noorda's venture investments, had
rejoined the company a few years ago under then-CEO
Robert Frankenberg to start a venture fund, but the plan
was put on the back burner. Under CEO Eric Schmidt,
who was appointed CEO last year as part of a
turnaround effort, the venture plan got new life. "It was
just a change of Eric Schmidt really wanting to do it,"
says Mr. Hicks. "He was the champion."
Nothing ventured, nothing gained
Novell's strategy is hardly novel. Many tech companies
have set up corporate venture funds to invest in
promising startups, most notably Adobe and Intel. For
companies with cash on their hands -- Novell has around
$1 billion -- the returns on venture investments can make
forming a fund a sound financial move.
But the funds must generate strategic benefits as well. By
investing directly in small companies, Novell can support
interesting work in complementary fields, and perhaps
get exposed to bleeding-edge technologies that it
otherwise might miss.
Companies that take corporate venture capital must
strike a careful balance. Take NetPro, for example:
Based in Scottsdale, Arizona, the seven-year-old
company has built directory-monitoring software for
Banyan Vines, an older networking operating system, as
well as for Novell Directory Services. But the company
also plans to support Microsoft's upcoming Active
Directory, a technology included in the as-yet-unreleased
Windows NT 5.0 that will compete directly with NDS.
"My commitment is to have this be a wildly successful
company, whose strength is directory services," says
Joanne Carthey, NetPro's president and chief executive
officer. "The contract I signed with Novell had no strings
attached whatsoever. They knew that we were
developing something for Active Directory." Ms. Carthey
says that her strategy is to be open with both partners,
and remain agnostic. In the short term -- two to three
years -- she expects both Active Directory and NDS to
win.
For Phil Broadbent, CEO of e-commerce developer
Evergreen Internet, it's not as big a challenge to align his
company's goals with Novell. Evergreen's software, sold
to large direct marketing companies with catalog
operations -- Spiegel was an early customer -- is built
with Java. Novell's extensive support of Java in
NetWare makes it a no-brainer for Evergreen to run its
software on the OS.
"Novell was in a search for a major Internet application
that could be of use and of interest to them, so they went
looking at literally hundreds of companies that develop
Internet commerce applications. And they settled on us,"
says Mr. Broadbent.
Similarly, GlobalCast, a Fremont, California-based
multicasting software maker, anticipates that its software
will be available on NetWare soon. And NetVision, next
door to Novell in Orem, Utah, already supports NDS in
its directory-integration products.
Jini in a bottle
None of these investments are moonshots, but they will
likely help NetWare and NDS compete, and perhaps
make some money for Novell. This first wave of
investments, though, tells little about the company's
long-term R&D strategies.
Bill Joy, Sun's vice president of research and a close
associate of Mr. Schmidt, recently joined the Novell
board, sparking speculation that Novell might join Sun's
Jini project, a Java-based technology to enable
"spontaneous" networking between PCs, servers, and
consumer devices -- a very different approach to
Novell's emphasis on centralized network directories.
But Mr. Hicks still sees plenty of opportunity in
directory-based software -- after all, Novell Directory
Services was just introduced in 1995. "We still believe
directory-enabled computing will be huge," he says.
"Eventually directories will be somewhat a commodity.
Applications built on top of them won't be, though."
Securing Novell's interests in that market may be a large
reason why Mr. Hicks has committed half of Novell's
fund to backing companies working with NDS.
Last October, Eric Schmidt looked towards "innovative
startups" to drive Internet technologies. Are these the ones?
Tell us something novel.
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