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

To: EPS who wrote (24628)	12/4/1998 6:09:00 PM
From: Spartex	Respond to of 42771

NEW YORK (Dow Jones)--It must be hard for fund managers Liam Burke and Bruce Behrens to pick one stock from their Flag Investors Communications Fund (TISHX) as a "Best Idea." After all, when your fund is up 52.5% in a year when the average domestic equity fund is only up 5.6%, all of your stocks must look pretty good. Behrens credits top 10 positions in winners like America Online (AOL), MCI/WorldCom (WCOM) and Lucent (LU), but also smaller positions in lesser-known telecommunications companies like Black Box (BBOX), Teleglobe (TGO) and SkyTel (SKYT) for fueling the fund's performance. The combination has made Flag Communications not only the top performing fund in its sector, but a contender in our horse race for the best fund of 1998. With this crop of heroes, it's a little surprising that an underdog like Novell (NOVL) is the stock of choice for these two managers. Once the leader in computer-networking software, Novell had been all but left for dead, crushed under the weight of its own mistakes and the 800-pound gorilla named Microsoft (MSFT). But in March 1997, the company brought in Eric Schmidt, then the chief technology officer at Sun Microsystems (SUNW), as its new chief executive. The arrival of Schmidt, a driving force behind the development of Java, came as a wake-up call. "For him to leave Sun Micro, and take this on, was a very powerful endorsement," said Burke. Schmidt has done an amazing job resurrecting Novell. The company's stock has nearly tripled from its 52-week low of 6 13/16. What happened? Schmidt refocused the dramatically slimmed-down company on a suite of networking products optimized for the biggest network of all - the Internet. Netware 5, the latest version of Novell's network operating system, launched in September to generally positive reviews. The software is built on Internet standards - allowing customers the ability to blend their corporate networks with the Internet. Burke and Behrens started buying the stock in the fall of 1997, about six months after Schmidt's arrival. They added to the position last spring, and the stock now accounts for 3.3% of the portfolio, putting it just outside the fund's top 10. The stock was cheap - they paid an average of $9 a share - and the co-managers saw it as a turnaround play. "Schmidt recognized that he had to move the company from a proprietor of LAN software into a wide-area network company that supports Internet-driven products," Burke said.