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January 17, 1997updated 05 Sep 2016 12:43pm


By CBR Staff Writer

When Forrester Research Inc took a straw poll of its Fortune 500 clients in September, the results spelt further disaster for network software company Novell Inc. While 90% were users of Novell’s NetWare file-and-print local area network operating system, only 48% said they expect to be using the product in three years time. Worse, 72% said that Novell had no part to play in their current or future Internet/intranet plans. Coupling that with the financial bloodbath that followed the company’s ill- fated acquisitions of the WordPerfect and Paradox products, as well as the unrelenting competitive pressure on NetWare from Microsoft Corp’s NT operating system, Forrester came to the controversial conclusion that it was too late for Novell to save NetWare – a product that is currently running on a million networks. Novell’s only hope, Forrester said, is to quickly become a provider of intranet technologies. The Novell management that took over around the time of the Forrester survey may not have wholly supported the pessimistic outlook for NetWare, but they quickly came to the conclusion that the company’s efforts to launch an intranet product line should eclipse NetWare and become the primary focus. In doing so, they were very much following the market trend. Intranet computing – in its simplest form a low- cost way of allowing networked users to view and share the contents of corporate files – had in many minds already superseded NetWare, making it look old and costly and proprietary (NetWare is based on the IPX network protocol rather than the Internet’s IP standard). Although Novell’s latest financial results are still dominated by its takeover errors and the impact of Microsoft’s NT, there are signs that its new intranet-centric strategy could already be inspiring a revival, albeit tentative. The bulk of the upswing came from the swift take-up of IntraNet-ware, effectively the company’s Web-enabled replacement for NetWare version 4 that features a bundle of Netscape’s Navigator, Novell’s Web Server integrated with its Novell Directory Services, and the company’s Internet Access Server, as well as a copy of NetWare 4. Server software business makes up two thirds of Novell’s revenues, but sales of its network application products also fared better. Now converted from a groupware to a Web offering, Novell’s Groupwise electronic mail and collaboration package showed sales up 24% over the third quarter to $31 million. And the LAN management package Managewise rose 18% sequentially to $20 million. That all looks like a step in the right direction, but there may be an element of mirage to all this. There is concern among some analysts that many of the hot-selling IntraNetware products that have been shipped so far are still in the channel – and may remain there. Anecdotal but not yet conclusive evidence suggests the initial sell-through of IntraNetware in the channel is encouraging, says Chuck Phillips at financial analysts, Morgan Stanley. But with [slower cash collection] and the presumption of a related rise in channel inventory, we remain cautious [about Novell’s outlook] until the company produces more evidence of sustained sell-through in the channel. Those concerns do not stop the Novell management predicting that the first quarter, ending January 31, will show revenue growth over the fourth quarter, especially as it will be the first full quarter of availability for Intranet-ware and Groupwise 5. In many ways, that is an admission that NetWare 4 and its predecessor NetWare 3 have lost out to NT and the Internet. What is crucial for Novell’s prospects of a more substantial revival is convincing the kind of corporate users that Forester Research talked to that the company is now a serious and long-term intranet player.


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