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NOVELL’S NEW CHIEF EXECUTIVE WILL BOOST INTERNET CREDIBILITY

By Gary Flood

Novell Corp finally announced Tuesday (CI No 3,122) that it had been able at last to persuade a heavy hitter to become its leader. In the event it wasn’t bookie’s candidate Ray Lane, chief operating officer of Oracle Corp – probably because Oracle threw a golden force field of guaranteed share options around him to keep him in Redwood City. Instead, Novell snagged Sun Microsystems Inc’s chief technology officer, Eric Schmidt. Its success in persuading the 41-year old 14-year Sun Microsystems Inc veteran to move his family photos into its seven-month long vacant corner office marked ‘CEO’ is designed to send out one loud message: intranet, intranet, intranet.

Impeccable credentials

Why else choose a highly respected technologist with impeccable intranet credentials – the man who more than many in Sun really tried to make its gnomic 1980s slogan ‘The network is the computer’ finally into something real, by championing the development of Java inside a company which at one time was so Web-averse it wanted to charge its developers $50 a month for using the Web? So needy is Novell as regards intranet capability that it may as well have chosen Web progenitor Tim Berners-Lee as its chief executive. Maybe it asked him. For Web cred has to be the only reason it chose Schmidt, who has never run a company, to pick it up from its slump in favor of a financial engineer (the Gerstner fix a la IBM) or asking a past luminary like former head Ray Noorda back (the Bring Steve And Woz Back fix a la Apple). Schmidt, who boasts three degrees including a Ph.D from Berkeley, and who is also a former alumnus of legendary braintrust Xerox Palo Alto Research Center, has already told The Wall St Journal his recipe for rebooting Novell when he takes up the job full time on April 7: co-existence with Microsoft Corp, especially Windows NT, which is by ill repute alone seen as driving Novell’s core network operating system NetWare out of its natural habitat. Yet plainly this is not all he intends, for that was essentially the strategy of underpowered former Novell chief executive Robert Frankenberg, who in his brief tenure before his board nuked him last August was often desperately back-pedaling the ’embrace and surround’ anti-Microsoft stance of Novell founder Ray Noorda. Frankenberg must at least be credited with divesting Novell of Noorda bonehead buys like Unix and WordPerfect and is back down to its knitting – network operating systems – its future, if it has one, is in the intranet. Frankenberg, a personally charming and diffident man but a lackluster leader, tried to come up with something to get us all excited about Novell again by misty talk of a giant super-Novell network of the future, with a billion connections by the year 2000 and smart houses where you could open your fridge door remotely via your PC on your office desk. Novell has realized that this was not going to cut it in time, and so it started banging on its intranet drum late last year. Analysts Forrester Research polled some of its Fortune 500 clients on Novell six months ago, and found that while 90% were users of NetWare, only 48% expected to still be so in three years’ time: even worse, 72% said they saw no part for Novell to play in its current or future internet plans. At that time Forrester concluded Novell’s only hope was to become a provider of intranet technology. That so many corporations are Novell clients should be no surprise – NetWare is supposed to have been licensed to 60 million users and run on a million networks – and just as unsurprising is that up until very recently Novell had no soundly theorized position on the network post-internet to offer. NetWare still hasn’t wholly embraced TCP/IP, and is still based on the older and less Internet friendly IPX protocol. But now one is meant to speak not of NetWare but its Web-enabled successor, IntraNetWare, a product which combines NetWare with network services, including integrated messaging, Internet, Web connectivity and publishing. Perhaps a better way to think of

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the product, though, is as an ‘intranet in a box,’ since it combines version 2.5 of Novell’s Web server, 50 Netscape browser licenses, an IPX to TCP/IP gateway and a multi-protocol router. Launched late in 1996, it still made some positive impact on Novell’s last fiscal (which always ends every October). From a standing start it sold $103m, helping Novell’s third to fourth quarter sales rise a modest but positive 5%. But all in all Novell’s last financial year was still down to $1.37bn from $2.04bn in 1995 with net profits slumping to $126m from $338m in the same period. Its first 1997 fiscal quarter showed more IntraNetWare growth but, overall, if this is a recovery then it is taking place in a sanatorium and the patient is hardly up jogging yet. Net profits were down 20% to $51m on revenues down 14% at $375m, and that after Novell got $61m one-off for selling UnixWare to Santa Cruz Operation Inc. But core network operating system sales saw 10% growth year on year, to $251m, the IntraNetware part of which was $185m. The life sign that investors look to most – share price – is hardly something to shout about, either. It now seems hard to believe, but five years ago Novell hit $57; while it rose 10% Tuesday on the news it still closed at $9.50, which is still way below its most recent 52-week high of around $15.

CEOship for Dummies

So what will Schmidt do at Novell, apart from buy ‘CEOShip For Dummies’ down at Barnes & Noble? He’ll have to use Novell’s impressive $1.1bn cash pile to acquire some hot intranet start-up companies to shore up the IntraNetWare message – perhaps a good area would be intranet systems management, which segues nicely into what NetWare used to do for us on local area networks. What is certain is that Novell stands an excellent chance of getting back on track with one of the top five individuals responsible for launching Unix and then Java on the world at its helm. Of Sun, we know nothing: press reports speak of no comment on his successor, and that he would merely be missed. But his mission there is surely over, and not yet begun at Novell, which once more must remake itself or die.