http://www.nytimes.com/2003/11/10/technology/10novell.html?ex=1069623336&ei=1&en=4afaf67a82fca0d4
Fortified by Linux, Novell Hopes to Regain Strength
November 10, 2003
By LAURIE J. FLYNN
Novell was left for dead years ago, another casualty of
Microsoft's hegemony over computer operating systems.
At the height of its popularity in the early 1990's,
Novell's Netware software controlled 70 percent of the
market in network server operating systems - software that
enables desktop computers to share files and communicate
over a network. But for nearly a decade, the company has
been losing market share to Windows NT, Unix and other
programs at a rate of nearly 10 percent a year. By 2002,
Netware's share of the market had shrunk to 7 percent. For
the first nine months of 2003, the company reported a loss
of $53 million.
"People remember Novell as a company they used to buy
things from in the 1980's," said Dan Kusnetzky, vice
president for systems software research at IDC, a market
research company.
But last week, Novell made an effort at a recovery when it
announced a $210 million deal to acquire Germany's SuSE
Linux, the world's second-largest seller of the Linux
operating system. In addition, I.B.M., which resells Linux
from both SuSE (pronounced SOO-za) and Red Hat, the largest
vendor, said it would invest $50 million in Novell. With
the deals, Novell is battling Microsoft on its home turf:
the PC operating system.
"All those customers who thought Novell was gone can see
that we're here - we're back," said Jack L. Messman, the
chief executive and president of Novell and the former head
of Cambridge Technology Partners, a consulting firm that
Novell acquired two years ago.
The fight will clearly be different this time. Already,
Microsoft has felt the sting of Linux, which many
corporations see as a reasonable and less expensive
alternative to the Windows operating system. In only a few
years, the program has gone from being a relatively obscure
and largely unsupported program for technology enthusiasts
to the fastest-growing operating system on the market, and
it is acquiring some of Microsoft's traditional corporate
customers.
Mr. Messman insists that the company's goal in acquiring
SuSE is to develop the Linux market, not to win over
Microsoft customers. But the distinction hardly matters.
For Novell, the program gives Netware customers more
options.
"Now that we've got the migration path lined up, we are
going to have a much broader following," Mr. Messman said.
Analysts say Novell's acquisition of SuSE, a company with
$40 million in revenue and 400 employees, could help Linux
win customers in United States who might be wary of buying
large volumes of software from a relatively unknown company
with overseas headquarters. SuSE, while the top seller in
Europe, stands to benefit from Novell's distribution
network in the United States, where the Linux leader, Red
Hat, is better known.
Novell, which is based in Provo, Utah, expects the Linux
operation to bring about $35 million to $40 million in
revenue annually, growing at about 30 percent a year,
consistent with the rest of the Linux industry.
The deal to acquire SuSE started as a development
discussion between the two companies, led by Chris Stone,
the vice chairman in the chief executive's office at
Novell. Mr. Stone rejoined the company in early 2002 after
leaving for three years to run a technology start-up, and
he now serves as Mr. Messman's right-hand man.
Mr. Messman is also in his second tour at Novell. A former
venture capitalist, he was an original investor in what was
then called Novell Beta Systems, founded in 1981, the same
year that I.B.M. released its first personal computer.
Two years later, Novell brought in Ray Noorda to run the
company, while Mr. Messman stayed on the board. Within a
few years, Novell was making a healthy profit selling
software that connected clusters of PC's that could share
files and printers.
Through the late 1980's and into the 1990's, Netware
maintained a loyal following among the computing engineers
charged with selecting the software that would run on their
companies' computers. But by the mid-1990's, corporate
computing decisions had moved into the hands of business
managers. These people tended to be more comfortable with
Microsoft and its arsenal of applications that included not
only operating systems but also word processing,
spreadsheet and communications software.
"Novell kept talking about the excellence of the
technology," said Mr. Kusnetzky of IDC, "while Microsoft's
message was that their products were good for your
business."
Mr. Noorda responded to the growing Microsoft threat by
acquiring companies to fill holes in Novell's product line,
including the Quattro Pro (spreadsheets) and Word Perfect
(word processing). But with Microsoft controlling both
Windows for PC's and Windows NT for servers, there was
little Mr. Noorda could do to outgun it.
In the early 1990's, Mr. Noorda joined the Justice
Department's battle against Microsoft, a fight that would
become a personal crusade, but that proved a fruitless and
costly distraction for Novell as the case stretched on for
years.
Novell directors, saying they were concerned about Mr.
Noorda's advancing age - he was nearing 70 at the time -
began looking for a successor. Robert J. Frankenberg,
formerly of Hewlett-Packard, ran Novell from 1994 to 1996,
followed by Eric E. Schmidt, a top technology executive at
Sun Microsystem's who headed Novell until leaving for
Google in 2001.
Meanwhile, the Microsoft juggernaut continued. By 1999,
Windows had supplanted Netware as the leading network
operating system. "We may have had the product, but we had
lost the war," Mr. Messman said.
Now, though, the company is ready to engage in battle once
again, this time with SuSE as its primary weapon.
http://www.nytimes.com/2003/11/10/technology/10novell.html?ex=1069623336&ei=1&en=4afaf67a82fca0d4
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