Novell Under Pressure From Investors

UltimaGuy writes "The pressure is growing on Novell Inc's management to make major strategic changes after a regulatory filing revealed a Novell shareholder has joined Credit Suisse First Boston in calling for change at the identity management and Linux vendor. The steps proposed by the investment firm include cutting costs by targeting Novell's two corporate jets, its 'overstaffed' R&D department, legacy products, and its 400 NetWare engineers, as well as selling non-core businesses to enable funds to be redeployed."

Comments

Public company must do the best for shareholders..

[Pecisk]

...news at eleven. I actually RTFA and yeah, there are some issues about management, but is more like communication problem between shareholders and management, and I guess it will be soon cleared out.

I repeat, it is NOT about finansial problems in Novell, they have some loss, but they are doing quite fine in large perspective.

Re:Sun Could Possibly Buy Novell?

[jg21]

It dates back to a Marrill Lynch report last year that The Reg reported on, calling for Sun Microsystems to acquire either Red Hat or Novell in order to get themselves taken seriously in the Linux server market. The impetus would be coming from Sun, then, not necessarily from Novell itself. Does that make a bit more sense?

Re:Set it up for a sale...

[jg21]

LinuxWorld's Mark Hinkle doesn't think Sun will buy Novell by the look of it, he thinks they'll buy Red Hat. Or maybe IBM will buy Red Hat. Looks like Novell isn't at the head of the line for takeover yet.

What about Mono?

[MobyDisk]

I hope this doesn't harm the Mono project, which Novell has been a vital part of. I have great hope for this project. But I'm not sure how it helps Novell's bottom line, so it might be the kind of thing that goes on the chopping block.

Dead End?

[alistair]

I can't agree that Netware is completly at a dead end. To be sure it isn't a rapidly growing market but it isn't shrinking so fast either, the last time I met my Novell salesperson he said they still had over 400 Million Netware user licences under maintenance. Even if they lose 10% per year that still deserves heavy R&D.

Novell has a clear strategy here, with the latest Netware you can run either the Netware or SuSE kernel. My guess is that eventually Netware will ship with a Linux core by default but a number of people will continue to buy it for all the value add features. Within 5 years you will then see a single core O/S sold and you will then be able to buy services such as eDirectory, file and print management, Zenworks etc. as the value add profitable services.

Novell simply can't move out of Netware quickly, many infrastructure systems rely on it (I know of one airline booking systems and 2 cash machine networks in the Uk which still rely on it and I'm sure there are many, many more).

IBM made a huge mistake in abandoning OS/2 with nowhere for its customers (especially embedded system / POS customers) to move to. Novell has proved once again the value of their maintenance contracts by fully supporting all their existing OS customers until they have a smooth migration plan to SuSE.

Re:Dead End?

[lgarner]

"To be sure it isn't a rapidly growing market but it isn't shrinking so fast either"

It is shrinking. There are few, if any, shops converting to NetWare from another NOS, but there are a lot moving away. The only increases are likely to be within organizations which alreary have NetWare and need to expand.

"with the latest Netware you can run either the Netware or SuSE kernel"

That's OES that people are talking about. Novell can change it's name to NetWare if they like, but when discussing R&D and product lines, remember NetWare is a different animal than Linux.

"My guess is that eventually Netware will ship with a Linux core by default but a number of people will continue to buy it for all the value add features."

Exactly. Then, you have an OS with all the good parts of NetWare and without all the technical shortcomings.

"Novell simply can't move out of Netware quickly, many infrastructure systems rely on it"

True, and they should continue to provide paid support for some time, but that doesn't mean that they need to devote R&D resources to improving NetWare. Leverage those resources to getting Linux (OES) up to speed so it can be a drop-in replacement for NW. I don't expect support for Win95 these days, and at some point I won't expect it for NetWare.

"IBM made a huge mistake in abandoning OS/2"

Unless that line was losing money, as I suspect it was at the end.

Re:Why does it have to happen......

[cpthowdy]

What do you mean, fully released? eDirectory has been running on Linux for like 5 years now...

Re:While I can possibly see...

[Korgan]

I disagree. eDirectory and DirXML (Now called the Novell Identity Manager) are both very excellent products that fit in to places that many other products don't go. Especially DirXML.

On job I did a few years ago required synchronising a Mac OpenDirectory network with an Active Directory network. Getting the two to talk together natively was a mission and never gave us results that were worth the effort. Putting DirXML in between solved that problem. Adding eDirectory in to the equation allowed us to then add in products like their SAP based ERP services and several other applications. This provided for a very smooth, extremely easily managed service that went far beyond just synchronising their OpenDirectory and Active Directory networks.

I have not yet seen another platform like DirXML that is as slick and as easy to implement while at the same time supporting such a large number of products out fo the box. And its modular design makes it even easier for developers and solution providers to add support for their own products.

AD didn't kill Novell. Anyone that takes the time to seriously use eDirectory will understand that AD doesn't even begin to offer the same flexibility. Not to mention that AD is not cross platform where as eDirectory (and pretty much all their products) will run on Linux, Solaris, HP-UX, Netware, AIX... Oh, and that nasty Microsoft Windows product too.

Re:"its 'overstaffed' R&D department?"

[fungai]

Cutting costs to satisfy short term profit/cash flow to the detrement of long term profits is a management strategy called harvesting. It's usually a sign of a company in serious decline. Now you know where HP's heading.

Re:Overstaffed R&D

[stevesliva]

You're pretty far off base on the claim that IBM doesn't make money on anything physical. Sure, it may not be anything close to "most" of IBM's revenue, but IBM's hardware revenue for a single quarter is larger than Novell's market cap. Even after the sale of the PC division, it still had $5.5 billion in hardware revenue for the 2nd quarter with higher margins than the $12 billion in services revenue. link.

Re:"its 'overstaffed' R&D department?"

[Live_in_Dayton]

This system also means that a talented researcher can go start a company, develop an innovative product(s) and then sell the company. The entrepreneur should make far more money this way than working as a researcher their whole life. Capitalism works!

Re:The real question

[java.bean]

Sorry, that's uninformed.

Public ownership means the corporate executives have a duty to the shareholders to maximize their value (i.e. keep the stock price high). The shareholders are, after all, the owners. You don't tell the owners to go take a flying fuck.

Even if they're making money, are they making enough money? Are they making the right strategic decisions? The shareholders invested a ton of capital in Novell, are the executives making the best use of it?

Novell: "We have 90% of the non-x86 server market"

[Reziac]

When I was at the latest Novell seminar, they brought up the point that they already have over 90% of the non-x86 server market. They acquired SuSE with the intent of expanding their share in the x86 market (which as you say, they've lost most of what once they had to Windows).

They also mentioned that they have a billion in cash on hand, and no debt. So Novell isn't hurting, tho it sounds like certain shareholders want to change that. :/