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Novell Under Pressure From Investors

Posted by ryuzaki0 on from the hard-times dept.

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."

16 of 214 comments (clear)

  1. Sun Could Possibly Buy Novell? by jg21 · · Score: 5, Interesting

    Maybe there's truth in the notion then that Sun might buy Novell. If it doesn't buy Red Hat first, as Mark Hinkle here seems to think it might.

  2. While I can possibly see... by cnelzie · · Score: 5, Insightful

    ...cutting costs by eliminating Corporate Jet Expenses, a technology company shouldn't be cutting its R&D Department because some MBA Holding Investment Firm thinks it is overstaffed.

        Granted, if the firm discovered that 80% of the R&D staff isn't actually doing anything outside of playing QuakeIII or something, then yeah, they should be cut, a little...

    --
    If you ignore the other uses of a tool, does that make the tool less useful, or you less useful?
    1. Re:While I can possibly see... by jmcmunn · · Score: 5, Insightful


      I completely agree. They are never going to release an innovative product for the future if they fire the engineers and cut R&D. Corporate jets, however, are simply not necessary in a world where anyone can be across the country on a commercial airline at the drop of a hat. They could even (gasp) fly coach to save money like the rest of us.

    2. Re:While I can possibly see... by Korgan · · Score: 5, Informative

      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.

  3. Why does it have to happen...... by amodm · · Score: 5, Insightful

    that investment firms and R&D don't go together well......

    I know that not everyone in R&D is a brilliant scientist, but in the long run, its the R&D that helps the industry move forward

    On a side note however, anything worthwhile coming out of Novell's R&D these days ?

  4. Re:Overstaffed R&D by Anonymous Coward · · Score: 5, Insightful

    That depends on whether you're looking at it from the perspective of a greedy money grabbing investor (share-holder value and all that), or someone who enjoys doing a job well.

  5. "its 'overstaffed' R&D department?" by starseeker · · Score: 5, Insightful

    I don't know about Novell, so perhaps they do have too many people, but I must say I'm rather alarmed the article mentions R&D being overstaffed and no other department. Most companies don't go all out hiring R&D folks to begin with - that's one of the things that makes Google so unusual - so they don't tend to be overstocked in R&D in the first place. I wonder if this fits in with the recent trend in corporate America to view R&D as a luxury and money sinkhole. Since the benefits don't show up next quarter, chop them off to look better in short term costs. Never mind five or ten years down the road when you need new products to stay competitive and don't have any.

    Does ANYBODY in the US think long term anymore and still have influence in corporate or government circles? Maybe they're all thinking that if everybody else is also dumping R&D, everyone will still be competitive, and it will only be the consumer that gets stuck with static technology and gradually decreasing quality. (Price wars with no quality differential do that, since consumers tend to be bad in the short term at distinguishing good products from bad.)

    --
    "I object to doing things that computers can do." -- Olin Shivers, lispers.org
    1. Re:"its 'overstaffed' R&D department?" by erroneus · · Score: 5, Insightful

      Current trends seem to indicate that R&D is best "procured" rather than done in-house. This can be accomplished in a variety of ways, but mostly, they just buy the small companies and individuals that make cool new stuff and call it their own. Kinda sucks how parasitic the corporate worlds have become.

    2. Re:"its 'overstaffed' R&D department?" by unother · · Score: 5, Insightful

      It's more pernicious than that, even, when looked at directly:

      Company A slashes its research budget. Stock price rises in response.

      Two researchers bootstrap a new research effort and eventually win venture capital. No longer in control of the enterprise due to the need for greater capital for their effort, it begins to bear fruit.

      Company A comes back in, and "buys" the startup from the venture capitalists with their inflated stock.

      As you can see, in this admittedly terse example, the financiers win in every sense of the word here. The researchers are forced into a fight-or-starve mode, and they do not get much overall benefit from their research. "On the books", however, it's a win-win scenario: for the original company, and the intermediary financiers (the VCs).

    3. Re:"its 'overstaffed' R&D department?" by fungai · · Score: 5, Informative

      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.

  6. The slashdot angle by bfree · · Score: 5, Interesting
    From the article (emphasis mine):

    The investment firm (Blum) has also called on Novell to increase its investment in Linux and open source software through partnerships and acquisitions to move "further up the stack".

    Blum's proposal is broadly similar to CSFB analyst Jason Maynard's suggestion that Novell should focus on software services rather than consulting, increase its emphasis on open source software, and repurchase company stock

    So at least the pressue isn't on for them to dump Suse/Linux which was my initial fear on reading the slashdot post. In fact if anything they aree being encouraged to place more focus on it showing even these (presumably) hardened business types can finally see the long term value in FOSS.
    --

    Never underestimate the dark side of the Source

  7. 400 NetWare engineers?? by Spy+Handler · · Score: 5, Insightful
    I don't suppose that means 400 CNEs.... they must be talking about 400 software engineers working on Netware.

    Since they're proposing to cut 400 guys, that must mean that the actual Netware development team is some number larger than 400. Why so many guys are still working on a dead-end product with no future is beyond me.

    1. Re:400 NetWare engineers?? by bonius_rex · · Score: 5, Interesting
      Why so many guys are still working on a dead-end product with no future is beyond me.

      I think Novell is in a hard spot wrt Netware. I admin about 50 Netware servers. *I* know that I can do everything I need on Open Enterprise Server. There is no technical reason to carry on with Netware, but convincing my higher-ups that Linux is no longer "just some hippie hobby thing" takes time.

      I'm afraid that if Novell were to discontinue support for Netware today, my management might decide it would be just as easy to migrate to Windows as to OES.

      Novell has to keep Netware support rolling along, while at the same time convincing PHBs (like mine) that Linux is perfectly acceptable for large scale mission critical deployments. Dropping a significant number of Netware engineers could cause Novell to lose customers if they are not very careful.

  8. What about Mono? by MobyDisk · · Score: 5, Informative

    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.

  9. Comment removed by account_deleted · · Score: 5, Insightful

    Comment removed based on user account deletion

  10. Pirates ahoy by FishandChips · · Score: 5, Insightful

    Ah, glad to see /. is keeping up with traditions as this one has been well covered on osnews.com for a day now.

    I guess a few ghastly, greedy "investors" fronted by teenage analysts are now circling Novell, scenting blood and booty. My understanding is that Novell is nowhere near profitability and the gap between declining Netware revenue and new Linux revenue is alarming. But Novell does have quite a lot of cash in hand and is entangled with IBM via the SuSE acquisition. I'd guess some of the Wall Street greed merchants are hoping for a takeover or a dismemberment, with IBM being greenmailed into picking up a very large tab on the Linux side because losing SuSE would be too painful for them.

    Of course, the little shits don't pitch it like that, just calling for better management.

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