Novell Inc

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NOVELL INC.

Novell Inc. is best known for its network server platform, Netware, which links desktop computers with corporate networks. Throughout the 1980s and early 1990s, Novell's NetWare was the leading server platform, eventually gaining a 65-percent market share. However, competition from Microsoft Corp.'s Windows NT, and from Linux—a network operating system created by volunteers—had pushed Netware into third place by the late 1990s. Novell currently is working on Netware 6, which will offer increased Internet storage management functions. It plans to finalize a shift in focus to Web-based solutions in 2002.

Novell Data Systems Inc. was founded as a personal computer (PC) manufacturer in 1980. The fledgling company spent the majority of its capital on hardware design, leaving minimal funds for advertising. Within two years, Novell found itself near bankruptcy. Realizing that it would be unable to afford leasing a booth at Comdex, the premier tradeshow of the computer industry, the firm instead displayed its products in a hotel room. Impressed by Novell's products, 58-year-old electronics engineer Raymond J. Noorda invested $125,000 of his personal savings and borrowed $1.3 million from investors to purchase a 33-percent stake in the young company. The long-time General Electric executive also took over as president. Believing Novell's most promising product was an operating system that enabled PCs to share peripherals such as printers and disk drives on a local area network (LAN), Noorda refocused the firm on networking technology. After changing its named to Novell Inc., the company developed Btrieve, the first multi-user database application for LANs. It also released a software package for UNIX-based computers.

In 1984, Novell released software for networks using Ethernet, a system created by Xerox Corp. and manufactured by rival 3Com Corp. The firm completed its first acquisition with the 1985 purchase of Microsource Inc. That year, Novell also developed networking technology for Microsoft's new DOS 3.1 platform, introduced software that allowed Apple's Macintosh computers to run on Ethernet networks, and conducted its initial public offering. Novell paid $4.1 million for Santa Clara Systems Inc., a data storage systems and LAN products maker, in 1986. The acquisition brought Novell closer to its goal of offering comprehensive network systems. In 1987, sales reached $222 million. Two years later, the firm released its blockbuster Netware 386 network server, which was compatible with Windows, UNIX, and Macintosh platforms.

Merger negotiations with PC software giant Lotus Development Corp. fell through in 1990. That year, Novell established Novell Japan Ltd., a joint venture with Canon Inc., Fujitsu Ltd., NEC Corp., Sony Corp., and Toshiba Corp. that sold NetWare products in Japan. Novell benefited from strained relations between IBM and Microsoft in 1991, when IBM agreed to market Netware in an effort to limit Microsoft's increasing control over PC standards. In other deals, both Hewlett-Packard Corp. and Compaq Computer Corp. agreed to work with Novell to develop and market computer-networking technologies for their machines. Acquisitions that year included Digital Research Inc. for $136 million and a five-percent stake in AT&T Corp.'s UNIX System Laboratories. Novell and UNIX also founded Univel, a joint venture that developed UNIX-based products. Noorda restructured Novell into three units: NetWare; general operations; and a division working on the development of extensive corporate networks that would later become known as intranets.

Lotus and Novell agreed to increase the compatibility of Netware and the Lotus Notes networking software in 1992. By then, Novell had become the world leader in computer networking. Its products included operating software, network management software, hardware, and services. Novell acquired UNIX System Laboratories from AT&T in 1993. Eventually, the UNIX operations were folded into Novell's Netware division. NetWare 4.0 was shipped that year. In 1994, Novell paid $1.4 billion in stock for Word-Perfect, a leading word processing software maker. The firm spent another $145 million on the spreadsheet operations of Borland International, which formed the basis for the Quattro Pro spreadsheet. Robert J. Frankenberg was named CEO, chairman, and president.

Taking a huge loss, Novell sold WordPerfect and Quattro Pro—both of which were struggling to compete with Microsoft's word processing and spreadsheet programs—to Corel Corp. for $186 million in 1996. The firm then refocused on its core network platform operations. Sun Microsystems Inc. licensed its Java platform for use with NetWare. Frankenberg was succeeded by John Young as chairman and Joseph Marengi as president. That year, Novell began focusing on developing technology for the Internet. To this end, it forged alliances with other firms and improved network connections with NetWare Embedded Systems Technology. Novell Inc. and Japan's Nippon Telegraph & Telephone Corp. launched a data networking service for Japanese companies. Eric Schmidt was appointed CEO in 1997. According to an August 2000 article in The Economist, he began working to "transform the company from a provider of traditional networking programs into a force in the promising 'net services' business: software for and delivered by the Internet."

In 1998, the firm acquired minority stakes in Evergreen Internet, GlobalCast Communications, Net-Pro Computing, and NetVision. The following year, computer security software maker Network Associates Inc. (NAI) agreed to work with Novell on technology to shield NetWare users from the increasing number of computer viruses. Novell, Sun, and CMGI established a joint venture in 2000. The new firm began working on ways to enhance Internet performance and increase a Web site's ability to gather information on visitors and use it to deliver customized content. In an effort to cuts costs, the firm laid off 900 workers. It also began beefing up its service offerings. To this end, Novell agreed to pay $266 million for Cambridge Technology Partners in March of 2001. When the deal is finalized, Cambridge CEO Jack Messman will take the reins at Novell.