NetWhere: Is Novell the Rodney Dangerfield of Internet Software?

If Novell (NASDAQ:NOVL), which has the world’s largest installed base of
networked users at 70 million, had half the marketing finesse of startup
Marimba, a company with few users but plenty of media exposure, then
perhaps the stock would take its place among the leaders in the software

Of course sales and earnings growth would help much more.

Despite having one of the best minds in the Internet space–Dr. Eric
Schmidt, who was Sun Microsystems chief technology guru before joining
Novell last April–Novell just doesn’t seem to get the kind of respect
on Wall Street that rivals with one-tenth the products and
one-one-hundredth of the experience receive.

In April 1996, NOVL shares were slightly more than $15 each. February 26
they closed at $10. The latest:

Novell By The Numbers





Shares out fully-diluted


Price 02.26.98

$ 10.00

Market cap


Less working cap


Plus long-term debt


= Enterprise value


Enterprise value per share

$ 6.73



1Q to 01.31.98 sales

$ 252.04

Vs. 1Q97 sales

$ 374.85

Percent difference


Net income 1Q98

$ 14.09

Vs. 1Q97 net income

$ 50.81

Percent difference


1Q98 EPS

$ 0.04

Fiscal 1997 sales to 10.31.97


Fiscal 1996


Percent difference


Net income 1997

$ (78.30)

Net income 1996

$ 71.04

Percent difference


Net income without charge

$ (23.30)

Percent difference




© 1998 Mecklermedia


For full fiscal year 1997 ending October, Novell posted about $1 billion
revenue and a net loss of $78 million or ($0.22) per share. The company’s
third-quarter restructuring charge of $55 million contributed ($0.10) per
share, after tax, to the loss. Notably, a $150 million loss before

Sales dropped 33% in the first quarter ending January 31, 1998 vs.
1Q97, even as Novell squeezed out $0.04 earnings per share, a sign of
internal cost cutting.

Perhaps it’s a message thing. Novell seems to have all the right stuff:
products, installed base, and strong technology. Still, it has soft
sellthrough vs. the past, despite reporting more users. In 1996 Novell
software users stood at 55 million users of NetWare or related
applications. Today it’s more than 79 million–Microsoft, Netscape, or Sun
drool at the prospect of those numbers and spend millions to try and get to
that point.

Since 1996, Novell’s been chanting Vint Cerf’s favorite ZENism “Internet
Protocol (IP) on Everything,” taking the formerly proprietary NetWare into
more open TCP/IP waters. Novell’s aggressive move to NetWare 5 affirms that
strategy with its built-in Java Virtual Machine, objects and “not even
Microsoft can touch this” leading-edge directory services. Novell’s is the
no-brainer that’s easy to manage. With NDS you can manage the entire
intranet environment, click, click, click.

But it hasn’t clicked yet with investors, the same ones that push Microsoft
(NASDAQ:MSFT) to $200 billion market capitalization, while Microsoft wants
to be Novell in the network space.

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