Focus, focus, focus

Where did Novell go wrong, and how can you fix it?
The company embarked on a strategy of growth through acquisition that was essentially disastrous. The company bought somewhere between 15 and 20 companies, depending on how you count. The theory was to aggregate to be big enough to compete with Microsoft. Unfortunately that strategy didn't work. In particular WordPerfect, which was an extremely large acquisition, cost a lot. Then the revenue collapsed for various competitive reasons within a year after the acquisition. And so, unfortunately, both the USL acquisition, which was the Unix acquisition, and the WordPerfect acquisition then were very painfully unwound by Bob Frankenberg. That whole episode cost the shareholders quite a bit of money.

The important point here is that Novell has returned to its networking roots. No matter what happens we're not buying WordPerfect again. We're going to focus on core, outstanding networking services.

You mean the biggest company in that space that isn't Microsoft?
Well, it's actually bigger than Microsoft in network services. Everybody somehow assumes that Microsoft is going to eat everybody's lunch. It's become a canonical wisdom of the industry, but the fact of the matter is that Novell has done very well in network services. It's simply that the last couple of years, with all these acquisitions, have been very distracting. So my answer for Novell is focus, focus, focus.

What do you focus on?
Basically, making the Netware platform a premier network services platform. And then focus on all the services that we want to build, like directory and security and single log-in and collaboration, on multiplatforms--not just Novell, but also Windows NT and Unix as well.

Who is Novell?
It's the leading network services company. And we need to define that in a way that has meaning for you.

Novell started out as a Utah-based, mostly Mormon company. Now the workforce is split between Silicon Valley and Utah. Does that create an internal culture conflict?
In my experience there are cultural issues within the company but they emanate from acquisitions, not religion. While it's true the company started out in Utah, it's since become a global company. There's more than 1,000 people in San Jose, which most people don't know about. The first question I've gotten is: "Are you moving?" And I say: "No, there's more than 1,000 people here in San Jose." I think, in fact, the executive staff are split half and half between Utah and California. My experience has been that Mormonism, as you put it, has if anything been positive, because the Mormon culture is a very strong, collaborative, supportive kind of culture. In a company that's going through tough times, it's a good culture to have. Also Mormons, as a gross generalization, are very dedicated and hard-working. I think it's a good fit.

Should more of the workforce be in Silicon Valley where the action is?
It's a big enough company that we can have people in both places. If we do this right, we can get the best of both. The problem with Utah is that it's isolated; the problem with California is that it's hard to keep a stable staff. The benefit of Utah is that it's a great place to live and people work very hard; the benefit of California, of course, is that you are completely tied into the Net, in just an incredible way.

This company is fundamentally run out of California, and I think that's very important. I think what you are going to see is Utah being primarily an engineering and development site, and the executives and their business decisions being made here in San Jose, and that's probably the right balance.

So, Novell has a great product, a good installed base, but isn't growing at the rate you'd like. What are its competitive problems?
The summary of Novell's competitive issues is Microsoft, Microsoft, Microsoft. The fact of the matter is that Windows NT is doing well. There are situations where people are finding that applications run on Windows NT and not on Netware, and that's the competitive challenge. The way you address that is that you build a better product in a space that we do well in, as a services platform. We're not saying that NetWare is better than NT; we're just saying that as a services platform.

Most anyone who does anything network-related seems to be looking towards the consumer space. Is that in the future for Novell?
Anything is possible in the future, but right now we need to focus on our core business. If you do any of the textbook management analysis, they tell you that if a company is encountering difficulties, either because of previous strategic decisions or changes in executives or what have you, the most important thing to do is to get your core business stabilized and go from there. Scott [McNealy] understood this intuitively, and so when Sun ran into trouble in the early 1990s he really focused down. So consumer products sound great, but let's do that next year, not this year.

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