Battered Novell to Focus on Internet Opportunities

BOSTON (05/26/2000) - Financially battered Novell Inc. this week reorganized into four business units charged with focusing on new Internet- related opportunities, as well as Novell's traditional base of network staples.

After three straight quarters of lackluster income reports, company officials said it was necessary to reorganize into the following divisions:

Net Management - centered on the enterprise and product staples, such as NetWare, GroupWise, BorderManager, ZENworks and storage services.

Net Content - focused on service providers, hosted services and the company's OnDemand Services, as well as NetPublisher, DigitalMe and Novell Internet Messaging System.

Net Directory - aimed at large companies and dot-coms, which will include eDirectory, Schemax and Single Sign-On products, as well as metadirectory DirXML and e-commerce iChain products.

Net Customer Service, which includes consulting services, technical support and education.

Reaction to the move was generally positive.

"[Reorganization] may not be a cure for all their ills, but it certainly is a step in the right direction," says Phil Schacter, an analyst with The Burton Group, in Midvale, Utah. "Novell was obviously struggling with how to execute its new strategy. They had a customer base and a product focus they were losing track of."

Nicholas Tiliacos had been tapped to head sales but resigned just short of two weeks on the job, citing personal issues. Novell also named Dave Shirk as chief technical officer, a position that has gone empty for almost a year.

CEO Eric Schmidt blamed a disorganized sales channel for the company's revenue decline. "The majority of the problems were caused by ourselves," Schmidt said.

He added that increased training would help improve channel sales.

Chief Financial Officer Dennis Raney said that reviving revenue would "not be a quick fix" and would not happen before the fourth quarter.

While channel sales were down, direct shipments of product to large enterprise networks increased, as did revenue from consulting services; Novell officials said ISPs and application service providers will require large amounts of consulting services to implement Novell products and services, they said, and the company will actively expand its consulting services.

One Novell customer remains confident that the company's fortunes can turn around.

"Novell's got life; it's not going anywhere," says Julian Smith, director of IS Thompson & Co., an advertising firm in Memphis, Tennessee. "It's evident with Novell's [declining] stock price that it was time for a change. By separating the divisions, they still have their operating system to hold on to if one of the divisions flops," he says.

Novell has appointed the previous CEO and founder of JustOn Inc., Simon Khalaf, as vice president and general manager of Net Content. Novell acquired JustOn in January and integrated its online data storage services into the company's service offerings. The three other divisions will be led by long-time Novell executives.

Although Drew Major, Novell's longtime chief architect, will spend the majority of his time with the Net Content business unit, he will also be involved in the Net Management and Net Directory groups.

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