Novell Reaches Out To European Loyalists

The event, which is being held in Barcelona, Spain, coincides with the company's annual EMEA partner summit, which has attracted executives representing more than 100 companies from 14 European countries and South Africa, too.

At Novell BrainShare Europe, the company announced a number of new product initiatives, some involving the company's recent acquisition of Ximian. Specifically, the company announced that:

• Beta testing of Nterprise Linux Services 1.0, due for delivery later this year, and Novell Nterprise Branch Office 2, a software appliance that allows organizations to extend network services to branch offices, has begun.
• Management services from Ximian Red Carpet will be included in Novell Nterprise Linux Services 1.0.
• From a partner standpoint, Novell announced this week that it was looking at ways to improve partner profitability. Through one plan in particular, the company is hoping to improve margins on products by as much as 10 percent to its top 200 or so allies.
• Johan Rosius, director of business market sales with Novell EMEA, declined to provide specifics on the record, but said his goal was to provide greater benefits to customers while providing maximum profits to partners. Novell's also disclosed that it will now manage all of its ISV and hardware partners through PartnerNet, the company's global partner program.
• For partners, these and other developments are welcome news.
• "Novell has its act together," said Jesper Bergstedt, CEO and president of 2nd C, a longstanding Novell ally based in Alleroed, Denmark.

• The new management team, he believes, is more committed than the past, and more proactive about engaging partners. That was evidenced this week in Barcelona, where both Novell CEO Jack Messman and Novell vice chairman Chris Stone participated in discussions and attended briefings. On Tuesday, for example, Messman engaged partners in an open Q&A session where he addressed partners concerns in real-time. Among other things, Messman said his company needs to play in an on-demand world and provide a "dynamic allocation of resources." Moreover, Messman addressed specific questions on the future of NetWare, such as whether versions 8, 9 and beyond could be expected.
• Messman answered that his company would certainly provide core NetWare services beyond the currently announced version 7.0 of NetWare. What kernel versions 8 or 9 of NetWare services run on will be immaterial, he added, simply because customers don't care about commodity kernels the way in which they once did.
• Overall, Messman expressed confidence in his business in Europe, where Novell generates roughly one-third of its annual revenue. Last year, for example, European sales totaled $347 million. As a percent of overall revenue, European sales are growing. For example, they were up 11 percent year over year in the most recent quarter.
• Here in Europe, where Novell boasts some 12,000 customers, there's a feeling of optimism among certain Novell partners. Overall, partners like the company's recent foray into Linux, which has greater traction here in big businesses and large government accounts than in the United States. They also like the fact the company has been riding a bit of a wave of late, especially on Wall Street. Novell shares climbed to a 52-week high this month and now trade for around $5.50 each. The stock started moving when the company announced it will pare its workforce by 10 percent to 5,700 worldwide as part of an effort to save as much as $100 million annually in costs.
• Additionally, Novell is also benefiting from its move to acquire Ximian, which strengthens its commitment to Linux. Furthermore, with a market cap of nearly $2 billion and no long-term debt, the company has plenty of options.
• The combination of actions taken by Novell and the improving health of the IT economy has prompted analysts, customers and partners to reconsider what they have long believed about Novell: that a resurgence may be in the offing. Roth Capital, for example, reiterated in August that it thinks Novell stock is a "strong buy."
• And European partners, including Robin Dunn, sales director at SNS, a Novell partner in the United Kingdom, says sales of the company's products have seen a recent rebound. He said Novell is a vendor around which his company can differentiate itself from Microsoft providers in the market. Likewise, Wiljar Nesse, CEO of Manamind of Norway, is counting on Novell to help serve as a foundation to assist the company as it expands its reach throughout Europe.
• Still, challenges remain. Sales growth in the United States remains nonexistent. In late August, for example, the company announced flat sales for the fiscal third quarter ended July 31. For the quarter, Novell reported revenue of $283 million, just $1 million more than the year previous. Worse yet, the company swung to a loss for the period. For the quarter, the company $12 million. This compared to net income of $10 million for the third fiscal quarter 2002.
• For the first nine months of fiscal 2003, sales at Novell have totaled $819 million, down from the $834 million the company racked up in the first three quarters of fiscal 2002. Losses year to date have been narrowed, however, to $53 million from $155 million last year.
• Messman, who conceded that the company has endured some challenging times, believes the worst is behind his company. The toughest period, he noted, was when Novell was trying to sort out the future direction of NetWare, Novell's flagship product. Messman said the company had its share of technology zealots for whom individual projects were a crusade. He went so far as to describe some as "bigots." While he praised their passion, he noted that their profound interest in special interests called into question their market judgment.
• The CEO said he finally reached a milestone inside the company after he produced a slide that showed the company's product road map with core services running on various platforms. He jokes that he told people inside that if they tried changing the slide, he would cut their fingers off. Thus far, no Novell executives are wearing bandages in public. But some have left. That includes Nancy Reynolds, former vice president of channels.
• Mark Hardardt, vice president of sales, is now overseeing much of what Reynolds did. Novell won't say why Reynolds left or under what conditions she departed, but the speculation is it was because partner sales in the United States were lagging.
• Hardardt, who is here in Spain this week, is already plugged in and engaged. He's interested in helping partners where possible and meeting with them in no-holds barred sessions trying to understand where the company is failing them. Some have tossed a few bricks his way, complaining about pricing issues, lack of field engagement, etc.
• A number of partners, however, have had good things to say about Novell, save for two areas: marketing support and ease of doing business. Ironically, those are two areas where U.S. partners say Novell could improve. (In VARBusiness' Annual Report Card study, due next month, we will report that Novell scored well against its rivals in many areas of support and partnership save for those two disciplines.)
• In closing the partner event, Hardardt pledged to work on performing formalized business reviews with partners, study ways to increase knowledge sharing between organizations and develop more advanced solution practices with partners, among other things. He also said partners could expect more leads and tools from the company.
• "We will commit to working on these things," Hardardt summed.
• As much as anything at the event, Novell provided greater clarity as to where it wanted to go, and what has taken it so long to get its strategy together. Messman, for example, acknowledged that ongoing management changes has caused some short-term upheaval within the company. But, he insisted, that getting the right mix of executives for specific tasks has been on ongoing challenge.
• Same with the product mix. While he hailed his engineering team's prowess, he said some of the toughest decisions he has had to make was to kill some projects that, while technically innovative, did not have much potential in the way of future revenue. However, he is glad that he has continued to fund directory development, despite the company's inability to make a robust business around directories. In light of the increased interest in security and secure ID management, which is growing better than 20 percent a year at Novell, Messman believes Novell's investment may yet been validated.
• All in all, Messman is confident in Novell's future and says the recent surge in share value is more in line with his company's intrinsic net worth. But, he conceded, managing has been a challenge.
• "As a CEO, it's easy to manage for today," he said. "And it's easy to manage for tomorrow. But doing both at the same time -- that's the challenge."