Novell Considers Radical Changes Including Giving Away NetWare

That was two years ago when Stone's friend Eric Schmidt ran the Provo, Utah, software and services company. Close as they are, however, Stone left Novell in frustration, unable to change the culture or business practices there.

With virtually free reign at the company now, courtesy of Novell CEO Jack Messman, Stone is having no trouble enacting changes, including those sure to rock the company to its very core. He's already moved to replace the company's marketing boss, replacing vice president Darin Richins with newly named CMO Debra Bergevine. And he has more radical changes up his sleeve. One idea, for example: Why not give away the company's all-time best selling product, NetWare, Stone says.

That idea came in a staff meeting where executives did the math on the fly, he adds. Their conclusion: Novell could ultimately generate more revenue upselling additional technologies on top of the NetWare platform if it essentially gave away the core NetWare product. No one at Novell has ever tried that before. But it has worked wonders for others, Stone notes, especially archrival Microsoft.

"Microsoft gives stuff away and we whine," he says. "But if you can't get revenue on something, why not charge zero and then upsell? The channel loves that."

Stone has moved quickly and decisively in other areas, too. He's decided against any significant Novell participation in various conventions where Novell has long been a fixture, including Comdex and Networld Interop, a show Novell helped launch more than a decade ago. In Chris Stone's world, something better must have a defensible return on investment or it's out.

Make no mistake, however: he does plan to step up investments in key areas. That includes marketing and engineering, and channels, too, which will soon get a new vice president who will be responsible for developing and maintaining ties to all of Novell's varied channel partners. Stone says he's close to naming his man for the job, though he hasn't broadcast either internally or externally who that individual will be.

One thing is likely, though: the person won't be anyone from Novell's current channel team, which includes Ladd Timpson, worldwide director for channel marketing, and Starla Cox, director of North American channel efforts. The team has made noticeable improvements to Novell's channel programs in recent months, say Novell partners both old and new. But the efforts haven't translated into a sharp rise in Novell sales.

In an interview at Novell's BrainShare conference, which is underway this week in Salt Lake City, Stone said the person he names will have the experience and bandwidth necessary to drive revenue and manage relationships.

Despite all his efforts to overhaul Novell, Stone says there remains a great deal of work to be done. First and foremost, he says, he needs to streamline Novell's complex product line, which will mean overhauling the company's vaunted engineering departments. Secondly, he must address the company's marketing shortcomings and shore up ties to the channel, which no longer is contributing significantly to Novell's top line. That, Stone says, must change.

When he left two years ago, the channel contributed about $90 million a year to the sale of certain Novell products.

"We're nowhere near that today," Stone says candidly.

While declining to say what Novell's channel contributes today, Stone does say that he'd be happy if he could squeeze out an additional $10 million in sales from the channel in the near term. Though that's little more than what one, modest-sized mid-tier VAR does in a single year, it would nonetheless be a sign of improvement for Novell, Stone says.

"I'd rather set low expectations at the onset and blow past them then promise something we don't deliver," he says.

As much as anything, Stone says, Novell needs to fix its culture, something his boss, Messman, has tried to address, too.

"Last time around I couldn't get things done and left in frustration," Stone says. "I came back because I know this company has all the tools and ammunition it needs to turn things around right here in the basement."

Problem is, Stone says, some of the very same problems plaguing Novell are still lurking in there, too.

"Some things here still need to be addressed," he says. "It's like they were frozen in time."

By the latter part of the year, Novell expects to see an uptick from all this activity. There could even be double-digit growth in '03, Stone says.

While positive sounding to partners, the sentiments have rankled a few within the company. Morale, he concedes, has been a problem. But it, too, is improving, he vows.

No such luck, yet, for the company's share price. As of Wednesday, Novell shares were trading around $3.78 per share, well off the 52-week high established in June of last year when shares hit $5.79 per share, but better, at least, than the post-Sept. 11 bottom hit 10 days after the terrorist attacks last fall. Then shares dropped at $2.96.