Analysis: Novell's solid quarter paves way for NetWare 5.0
Published: 21 Aug 1998 12:05 BST
On the eve of NetWare 5.0's release, Novell is out to show that it is here to stay. Due for a September 20 release, the network operating system will include the latest version of Novell Directory Services, native TCP/IP and come with the Oracle8 database and Zenworks management utility bundled. Its success will have a large say in whether Novell remains an important part of enterprise computing.
Novell today announced a reasonably healthy financial quarter, notching its fourth quarter of profit growth in a row. The Utah firm chalked up a $27m (£16.46m) profit on $272m (£166m) in revenues for its third quarter. The numbers compared to a $20m (£12m) profit on $262m (£160m) revenues for the second quarter.
Novell said it was happiest about the fact it had posted record sales from large accounts, counting JP Morgan, Telecom Italia, and Wal-Mart among big wins in the quarter. Sales of directory-enabled NetWare servers - a big push for Novell - increased 15 percent over the second fiscal quarter.
However, behind Novell's flag-waving, the overall picture points to a company that has steadied the ship making it profitable but is still growing at a snail's pace. The big picture shows revenue for the first nine months of this financial year of $786m (£479.3m) up from $738m (£450m) on the same period in fiscal 1997.
Also, despite some success in emphasising related network products, Novell remains reliant on NetWare for the bulk of its revenues. $160m (£98m) of its $272m (£166m) in third quarter revenues came from the network operating system.
"Twelve months ago we were restructuring the company and we've now shown solid but stable growth," said Steve Brown, major markets sales manager at Novell UK. "To a certain extent though, it's the calm before the [NetWare 5.0] storm."
It's no surprise that Novell is making a song and dance about its solid balance sheet. With NetWare 5.0 ready to go it needs to reassure IT buyers that it will be a stayer. Its task is aided by a cash mountain and the uncertain release schedule for Windows NT 5.0 but hindered by the race for Year 2000 compliance that will put many large-scale IT projects on ice. However, Brown said that the Y2K issue is unlikely to have a huge impact on NetWare sales. "The directory services are essentially the same as in NetWare 4 and even the move from IPX to IP is a transition rather than a quantum leap."
Novell's challenge now is to grow directory-enabled services in areas such as systems management and electronic commerce. But that won't mean a major spending spree as the company seems to have learned from the debacle that was the WordPerfect acquisition. "Our job is to add value to directories through products like Zenworks, and directories is a huge gap in Microsoft's portfolio. Rather than wholesale acquisitions like WordPerfect, we will work with Internet startup companies."
By riding the Internet standards wave and adopting a belt-and-braces approach to finances, Novell goes into the market with NetWare 5.0 in good shape. Whether it can convince users that NetWare and NDS are the way to go in post-millennium networking will decide Novell's future.
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