Novell Reorganizes After Bad Showing

Networking software vendor Novell Inc. last week announced a dramatic reorganization of its operations and released weak financial results for the most recent quarter.

Plans for Novell's reorganization call for the company to be split into four business units: Net Management, Net Directory, Net Content and Novell Customer Services.

The company blamed its problems on its resellers plunging sales of its packaged software. Novell warned earlier that revenue and earnings would be lower than expected for the quarter ended April 30.

"There has been a stark decline in (sales of) our packaged software," said Eric Schmidt, Novell's chairman and CEO, during a conference call last week. "We underinvested and underfocused on an important area. We intend to fix that."

Revenue from indirect sales of Novell's packaged software in the second quarter was down by about 50%, Schmidt said. He said he hopes to put the reseller-channel issues behind the company by early next year.

"There needed to be a shake-up, especially in the marketing and sales there," said Steve Shepich, an analyst at Olde Discount Corp. in Detroit. Novell has good products, "but these guys are not the best marketers," he said.

Norman Fuchs, an analyst at M. H. Meyerson & Co. in Jersey City, N.J., said Novell missed an opportunity to capitalize on delays in the release of Microsoft Corp.'s Windows 2000, which finally shipped earlier this year.

"I think (Novell's) management basically blew it," Fuchs said. "They gave out the wrong marketing and sales messages." The problems could be seen as early as six months ago, when many of the company's top sales managers departed en masse, he said.

Stewart Nelson, Novell's chief operating officer, said the company plans to "carve out specific segments of Novell's market for the indirect channel and eliminate conflict with direct sales, which will be a huge change for us."

Meanwhile, in an attempt to make the vendor more market-driven, each of the new units will have its own business strategy and distribution channels, according to Nelson.

The Net Management unit will encompass many of Novell's products, such as the company's NetWare operating system and its GroupWise groupware technology. The Net Directory unit will be responsible for Novell's directory software, while Net Content will focus on application delivery services, caching and content exchange for dot-com companies. Novell Customer Services will be in charge of customer services.

Schmidt remained upbeat about Novell's prospects. "I'm confident we'll overcome the transitional issues," he said.

Haney is a correspondent for the IDG News Service.

Copyright © 2000 IDG Communications, Inc.

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