With the company's stock hovering around its year-low price, a solid product road map and a slimmed-down work force, speculation is mounting that Chairman and CEO Eric Schmidt has successfully conditioned the networking company for purchase.
The prime suitor? IBM, according to sources from both companies.
"Novell's huge installed base, networking expertise and billion dollars in cash make it an attractive option for IBM," said John Oltsik, an analyst at Forrester Research Inc., in Cambridge, Mass. "For Novell, a merger with IBM could keep it in the picture by renewing faith in its viability."
An IBM/Novell marriage would be advantageous to both parties. Novell's strong network services such as file, print, directory and replication would add value to IBM's various operating systems. IBM subsidiary Lotus Development Corp.'s Notes and applications services would strengthen that mixture even further.
For Novell's part, the financial stability a merger with IBM would bring could keep the company's products afloat and renew customers' long-lost faith.
"Customers talk about Unix and NT. There's no one talking about NetWare anymore," said Gary Sudin, owner of Novell reseller GSI Inc., in St. Louis.
Officials from Novell, in Orem, Utah, and IBM, in Armonk, N.Y., declined to comment.
Since joining Novell in April, Schmidt has indeed cut costs. Following poor second-quarter results in May, he trimmed the company's work force by 18 percent to 4,800. He also reunited Novell's development teams in Orem and San Jose, Calif. This month, Schmidt strengthened two of Novell's weakest areas with the addition of new executives to handle marketing and strategy.
Despite these moves, Novell continues to post dismal quarterly results. Yestesrday, the company reported a net loss of $122 million for its fiscal third quarter, ended July 31, or a 35-cent loss per share on revenues of $90 million. For the same period a year ago, Novell reported a profit of 17 cents per share on sales of $365 million.
The company's stock rose after news of the loss to $8.75 as of midday today. The year-low price was $6.
Novell will try to regain some momentum this week when it releases the first of a series of new products at the Java Internet Business Expo in New York.
Novell is expected to announce its Java Application Environment for IntranetWare, as well as a new NDS (Novell Directory Services) developer initiative and the first shipment of its BorderManager suite of Internet access products.
Beyond JIBE, Novell is preparing to announce new products next month, sources said, including NDS for Windows NT.
Other products now in beta and expected to ship in September include Remote Authentication Dial-In User Service support for NDS, Novell Replication Services and Novell Distributed Print Services.
Other products slated for fall release include Visigenic Software Inc.'s Object Request Broker for IntranetWare and an NDS trader service, enabling objects to be registered and managed in the directory.
Novell will ship into beta its next release of IntranetWare, code-named Moab, in late 1997. In 1998, Novell plans to deliver its next-generation file storage services, IntranetWare support for IPv6 and the first of its Wolf Mountain clustering technologies.