Novell, Inc. was an American software and services company headquartered in Provo, Utah, that existed from 1980 until 2014. Its most significant product was the multi-System platform network operating system known as Novell NetWare.
Under the leadership of chief executive Ray Noorda, NetWare became the dominant form of personal computer networking during the second half of the 1980s and first half of the 1990s. At its high point, NetWare had a 63 percent share of the market for network operating systems and by the early 1990s there were over half a million NetWare-based networks installed worldwide encompassing more than 50 million users. Novell technology contributed to the emergence of local area networks, which displaced the dominant mainframe computing model and changed computing worldwide. Novell was the second-largest maker of software for personal computers, trailing only Microsoft Corporation, and became instrumental in making Utah Valley a focus for technology and software development.
During the early to mid-1990s, Noorda attempted to compete directly with Microsoft by acquiring Digital Research, Unix System Laboratories, WordPerfect, and the Quattro Pro division of Borland. These moves did not work out, due to new technologies not fitting well with Novell's existing user base or to being too late to compete with equivalent Microsoft products, and NetWare began losing market share once Microsoft bundled network services with the Windows NT operating system and its successors. Despite new products such as Novell Directory Services and GroupWise, Novell entered a long period of decline. Eventually Novell acquired SUSE Linux and attempted to refocus its technology base. Despite building or acquiring several new kinds of products, Novell failed to find consistent success and never regained its past dominance.
The company was an independent corporate entity until it was acquired as a wholly owned subsidiary by The Attachmate Group in 2011, which in turn was acquired in 2014 by Micro Focus. Novell products and technologies are now integrated within various Micro Focus divisions.
A funding proposal was brought to Pete Musser, chairman of the board of Safeguard Scientifics, Inc., a Pennsylvania-based, technology-focused venture capital firm that was an offshoot of the older Safeguard Business Systems. Safeguard Scientifics believed that a new computer systems company could help the Business Systems company automate their accounting systems. Accordingly, Safeguard Scientifics provided over $2 million in seed funding, and they became the majority owner of Novell Data Systems. Canova also owned a significant portion of the new company.
Novell Data Systems set up offices in a former carpet warehouse located in an obscure industrial park down the road from the largely vacant Geneva Steel works. By November 1980, they were placing display ads in the classifieds pages of Utah Valley newspapers, seeking to hire hardware and software engineers and other staff.
At first the company began to grow rapidly. By mid-1981 the company was selling two products, the Nexus Series microcomputer and the Image 800 dot matrix printer. Orders began shipping during the second half of 1981. The computer product was based on the Zilog Z80 microprocessor and the CP/M operating system.
The company subsequently did not do well. The microcomputer produced by the company was late to an increasingly crowded market and was noncompetitive in terms of performance when it did arrive. According to one paraphrase of a Value Line report on Novell Data Systems as a whole during this period, their "revenue was minimal, but expenses were tremendous." Davis was fired from Novell Data Systems, a change that occurred in November 1981.
In order to compete on systems sales, Novell Data Systems planned a program to link more than one microcomputer to operate together. The current or former BYU students Drew Major, Dale Neibaur and Kyle Powell, known as the SuperSet Software group, were hired to this task and began consulting for Novell during 1981.
During the first calendar quarter of 1982, heavy costs continued to be incurred at Novell Data Systems, which resulted in management shuffles, organizational consolidations, and a significant layoff. Canova was fired and Jack Messman, representing Safeguard Scientifics, was named president. The poor performance of Novell Data Systems resulted in losses being announced in April 1982 for the publicly-held Safeguard Scientifics and put pressure on that company's stock price. However, by this point the computer-linking work that the SuperSet group had produced was drawing considerable interest and Novell Data Systems was describing themselves as a company that made not just stand-alone microcomputers but also products for local area networking (LAN). The dual emphasis on hardware and software products continued for several months but continued to have troubled results, and in July 1982 another round of layoffs took place which resulted in the employee count being reduced from 50 people to 30.
At that time Safeguard reported that it would be writing down $3.4 million in losses due to Novell Data Systems' switch from being a hardware company to a software company. Throughout 1982 there were further management shuffles with other people being named president of the company. Major, Neibaur, and Powell continued to support Novell through their SuperSet Software group. As Major later said, "It was great that our hardware was so lousy because that gave us the idea that hardware wasn't really where the value was."
Two other important NDSI employees were strategist Craig Burton and communications specialist Judith Clarke. Despite its struggles, Novell Data Systems had a presence at the COMDEX show in Las Vegas in November 1982; a man named Ray Noorda saw it and become interested in the company's potential.
The new Novell started with around 15 employees. Noorda emphasized that the file server product acquired from Novell Data Systems would be the heart of what the new Novell would be doing. Later that same year, the company introduced its most significant product, the multi-System platform network operating system (NOS), Novell NetWare.
Funding for the new company was still an issue, and Musser contacted two Safeguard investors and brokers, Barry Rubenstein and Fred Dolan, who were with the Cleveland brokerage house Prescott, Ball and Turben, in these efforts. Rubenstein and Dolan eventually came up with the idea of a rights offering to Safeguard shareholders. Accordingly, in January 1985, Safeguard Scientifics made an initial offering of shares in Novell, Inc. to its own shareholders, at $2.50 a share. The sale brought Safeguard more than $5 million in cash, and Safeguard's ownership in Novell went from 51 percent down to 24 percent. Novell, Inc. began trading as an over-the-counter stock.
The company realized that making a proprietary solution in this sense was disadvantageous and looked instead to the IBM PC as an alternative platform. Now called NetWare, the network operating system was ported to run on an IBM PC XT with an Intel 8086 processor and supported centralized, multitasking file and print services. By March 1984, Novell was putting out announcements about third-party products that worked with Novell NetWare.
NetWare came on the computing scene just as the IBM PC was emerging as a market force and applications such as the VisiCalc spreadsheet for the Apple II were showing what microcomputers could do for businesses. There was an immediate demand for local area networking that could make files and printers available across many PCs. In addition, the advent of the PC caused organizational changes within companies and enterprises and allowed Novell to find entryways into individual departments or regional facilities rather than having to convince upper management of the value of networking. Thus, Novell's timing was spot on. As the New York Times subsequently wrote, "Novell, in one of those instances of serendipity and visionary thinking that are the stuff of personal computer legend, found itself in the right place at the right time."
Partly in consequence of its design of running at kernel level ring 0 without regard for separate or protected address spaces, and thus not having the properties of a general-purpose operating system, NetWare was known for being very fast in operation. This trend continued into 1987 with the Advanced NetWare/286 release, which was well received within the industry. NetWare also excelled with respect to computer security considerations, supporting user- and group-based roles and volume- and file-level access restrictions, thus making it attractive to systems administrators.
Novell based its network protocol on Xerox Network Systems (XNS), and created its own standards which it named Internetwork Packet Exchange (IPX) and Sequenced Packet Exchange (SPX). These protocols were based on a client–server model. File and print services ran on the NetWare Core Protocol (NCP) over IPX, as did Routing Information Protocol (RIP) and Service Advertising Protocol (SAP). All of these NetWare protocols mapped to various layers of the OSI model.
Starting in 1987, Novell began selling its own Ethernet-based network adapter cards. These included the 8-bit NE1000, and then in 1988, the 16-bit NE2000. They priced them lower than cards from competitors such as 3Com, whose card Novell had previously been distributing. By 1989, Novell's cards were being sold at a rate of 20,000 per month, aggressively expanding Novell's market presence. At that point, Novell transferred the NE1000/NE2000 business to Anthem Electronics, the firm that had actually been making them, but the cards remained branded as Novell products.
As author James Causey would later write, "NetWare deserves the lion's share of the credit for elevating PC-based local area networks from being cute toys to providing powerful, reliable, and serious network services. NetWare was the first Intel-based network operating system to provide a serious alternative to mainframe-based server networks, providing critical reliability and security features needed in the modern enterprise."
Novell acquired Kanwal Rekhi's company Excelan in 1989; Excelan manufactured smart Ethernet cards and commercialized the Internet protocol TCP/IP, solidifying Novell's presence in these areas. The acquisition combined Novell's $281 million in annual revenue with Excelan's $66 million. Rekhi became a high-ranking Novell executive, and played an influential strategic and managerial role with the company over the next several years. Excelan was based in San Jose, California, and they, along with a couple of prior Novell acquisitions, formed the basis for Novell's presence in Silicon Valley going forward.
An analyst for Dataquest said that NetWare 386 "is truly a blow-away-the-competition type product". Overall, NetWare 3 was the most significant rewrite that the product would ever get, and proved very successful. By 1990, Novell had an almost monopoly position in NOS for any business requiring a network.
There were competitor companies in the same space, such as Corvus Systems, Banyan Systems, and LANtastic, but none of them made much of a dent in Novell's business. Microsoft tried on two early occasions to take on Novell in networking, first with the MS-NET product and then with LAN Manager, but both failed badly. IBM similarly had limited success in this area. From 1988 to 1992, Novell's revenues rose almost three-fold, to $933 million a year, with about half of Novell's sales coming from North America and half from overseas. Earnings also rose to $249 million a year. From 1986 to 1991, Novell's stock price climbed twelve-fold.
With this market leadership, Novell began to acquire and build services on top of its NetWare operating platform. These services extended NetWare's capabilities with such products as NetWare for SAA and Novell multi-protocol router.
However, Novell was also diversifying, moving away from its smaller users to target large corporations and wide area networks. A marketing and development alliance with IBM announced in 1991 was part of this initiative. The company did later attempt to refocus with NetWare for Small Business. It reduced investment in research and was slow to improve the product administration tools, although it was helped by the fact its products typically needed little "tweaking" – they just ran.
Under Noorda, Novell embraced the notion of "coopetition", or cooperative competition. The central idea was that whatever was good for networking in general would be good for Novell and took the form of encouraging the growth of an ecosystem composed of hundreds of suppliers of hardware and software networking products, even if some of those suppliers had products that competed with Novell's. 3Com, who had been an early competitor of Novell's, sold more instances of their Ethernet networking cards for use in conjunction with NetWare than they did for use with their own 3+Share network operating systems, and a similar situation existed for IBM and their Token Ring cards. It was due to this kind of industry vision that Noorda would become known as the "Father of Network Computing".
From the first years of the new Novell's success, Noorda was credited in the press with forging that path. The company reflected aspects of Noorda's personal background, such as his LDS Church, which brought about what was termed "the Mormon work ethic" at Novell. As one account later put it, Novell was "reputedly staffed with lots of hard-selling but soft-drinking Mormons." Noorda himself was famous for his frugal ways and for working from a plain, small office.
In 1989 senior executives Craig Burton and Judith Clarke, whom many credited for much of Novell's past success, left Novell. Burton had been seen as Noorda's most likely successor while Judith Clarke had been instrumental in marketing and positioning Novell.
In April 1990, Novell and Lotus Development Corporation announced merger of equals based on a $1.5-billion stock swap that would have been the largest deal in the software industry to that time. But it collapsed the following month: when Lotus head Jim Manzi refused to give Novell an equal number of seats on the new board, Noorda pulled out shortly before the deal would have been completed.
At its high point around 1993, NetWare had a roughly two-thirds share of the market for network operating systems; one analysis put the figure at 63 percent. There were over half a million NetWare-based networks installed worldwide and some 55 million NetWare users on those networks. And networking itself was the fastest-growing segment of the computer market, increasing by 30 percent a year and reaching a $10 billion figure by 1993. Novell was the second largest maker of software for personal computers, trailing only Microsoft. Novell's employee base, which had been around 15 when Noorda joined, had risen to 4,335 by the end of 1993. Besides Utah, Novell continued to grow in San Jose, where many of the sales, marketing, product management, and executive functions were located.
Under Ray Noorda's leadership, Novell provided upgrades to resellers and customers in the same packaging as a newly purchased copy of NetWare, but at one third the cost, which created a gray market that allowed NetWare resellers to sell upgrades as newly purchased NetWare versions at full price periodically, which Novell intentionally did not track. Noorda commented to several analysts that he devised this strategy to allow front line resellers to "punch through" the distributors like Tech Data and Ingram and acquire NetWare versions at a discounted rate, as Novell "looked the other way"; this helped fund the salaries of Novell Field Support Technicians, who for the most part were employees who worked for the front line resellers as Novell CNE (Certified NetWare Engineers).
Noorda commented that this strategy was one he learned as an executive at General Electric when competing against imported home appliances: allow the resellers to "make more money off your product than someone else's".
Under Noorda, Novell made a series of acquisitions interpreted by many to be a direct challenge to Microsoft. Noorda was motivated in part by a realization that NetWare's technology was not suitable as the basis for a full-fledged operating system and application platform. There was also enmity between the two companies and the two CEOs, stemming in part from merger talks between Noorda and Microsoft head Bill Gates that had begun in 1989 and been on-and-off for the next couple of years before breaking down for good. Subsequently, Novell had played a role in keeping the Federal Trade Commission investigation into Microsoft going.
Between 1991 and 1994, the Noorda-led Novell made this series of major acquisitions: Digital Research Inc., producer of DR-DOS, to compete with Microsoft's MS-DOS; Unix System Laboratories, holder of Unix operating system technology, to improve Novell's technology base versus Windows NT; Serius Corp., maker of an advanced application development tool; and WordPerfect Corporation and Quattro Pro from Borland to provide personal productivity and group collaboration products. In all, Noorda acquired ten companies within a four-year span. By September 1993, BusinessWeek was writing, "Of the many rivalries in the personal-computer industry, for sheer nastiness it's hard to beat the one between Microsoft Corp. and Novell Inc." In November 1993, Noorda confirmed published reports that he had been suffering from some memory lapses and announced that he would be stepping down from the CEO position once a successor was found.
In April 1994, former HP executive Robert Frankenberg was announced as the new CEO of Novell, with Noorda remaining as chairman of the board of directors. By then the USL acquisition was already showing difficulties, while the WordPerfect acquisition was questioned even more. Nonetheless, Frankenberg said he was enthusiastic about it: "For me, it was a pivotal item in my decision to join Novell because it makes possible an entirely new category of networked applications which no one else can provide." When the WordPerfect and Quattro Pro acquisitions closed in June 1994, it was the largest such deal in the software industry to that time; it made Novell the third-largest software company in the world, trailing only Microsoft and Computer Associates.
Noorda retired from the chairman position and left Novell completely in November 1994, although he was still the largest shareholder of the company. At that point in time, Frankenberg became chairman as well.
Novell had already abandoned Digital Research's Multiuser DOS in 1992. The three former Master Value Added Resellers (VARs) DataPac Australasia, Concurrent Controls and Intelligent Micro Software could license the source code to take over and continue independent development of their derivations in 1994.
Digital Research's FlexOS had been licensed to IBM for their 4690 OS in 1993 and was also utilized for the in-house development of Novell's Embedded Systems Technology (NEST), but was sold off to Integrated Systems, Inc. (ISI) for in July 1994. The deal comprised a direct payment of half this sum as well as shares representing 2% of the company.
NEST however held importance for Frankenberg's vision of "pervasive computing", wherein Novell software would be connecting a billion nodes by 2000. Many of those nodes would be common, everyday devices running NEST, linked by SuperNOS, Novell Directory Services, and other management services components.
Novell also abandoned their Novell Corsair desktop project and in late 1994 transferred some components to Caldera, a startup funded by Noorda's Canopy Group. The Canopy Group was a technology investment firm and real estate company that Noorda focused on after his departure from Novell.
Novell DOS (and all former DR DOS versions including StarTrek, PalmDOS and DOS Plus) as well as other remaining Digital Research assets (like GEM and the CP/M- and MP/M-based operating systems, programming languages, tools and technologies) were sold to Caldera on 23 July 1996. Personal NetWare had been abandoned at Novell in 1995 but was licensed to Caldera in binary form only. The deal consisted of a direct payment of US$400,000 as well as percentual royalties for any revenues derived from those assets to Novell.
In January 1997, Novell's NEST initiative was abandoned as well.
The deal closed in June 1993, with Novell acquiring rights to the Unix SVR4 source base and the UnixWare operating system product. Novell then turned the Unix brand name and specification over to the industry consortium X/Open.
Novell created the Unix Systems Group to contain the new business, which also absorbed the Univel venture. Most of the core USL employees remained in USL's Summit, New Jersey facility, which was later relocated to Florham Park, New Jersey in the summer of 1995. The USL Europe office in London was moved into Novell's facility in Bracknell, Berkshire.
Novell's time with Unix technology saw the release of UnixWare 1.1 in January 1994, in both personal and advanced server editions and with the bundled inclusion of TCP/IP, a NetWare Unix Client, and Merge functionality for running DOS and Windows 3.1 applications. This was followed in early 1995 by the release of UnixWare 2.0, which included full support for multiple processors as well as improved installation and ease-of-use and additional NetWare integration features.
In September 1994 Novell began publicly describing its plans to develop a "SuperNOS", a microkernel-based network operating system based on NetWare 4.1 and UnixWare 2.0. The aim was to include UnixWare technology inside NetWare, provide the strengths of both NetWare's network services and UnixWare's application services, be able to run existing NetWare Loadable Modules (NLMs) and Unix executables, and accordingly create a network operating system that could successfully compete with Microsoft's Windows NT. SuperNOS would also operate across distributed servers with unified presentation. Finally, SuperNOS would take advantage of object-oriented programming paradigms as a way of fostering easier application development.
In terms of operating system architecture, SuperNOS would run NLMs in kernel space, for maximum throughput, while it would run Spec 1170-based Unix applications in user space. For clustering, SuperNOS would embrace elements of a NetWare distributed parallel processing proposal and a UnixWare single system image initiative. SuperNOS was based on work that had already started at USL and at the French company Chorus Systèmes SA for cooperative work on the ChorusOS microkernel technology in the context of supporting SVR4 on a microkernel. This microkernel was arguably superior for this purpose than the more well-known Mach one, because it gave more flexibility at the kernel mode–user mode boundary. By mid-1995 the SuperNOS project was reportedly about one-third completed, with 1997 being seen as a customer release date for it. There were over 60 engineers assigned to it, mostly from the UnixWare and Chorus side. The project endured prolonged internal architectural debates and resistance from the NetWare side due to a reluctance to believe that Unix was really superior to NetWare in key aspects. In one instance, Novell's Drew Major and Chorus Systèmes' Michel Gien disagreed in the trade press about whether the existent Chorus technology was up to the task. The long-running disputes reflected cultural and political divisions between the San Jose (with Rekhi being a Unix supporter before leaving altogether) and Utah camps within Novell. In any case the 1997 date was seen by industry observers as being too late to forestall the market-share gains that Windows NT was already making.
The acquisition of USL never really worked out for Novell. During the company's fiscal years of 1993, 1994, and 1995, Novell's Unix Systems Group represented only about 5 percent of the company's revenue on an ongoing basis. Very few Certified NetWare Engineers ever reached a similar level of involvement with UnixWare. Another aim, that Novell might be able to coalesce Unix vendor versions and thus resolve the Unix wars, was not achieved either. By late summer 1995 the company was looking for a way out of the Unix business.
In September 1995, Novell announced the sale of UnixWare to the Santa Cruz Operation (SCO), coincident with a licensing arrangement with Hewlett-Packard. As part of the deal, SCO said that it would merge the SVR4.2-based UnixWare with its existing SVR3.2-based OpenServer operating system and add NetWare services to the new merged product, code-named "Gemini". Gemini would then be sold through SCO's well-known channel and reseller operation. As for HP, they said they would add NetWare code and NetWare Directory Services to their own version of Unix, HP-UX, in combination with Distributed Computing Environment elements, which would then be sold by HP's strong direct-sales force. Finally, SCO and HP said that they would co-develop a next-generation, 64-bit version of Unix. Some 400 Novell software engineers had been working on UnixWare; most of them were offered jobs with either SCO or HP, while a few remained with Novell.
While some lip service was paid to the notion that SuperNOS would go on after the three-way deal, in fact, it was abandoned and never achieved fruition in that form. (A decade later, Novell's Open Enterprise Server product would realize some aspects of a hybrid NetWare/Unix-like system, this time based around SUSE Linux Enterprise Server rather than UnixWare.)
By December, there were already some indications that the three-way arrangement was not working out as had been initially advertised. The computer industry was not sure that SCO could handle being the primary Unix shepherd. The HP project, code-named "White Box", focused on making a hybrid environment out of the SVR4.2-based Gemini and the SVR3.2-based HP-UX, but that effort faced major technical hurdles. The terms of the deal between Novell and SCO, which closed in December 1995, were uncertain enough that an amendment had to be signed in October 1996, and even that was not clear enough to preclude an extended battle between the two companies during the SCO-Linux disputes of the 2000s.
AppWare was one of the three main strategic focuses of Novell during this period, along with NetWare and UnixWare. These three prongs were intended to satisfy the growing need for scalable, distributed computing at the enterprise level of applications such as general ledger systems or reservation systems; as Novell executive Jim Tolonen outlined: "NetWare being the underlying infrastructure over which those mission critical transactions will be moved, Unix being a place on which the applications can run, and AppWare as tools that will help programmers write that class of application in a distributed environment."
It was not long before the AppWare plans started to fall apart. In September 1994 Novell announced they would be selling the Appware Foundation product to a third party. Novell did state that development of Visual AppBuilder would continue, and a Unix port would be following (that did not materialize). Novell also continued to release a number of new Appware Loadable Modules. But overall, as Byte magazine wrote in early 1995 about the three-pronged strategy, these "unrelated ... families of products formed an unsteady tripod".
Joe Firmage became disillusioned with Novell in mid-1995, following its decision to sell UnixWare and abandon the SuperNOS project, and left Novell later that year. Novell then publicly stated in November 1995 that it was looking for a buyer for AppWare. In March 1996, it was announced (based on an agreement that had been signed the month before) that Novell had sold all rights to the AppWare technology to a new company called Network Multimedia Inc., which was headed by Ed Firmage, who had been director of AppWare marketing at Novell.
The market for standalone word processors and spreadsheets was expanding to that of office suites, where Microsoft Office had an early lead in marketshare. To compete, Novell PerfectOffice 3.0 was released in December 1994. It was based upon an earlier effort, Borland Office 2.0 for Windows, but had superior look-and-feel and integration. It contained not just WordPerfect and Quattro Pro but also other products, most of which had originated at WordPerfect Corporation, including Presentations for slides preparation, a personal information manager called InfoCentral, and the GroupWise collaboration product. There was also a professional edition that included AppWare as well as Borland's Paradox database. PerfectOffice surpassed in sales one early player in the space, Lotus SmartSuite, and GroupWise found three times the number of users as Lotus Notes. The application products also had the advantage of what Novell's senior vice president for corporate marketing, Christine Hughes, called "an 'in your face' presence for the user. Otherwise no one is aware it's Novell providing that connection." But industry analyst reaction was that while PerfectOffice 3.0 was a good product, it was arriving too late to head off Microsoft Office's momentum.
WordPerfect also played in a role in larger architectural ambitions within Novell, as WordPerfect incorporated OpenDoc and IBM System Object Model technology. These became part of the basis for Novell's larger distributed object strategy. That strategy was tied to having supporting multiple object request brokers that could tie in NetWare Loadable Modules, the AppWare Bus, UnixWare, and eventually SuperNOS itself. WordPerfect itself was also supposedly using the AppWare foundation layer in its work. Other parts of WordPerfect were deemed less strategic, and the Main Street line of multimedia products for children was dropped.
During its time in Novell, WordPerfect still sold reasonably well as standalone software, garnering almost half of all such word processor sales; but the market was increasingly dominated by the idea of office suites, and there Microsoft Office was supreme, with 86 percent of the market compared to only 5 percent for Novell's PerfectOffice. As such, the WordPerfect and Quattro Pro part of the company dragged down Novell's earnings and stock price.
Novell stated in November 1995 that it was putting its personal productivity product line up for sale. Then in January 1996 it announced that the sale of these products, primarily WordPerfect and Quattro Pro, would be made to Corel for $186 million, a large loss from the $855 million that it had originally paid to acquire WordPerfect. Novell did hold onto a few pieces that it had acquired from WordPerfect, most importantly the GroupWise collaboration product. By some estimates Novell had lost $750 million on the WordPerfect experience. The sale to Corel was completed in March 1996.
The business press was negative on the whole attempt: The New York Times referred to "acquisitions Mr. Noorda had made in his latter years in a disastrous attempt to compete head-on with Microsoft", while the San Francisco Chronicle talked of "a disastrous acquisition spree undertaken by previous CEO Ray Noorda in an effort to compete with Microsoft." By the year 2000, The Age would say that "The WordPerfect acquisition was the biggest disaster in software history".
Novell continued to have mediocre-at-best financial results during 1995 and 1996.
In August 1996, Frankenberg himself departed Novell in what was variously portrayed as a mutual decision, or as a resignation under pressure from the company's board of directors. His years there had been marked by having to disassemble Noorda's acquisitions but also by failing to fully recognize the growing importance of the Internet for networking applications.
Then with UnixWare gone, Novell focused on major upgrades to its core NetWare-based network operating system. The initial release of NetWare 4 came with compatibility problems for some NetWare 3 users, and large enterprises were faced with an upgrade-all-or-upgrade-none decision. However some 40 million users declined to move to NetWare 4, with the result that Novell lost large amounts of possible revenue in upgrades. Although the NetWare 4.1 release of 1995 sought to remedy some of these issues, the lag had caused many Novell customers to take a serious look at Windows NT. And Windows NT was proving better as a platform for application and database services than NetWare. Furthermore, Microsoft was having success with its no-extra-charge bundling of Microsoft's IIS web server on NT, while Novell's presence in the Internet market was severely lacking. Still, as of 1996, by one estimate there were three million networks, and tens of millions of PCs, still using NetWare.
In 1996, the company began a move into Internet-enabled products, replacing reliance on the proprietary IPX protocol in favor of a native TCP/IP stack. Support for the new Java programming language also began to be added to NetWare. An Internet-focused product released during 1996 was called Intranetware.
These moves were accelerated when Eric Schmidt became CEO in April 1997, the first in the post since Frankenberg's departure; Christopher Stone was brought in as senior vice president of strategy and corporate development, reporting to Schmidt. Many observers were surprised that Schmidt would leave his chief technical officer position at Sun Microsystems, which at the time was doing very well, to go to Novell, which was viewed as a company in real trouble. The new CEO said, "Novell has been defocused by a series of acquisitions and forays that didn't work out. In this collaborative world, it's more important to do a few things well and just go for them like you've never seen."
One result of these shifts was BorderManager, released in August 1997, which supplied proxy server, firewall, and other services for connecting NetWare networks to the Internet. Another was a new version of NDS, that was capable of running with Windows NT, not just NetWare.
And still another was NetWare 5.0, released in October 1998, with hopes for it accelerating Novell's improved fortunes under Schmidt. NetWare 5.0 leveraged and built upon eDirectory and introduced new functions, such as Novell Cluster Services (NCS, a replacement for SFT-III) and Novell Storage Services (NSS), a replacement for the traditional Turbo FAT filesystem used by earlier versions of NetWare. While NetWare 5.0 introduced native TCP/IP support into the NOS, IPX was still supported, allowing for smooth transitions between environments and avoiding the "forklift upgrades" frequently required by competing environments. Similarly, the traditional Turbo FAT file system remained a supported option.
With revenues in decline, Schmidt took actions to control costs, and some 18 percent of Novell employees were laid off during the first few months of his tenure. In addition he was forced to halt NetWare shipments to resellers because unsold inventory levels were so high. By the end of summer 1997, Schmidt was saying, "I took the job on the presumption that we would not have to do this. If I'd known what shape the company was in, I might not have taken it." While there was some speculation that Novell might relocate much of the company to its San Jose facility, Novell instead recommitted to Provo, building a new headquarters tower that opened in 2000.
But Novell's decline and loss of market share accelerated under Schmidt's leadership, with Novell experiencing an across-the-board decline in sales and purchases of NetWare and a drop in share price from /share to /share. Analysts commented that the primary reason for Novell's demise was linked to its channel strategy and mismanagement of channel partners under Schmidt.
Schmidt embarked on a channel strategy to undo Noorda's "look the other way" approach and thereby remove the upgrades as whole box products, then directed Novell's general counsel to initiate litigation against a large number of Novell resellers who were routinely selling upgrades as newly purchased NetWare versions.
Although this move bolstered Novell's revenue numbers for several quarters, Novell's channels subsequently collapsed with the majority of Novell's resellers dropping NetWare for fear of litigation.
By 1999, Novell had lost its dominant market position, and was continually being out-marketed by Microsoft as resellers dropped NetWare, allowing Microsoft to gain access to corporate data centers by bypassing technical staff and selling directly to corporate executives. Most resellers then re-certified their Novell CNE employees— the field support technicians who were Novell's primary contact in the field with direct customers—as Microsoft MCSE technicians, and were encouraged to position NetWare as inferior to Windows 2000 features such as Group Policy and Microsoft's GUI, which was considered to be more modern than the character-based Novell interfaces. With falling revenue, the company focused on net services and platform interoperability. Products such as eDirectory and GroupWise were made multi-platform.
By 2000, some large NetWare enterprise customers, such as Chase Manhattan Bank, United Parcel Service, and the University of Southern California were in the process of migrating most or all of their NetWare systems to alternatives. Revenue warnings during the second quarter of 2000 resulted in a 40 percent drop in the company's stock price. In October 2000, Novell released a new product, dubbed "DirXML", which was designed to synchronize data—typically user information—between disparate directory and database systems. This product leveraged the speed and functionality of eDirectory to store information, and would later become the Novell Identity Manager, forming the foundation of a core product set within Novell.
During Schmidt's tenure during the late 1990s, Novell developed and delivered a series of Internet-centric products that were well-reviewed. But these new products did not sell as well as the company had hoped, in part due to Novell channel issues with training, lead generation, and support. Indeed, there were reports of channel stuffing taking place. So despite its efforts in these other spaces, Novell was increasingly becoming irrelevant within the industry. Of Schmidt's efforts with Novell, News.com wrote, "He had traversed a rocky road as chief executive at Novell, briefly laying a smooth path for a renaissance at the aging network software provider before succumbing to strategy issues that have plagued it for years."
The CEO of CTP, Jack Messman, engineered the merger using his position as a board member of Novell since its inception, and as part of the deal became CEO of Novell. Chris Stone, who had left in 1999, was rehired as vice chairman to set the course for Novell's strategy into open source and enterprise Linux. With the acquisition of CTP, which closed in July 2001, Novell moved its headquarters to Massachusetts. As for Schmidt, he departed Novell soon after the CTP announcement and headed for Google, where he became chair of the board (and soon after that, CEO).
In July 2002, Novell acquired SilverStream Software, a leader in web services-oriented applications, but a laggard in the marketplace. Renamed to Novell exteNd, the platform comprised XML and web service tools based on Java EE.
In November 2003, Novell acquired Linux OS developer SuSE, which led to a major shift of power in Linux distributions. IBM also invested to show support of the SuSE acquisition.
In mid-2003, Novell released "Novell Enterprise Linux Services" (NNLS), which ported some of the services traditionally associated with NetWare to SUSE Linux Enterprise Server (SLES) version 8. NetWare 6.5, released in 2003, would prove to be the last version of that product.
In November 2004, Novell released the Linux-based enterprise desktop Novell Linux Desktop 9, based on Ximian Desktop and SUSE Linux Professional 9.1. This was Novell's first attempt to get into the enterprise desktop market.
The successor product to NetWare, Novell Open Enterprise Server (OES), was released in March 2005. OES offers all the services previously hosted by NetWare 6.5, and added the choice of delivering those services using either a NetWare 6.5 or SUSE Linux Enterprise Server 9 kernel. The release was aimed to persuade NetWare customers to move to Linux.
In August 2005, Novell created the openSUSE project, based on SUSE Professional. openSUSE can be downloaded freely and is also available as boxed retail product.
In June 2006, chief executive Jack Messman and chief finance officer Joseph Tibbetts were fired, with Ronald Hovsepian, Novell's president and chief operating officer, appointed chief executive, and Dana Russell, vice-president of finance and corporate controller, appointed interim CFO.
The case attracted considerable industry and media attention, with the free and open-source software (FOSS) community solidly on the side of Novell. There were a series of court rulings, most of which went in Novell's favor and which sent The SCO Group into bankruptcy. The matter was settled finally in 2010 when a jury trial in Utah ruled that the copyrights belonged to Novell. (Novell made no material use of the Unix ownership once it was ruled theirs, as by then their interests were with SuSE Linux.)
In 2004, Novell sued Microsoft, asserting it had engaged in antitrust violations regarding Novell's WordPerfect business in 1994 through 1996. Novell's lawsuit was subsequently dismissed by the United States District Court in July 2012 after it concluded that the claims were without merit.
On 2 November 2006, the two companies announced a joint collaboration agreement, including coverage of their respective products for each other's customers. They also promised to work more closely to improve compatibility of software, setting up a joint research facility. Executives of both companies expressed the hope that such cooperation would lead to better compatibility between Microsoft Office and OpenOffice.org and better virtualization techniques.
Microsoft CEO Steve Ballmer said of the deal, "This set of agreements will really help bridge the divide between open-source and proprietary source software."
The deal involved upfront payment of from Microsoft to Novell for patent cooperation and SLES subscription. Additionally, Microsoft agreed to spend around yearly, over the next 5 years, for marketing and selling a combined SLES/Windows Server offering and related virtualization solutions, while Novell paid at least yearly to Microsoft, in the same period.
One of the first results of this partnership was Novell adapting the OpenXML/ODF Translator for use in OpenOffice.org.
Microsoft released two public covenants not to sue users of the open source Moonlight runtime—a workalike for the Microsoft Silverlight rich media platform—for patent infringement. One condition common to each covenant was that no Moonlight implementation be released under the GPLv3 free software license.
In contrast to the SCO case, here initial reaction from members of the free and open source software community over the patent protection was mostly critical, with expressions of concern that Novell had "sold out" and doubt that the GNU GPL would allow distribution of code, including the Linux kernel, under this exclusive agreement.
In a letter to the FOSS development community on 9 November 2006, Bradley M. Kuhn, CTO of the Software Freedom Law Center (SFLC), described the agreement as "worse than useless". In a separate development, the chairman of the SFLC, Eben Moglen, reported that Novell had offered cooperation with the SFLC to permit a confidential audit to determine the compliance of the agreement with the GPL (version 2). Richard Stallman, founder of the Free Software Foundation, said in November 2006 that changes coming with version 3 of the GPL would preclude such deals. When the final revision of the third version of the GPL license was decided, the deal between Microsoft and Novell was grandfathered in. A clause within GPLv3 allows companies to distribute GPLv3 software even if they have made such patent partnerships in the past, as long as the partnership deal was made before 28 March 2007 (GPLv3 Section 11 paragraph 7).
On 12 November 2006, the Samba team expressed strong disapproval of the announcement and asked Novell to reconsider. The team included an employee of Novell, Jeremy Allison, who confirmed in a comment on Slashdot that the statement was agreed on by all members of the team, and later quit his job at Novell in protest.
In early February 2007, Reuters reported that the Free Software Foundation had announced that it was reviewing Novell's right to sell Linux versions, and was considering banning Novell from selling Linux. However, spokesman Eben Moglen later said that he was quoted out of context, and was only noting that GPL version 3 would be designed to block similar deals in the future.
Partnerships in connection with intelligent workload management were announced with SAP, Citrix Systems, Ingres, and others. Reaction of industry analysts to the move varied, with some positive and some more mixed. Among the more skeptical was Dan Kusnetzky of ZDNet, who wrote that Novell "clearly hopes that putting its products together in new ways and invoking today's catch phrases and buzz words will appear fresh and new." While Novell did have strong technologies in this computing realm, it struggled to attract the same market attention that competing product lines from the likes of Microsoft or VMware held.
Novell announced in November 2010 that it had agreed to be acquired by The Attachmate Group for , and planned to operate Novell as two units, one being SUSE. As part of the deal, 882 Software patent owned by Novell were sold to CPTN Holdings LLC, a consortium of companies led by Microsoft and including Apple Computer, EMC Corporation, and Oracle. According to Novell's SEC filing, the patents "relate primarily to enterprise-level computer systems management software, enterprise-level file management and collaboration software in addition to patents relevant to our identity and security management business, although it is possible that certain of such issued patents and patent applications read on a range of different software products". The Attachmate Group expressed in advance of the deal closing that there would no change to the relationship between the SUSE business and the openSUSE project. The merger completed in April 2011, with per share in cash being paid to acquire Novell. Novell became a wholly owned subsidiary of The Attachmate Group.
Concurrent with the closing of the acquisition, some of Novell's products and brands were transferred to another of the Attachmate Group business units, NetIQ, and the SUSE Linux brand was spun off as its own business unit. The fourth business unit, Attachmate, was not directly affected by the acquisition.
Immediately prior to merger being finalized, Novell completed the patent sale to CPTN Holdings for . The U.S. Department of Justice announced that, as originally proposed, the deal with CPTN would jeopardize the ability of open source software, such as Linux, to continue to innovate and compete in the development and distribution of server, desktop, and mobile operating systems, middleware, and virtualization products; to address the department's antitrust concerns, CPTN and its owners had altered their original agreement:
With the acquisition, Novell's headquarters were moved back to Provo. But by then considerable consolidation had occurred, and the original six buildings of the Provo campus were sold.
During April and May 2011, The Attachmate Group announced layoffs for the Novell workforce, including hundreds of employees from the Provo location, raising questions about the future of some open source projects such as Mono.
The Novell products themselves were relabeled and dispersed among the file and networking services, collaborations, and security product lines of Micro Focus, such that offerings like Open Enterprise Server, GroupWise, and Zenworks became billed as Micro Focus products with no mention of their Novell past. The one page at the Micro Focus website listing former Novell products does not even mention NetWare.
But the effects of Novell have been long-lasting. While information technology had been present along the Wasatch Front since the 1950s in the form of work done at Utah State University, the first two software giants in the field in Utah were Novell and WordPerfect in the early 1980s. To that point, the Deseret News has stated, "WordPerfect and Novell put Utah Valley on the high-tech industry map in the 1980s." Moreover, even when employees left the two companies, or were downsized, they often stayed in the Utah Valley area and started their own companies. This began a culture of entrepreneurship that led to the Wasatch Front becoming known by some as Silicon Slopes. Silicon Slopes Magazine has credited the rise of the industry in Utah to three people, among them Ray Noorda.
Corporate ethos and "coopetition"
Sales and channel practices
Taking on Microsoft
Motivations
Desktop OS and embedded systems: DOS, NEST, and Corsair
Server OS: UnixWare and SuperNOS
Tools: AppWare
Applications: WordPerfect, Quattro Pro, and GroupWise
Results
Loss of networking dominance
NDS and other new products
Decline of marketshare
Cambridge Technology Partners
Linux
SuSE and Open Enterprise Server
Stagnation
"Your Linux is Ready"
Legal actions and reactions
Intelligent workload management
Acquisition by The Attachmate Group
Acquisition by Micro Focus
Companies acquired
Certification
Legacy
Products
See also
Further reading
External links
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