Potentially fruitful tactics for Novell during this critical period include forging tighter relationships with portal vendors as a directory, security, and identity provider, and focusing on (and packaging more adeptly) identity, directory, and other file management services for extranets/intranets.
User Action: Near term, current Novell users have no reason to fear that the company will go out of business or abandon them. Novell’s momentum and cash position will keep NetWare going for at least the next two years, which will give Win2000 networking time to mature for some potential switchers. The erosion of the NetWare market has slowed with the economic downturn, and we believe that most companies planning to abandon NetWare for Win2000 near term are already well along in their migration. Therefore, we do not view the current announcement as a signal for users to start moving to other products, unless they are already planning such a move. We expect the NetWare market to stabilize for the next year.
Companies looking for an external network directory system – particularly those that need a solution soon – should have Novell eDirectory on their shortlists, along with iPlanet. They should not be concerned about Novell’s stability as a directory vendor. eDirectory should be judged on its own merits and not on its connection to Novell’s brand.
In the services market, CTP continues to present a spotty service profile. Whether it has the resources and expertise for a given project is a hit-or-miss situation. CTP was struggling before Novell bought it, and the takeover has not provided it with the resources to change that situation.
Rather than trying to transform Novell into a services company – a difficult transition for any hardware or software vendor in the best of times, and much harder in the current economy – Novell’s management might be more successful at leveraging CTP’s services presence to help it win a larger market for eDirectory and other products.
While Novell’s long-term future is uncertain, the question is whether it retains its current market presence, fades into a boutique company, or becomes an acquisition target and possibly is broken up in the process. Novell’s present course seems to promise continued shrinkage rather than growth. However, we believe the company still has a year to turn itself around, and it has accomplished similar turnarounds in the past. It is a year too early to count Novell out.
META Group analysts Earl Perkins, Val Sribar, Jack Gold, Dale Kutnick, and David Yockelson contributed to this article.