In response to questions about the perception that Novell is losing ground to Microsoft, CEO Eric Schmidt turns the question around by asking, "How many quarters of rising revenue, rising profits and successful products would it take to get a positive story written about us?"
I thought that was a pretty good response and it got me thinking about whether it was time to write a "Novell is back" sort of story. I did a little research and found that, for the most part, Schmidt's claims about Novell's comeback hold water.
In a late October interview with a handful of Network World editors (NW, Nov. 2), Schmidt said Novell's revenue has gone up roughly $10 million in each of the last four or five quarters. If you ignore the quarter ending in January 1998, during which Novell suffered a revenue decrease of $17 million vs. the previous quarter, his statement is on the money, according to Hoover's Online.
Novell has had five consecutive profitable quarters, starting with the fourth quarter of 1997, and has seen net income and net profit margin increase in each quarter. Net income has gone up from $7.2 million in the fourth quarter of 1997 to an estimated $42 million for the fourth quarter 1998, which ended October 31. Over the same period, net profit margin has gone from 2.7% to 14.1%. So it certainly appears that Novell is the comeback trail.
That's only part of the story. The more intriguing part has yet to come.
Schmidt is clearly betting Novell's future on Novell Directory Services (NDS). When asked whether he thought this was enough to sustain the company on, he said the directory opportunity is like the SQL database market of 15 years ago, noting that the SQL market is now worth $80 billion (that's his figure, not mine). Schmidt says it's not so much NDS that will make money for Novell, but the myriad applications built around it. "We don't really sell the directory, we sell things that use the directory," he says. Most of these will be management applications - for example, tools that help you find resources, do software distribution and manage security certificates. Novell's ZENWorks management tool is one specific example, and it has done well by most accounts.
In his keynote talk at Networld+Interop in Atlanta, Schmidt painted a picture of directories extending to the Internet. Consumers will have profiles of themselves at various places on the 'Net as well as lists of their shopping preferences and such. Some of this information would be shared among companies, depending on the level of privacy users select for themselves, so a user won't have to enter credit card data and shirt sizes to both L.L. Bean and Lands' End. Directories would be behind it all.
Corporations will have similar profiles for their employees, for example, showing what applications they should have on their desktop. If a user accidentally deletes some applications, they could be easily replaced. ZENWorks can do such things already. The corporate profile would also hold information that would be relevant to multiple departments; this means that finance won't need to duplicate information that is already in the HR database.
This sounds all well and good (assuming some rather tough security issues can be worked out), but is the directory opportunity as big as Schmidt says? Is it enough to sustain the kind of growth Novell has seen over the last year?
To find out, I've picked up on Schmidt's question about what it would take to write a positive story about Novell and have commissioned a feature story about the company. In it, we'll explore what has led to the growth Novell has seen of late. But we'll also explore this directory opportunity, in an effort to find out whether it really can sustain Novell going forward.
The plan is to talk to the players that will have to make it happen. Novell is clearly one, but for Schmidt's vision to come true there will have to be lots of other companies building directory-driven applications. Likewise, user organizations will have to buy into the whole idea, and be comfortable with betting their directory strategy on Novell.
This is where we can use your help. We're looking for users who can speak to this directory issue, whether you agree with Schmidt's vision or not. If so, how much would you be willing to spend for the kinds of products that Schmidt envisions? Will you buy from Novell today, or wait and see what Microsoft comes up with?
And developers, we can use your help, too. What applications are in the works that will take advantage of this directory technology? What do your business plans say is the revenue opportunity from these applications?
Send your comments to me at pdesmond@nww.com, or drop your thoughts in our online forum. Thanks in advance.
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So, are directories enough? Tell us in our forum or let Features Editor Paul Desmond know via e-mail.
Schmidt: Laser-like focus on boosting NDS
Novell CEO discusses future of directories, network applications and industry competition. Network World, 11/2/98.
