Novell Bull's Rebuttal
by Louis Corrigan ([email protected])

Straight off I need to thank David for the great link to the Ziff-Davis Sm@rt Reseller article comparing Novell's NetWare 5 with Microsoft's Windows NT 5.0 and UNIX. Not only does this article provide most of the grist for David's bear mill, it offers compelling counter-arguments for why that mill should be shut down!

Investors do need to remember that Novell is a turnaround that faces an extraordinary competitor in Microsoft. So I would agree with David that Novell presents some long-term risks. But the remedy for that is simply to be active in monitoring the firm's progress. That's the nature of turnaround investing. Today's progress report could hardly be better. The business has stabilized after a restructuring, and the company has just launched a hot new version of its central product that gives it a one to two year jump on its most significant competitor.

It's enormously important that NetWare 5 will allow Novell to satisfy its huge installed base with an advanced offering. The Sm@rt Reseller article agrees that companies now using earlier versions of the software will conclude that NetWare 5 offers "a big impetus to upgrade."

Moreover, this software breaks new competitive ground for Novell. The article notes that "if your NetWare customers use NT or Unix machines to host Web servers, that functionality can now be consolidated onto NetWare." NetWare 5 also features Oracle's database management system, making it attractive to firms using Oracle's offerings.

Also, while NetWare 5 can't yet match UNIX on the high-end of the server market, Ziff Davis tells resellers that "...midrange UNIX server offerings may find themselves in a value-added race for survival. The new NetWare is that good..." Perhaps most interesting, the article concludes saying that while diehard Windows NT users may not switch, "technically speaking, you can take NetWare 5.0 into undecided customers and expect to come out with a sale." Sounds like what's happening with Apple as its new iMac attracts a significant number of first time PC buyers as well as some former Wintel folks.

David argues for the power of Microsoft's marketing and for a possible lack of applications support for Novell's products. Neither should be dismissed, but what we're actually comparing here is a product already being installed with a product that won't come out for at least a year and that experts suggest won't begin to be widely deployed for at least two years.

It's too soon to know what kind of inroads Novell can make into the NT market in the meantime, but given the centrality of networking functionality to the wired world, Microsoft's vaporware won't amount to much no matter how much it's hyped. If you want the best solution today, Novell is the choice. And as we saw with Apple, applications vendors gladly recommit themselves once they see real opportunity. For now, though, simply a strong upgrade cycle should be enough to keep Novell's shareowners happy.

Next: The Bear Responds