Novell: 20 chances to reinvent itself

The company needs to reinvent itself, and a private-equity buyout may be the perfect way to accomplish this.

Most companies struggle to reinvent themselves, so shackled by their pasts that they can't reorient themselves toward the future.

Novell, once the king of the software world, is like that. Over the years it has built up a broad portfolio of software (with associated revenue streams) in repeated attempts to regain its glory days. That portfolio now stifles its ability to focus on other areas with the most promise.

But Novell's management may be about to get a lifeline. Twenty of them, actually.

According to Thursday's Wall Street Journal, up to 20 bidders, most of them private equity firms, are vying for Novell's affections. As reported by The New York Times, Novell's management has imposed a deadline of this week for bids.

It may be that Novell's management didn't seek this particular spotlight, but it could prove to be the perfect way for Novell to shed some of its dead-weight products and become a lean contender again.

If you were Novell CEO Ron Hovsepian, wouldn't you welcome this?

Hovsepian has done an admirable job managing Novell's existing product line, but his ability to maneuver is significantly constricted by the need to appease Wall Street with consistent revenue and profitability.

One of the groups bidding on Novell has asked for my opinion on the company and its chances. Here's the gist of what I told them and what I firmly believe: As I've noted before, Novell's Linux business offers real promise and could be all the more valuable due to exceptional technology like Suse Studio .

But it's hard for Novell to really focus on Linux when it is Workgroup and other legacy product lines that still deliver the grocery money.

Novell's Suse business needs to get out of Red Hat's shadow, and it's unlikely to be able to do that with a message that basically says: "We're cheaper than Red Hat Enterprise Linux." As I've argued before, CentOS already owns that "cheaper" label, and it has the benefit of close compatibility with RHEL.

Novell needs to blaze new trails, something that is hard to do when saddled with so much legacy revenue in areas that don't point to its future.

Novell's management might prefer a buyout from Oracle, IBM, or another software peer, but a private-equity exit might actually be preferable for the business. A private equity fund should find it easier to package and sell off pieces of the Novell product portfolio that don't lead to this new future, whatever that turns out to be.

Regardless, Novell needs to go private so that it can make the hard decisions it has been wanting to make since at least 2002, when I was there. Novell's pressure to grow while under the fierce spotlight of Wall Street prompted its ill-fated engagement with Microsoft, which has delivered short-term revenue while destroying long-term value and goodwill within the open-source community.

I don't believe Novell did that deal through ignorance or animosity toward open source. Novell management was just playing the hand dealt to it.

A buyout gives Novell the opportunity to be dealt a better hand. This is something to be welcomed, not feared. Will it be painless? Of course not. But it is necessary.


Disclosure: I believe it's abundantly clear that I used to work at Novell and that I currently work at Canonical, a competitor. I hope it's also obvious that this post is meant to be encouraging of Novell's future, not dismissive. I have many friends who continue to work at Novell and have no interest in hurting them.

About the author

    Matt Asay is chief operating officer at Canonical, the company behind the Ubuntu Linux operating system. Prior to Canonical, Matt was general manager of the Americas division and vice president of business development at Alfresco, an open-source applications company. Matt brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. He is a member of the CNET Blog Network and is not an employee of CNET. You can follow Matt on Twitter @mjasay.

     

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