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Novell could turn corner

Novell may be reaching a period of relative stability following a rocky 1996.

Novell (NOVL) may be reaching a period of relative stability following a rocky 1996.

According to consensus estimates from First Call, Novell will announce earnings tomorrow of 18 cents per share for its first quarter. This news follows a tepid fourth quarter in which revenue shrunk by $103 million, a portion of which may be the result of a recent company sell-off of languishing businesses.

But Novell saw marked growth in adoption across their product line last quarter, which is composed of the NetWare and IntranetWare network operating system platforms, the GroupWise messaging package, the ManageWise network management suite for LANs (local area networks), and NetWare Directory Services (NDS), which provide the administrative glue for networks.

As the company gears up for its annual BrainShare '97 confab in Salt Lake City next month, the principal question everyone seems to be asking is who will be the next CEO. As part of a disastrous 1996 that saw Novell bleed red ink, former CEO Robert Frankenberg resigned, ushering in a period of instability, with many questioning the company's continued viability in the marketplace.

Current Oracle COO Ray Lane and former Bay Networks founder Andy Ludwick have been linked to the job in recent press reports, but most industry observers believe the Novell brain trust will settle for a lesser-known candidate with visionary qualities. The company has attempted to refocus itself around four principal products and renamed its flagship platform as it continued to feel the pressure from Microsoft (MSFT) on the operating system front with the introduction of Windows NT 4.0.

Analysts say Novell's woes are attributed to the current state of its main products compared with those of its rivals. "NetWare is a horrible general purpose operating system," said Neal MacDonald, an analyst for the market research firm Gartner Group. A lack of flexibility in the OS has contributed to the perception that the company is pushing "legacy" technology.

But Novell retains a monstrous installed base, a fact that will continue to be attractive for potential executives looking to lead Novell, potential parties interested in acquiring the company, and for customers who know it won't fold up the tent. The company is also moving as quickly as possible to embrace Internet protocols and standards and plans to offer NDS on as many operating systems platforms as possible, including Windows NT, which could be just the tonic the company needs.

Novell's stock was trading at 12-11/16, up 9/16, in heavy afternoon trading today on Wall Street.