Analyst slams Novell, seeks new management
- Shankland covered the tech industry for more than 25 years and was a science writer for five years before that. He has deep expertise in microprocessors, digital photography, computer hardware and software, internet standards, web technology, and more.
A financial analyst for Credit Suisse First Boston has called for Novell's board to make major changes, including new management and a greater emphasis on Linux and open-source software.
"Novell has the necessary resources to be a much more profitable enterprise, but it currently lacks the vision, strategy, and execution to produce respectable returns," CSFB analyst Jason Maynard wrote Wednesday. "With a stagnant stock price and frustration within the shareholder base, we believe the status quo is unsustainable."
He suggested four changes: New management, a focus on software services and not consulting, an emphasis on open-source software, and the repurchase of company stock. At the same time, he upgraded Novell to "outperform," arguing that "Novell's value can be unlocked."
Novell declined to comment.
Novell reported net income of $2 million, or nil per share, on revenue of $290 million for its most recent quarter. Both net income and revenue decreased compared to the year-earlier period, and Novell is in the midst of layoffs.
Regarding management, he said, "We believe the current management team has been afforded ample time to produce results and turn Novell into a sustainable and profitable business, yet has provided little evidence of progress and does not instill confidence in their ability to execute. Without a change at the top we believe the company will continue to languish." He suggested rehiring Chris Stone, who left a senior Novell post in 2004, or perhaps acquiring start-up Cassatt for its CEO Bill Coleman, who also helped found BEA Systems.
The acquisition of Suse Linux was smart, but while the Linux market has boomed, Novell has actually lost market share to leader Red Hat since the January 2004 acquisition. From 2002 to 2004, Novell's share of Linux license revenue dropped from 25 percent to 20 percent, while Red Hat's increased from 40 percent to 63 percent, he said.
The company should focus on an open-source strategy--"certify, manage, and support open-source offerings"--while backing off its NetWare and identity software.