The Linux factor

A decade ago, then-CEO Ray Noorda decided it would be neat to turn Novell into a carbon copy of Microsoft.

As far as brainstorms go, this one rates right up there with the charge of the Light Brigade: It produced a lot of headlines but ended up badly for all those concerned.

Novell had a nice gig selling network operating systems. But Noorda, who could have used personal instruction from Michael Corleone, confused business with the personal and became obsessed with taking down detested rival Bill Gates.

So he decided that Novell would reinvent itself, offering a constellation of programs and services to surround its core operating system. In relatively short order Novell paid a bundle of money to acquire Unix Systems Labs and a suite of application software.

The move looked great on paper but was an awful mess in reality. Customers bolted as products fell behind schedule, the new organization lapsed in disarray, and management wondered cluelessly how to make things right. Not only did Microsoft extend its lead in office applications, but Windows NT also caught up and surpassed Novell's NetWare.

The end was predictable: Noorda was sent packing, and management rid itself of all his handicraft--at fire sale prices, to boot. Novell never recovered from its stumble, and the pink slips multiplied as losses mounted. Bob Frankenberg, Joe Marengi and Eric Schmidt all took turns trying to revive the company, but it was largely viewed as another piece of roadkill crushed by Microsoft.

But current CEO Jack Messman has come up with an unconventional strategy that can be summed up in one word: Linux.

Novell already had ties to the open-source technology, having made tools to manage Linux servers, and last year it bought SilverStream to smooth the way its software worked with Java applications. Now, with its two most recent acquisitions--Ximian and SuSE Linux--Novell has completed the reinvention. Ximian's software is designed to foster the use of Linux desktops, while SuSE is the No. 2 seller of the server version of Linux used by corporations.

Novell was largely viewed as another piece of roadkill crushed by Microsoft.

However this all works out, the balance of power in software is destined for change. Red Hat, the No. 1 provider of Linux, will be more immediately affected by these changes, but Microsoft also must wonder what a reconstituted Novell is going to mean to its business.

Senior management at Microsoft has softened its stand on open-source software in general: The company no longer dismisses it as the invention of godless anarchists bent upon taking down the capitalist system. Instead, the toned-down message stresses the advantage of using a homegrown technology developed from the kernel on up.

That leaves room for an alternative camp to grow around Novell in the software landscape. Backed by Big Blue, which has its own selfish reasons for promoting the wider adoption of Linux, Novell receives $50 million--a 2 percent stake in the company--as part of the SuSE deal, as well as the support from the technology powerhouse.

Watching from the sidelines, corporate customers aren't likely to rush back to Novell out of Linux fever alone. But unless Novell screws up again, the company will be entering an interesting new chapter. At the very least, for the first time in what seems like an eternity, Novell is cool again.