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Frankenberg to leave Novell

Robert Frankenberg resigns as CEO of struggling network software maker Novell.

The two-year reign of Robert Frankenberg at the top of Novell was spent refocusing the company back on its strengths in the LAN market just as a new technology wave--the Internet--shattered previous assumptions about networking.

The Internet explosion left Novell (NOVL) in a reactive position, just as it was getting its house back in order after two ill-fated acquisitions by previous Novell CEO and founder Ray Noorda. Ironically, as the company's core competencies--network-based computing and directory services--were getting the internal attention they deserved, a new network paradigm was taking hold, based on an easy-to-use interface.

In recognition of these realities, Novell's board of directors announced the resignation of Frankenberg today, surprising some observers and leaving the company with no heir apparent waiting in the wings.

John A. Young, a member of Novell's board and past president and CEO of Hewlett-Packard, has been named chairman of the board. Joseph Marengi, a Novell executive vice president, has been named president. Frankenberg served as president, CEO and chairman of the board.

The board announced it has started a search to find Frankenberg's replacement but his eventual successor will take over a company that will have to get used to lower expectations in the new Internet era, according to industry observers.

Young said the Novell board and Frankenberg agreed that it was the "right time" for Frankenberg to step down. Young called Frankenberg's tenure "a difficult time" for Novell as it jettisoned products and focused on its company strengths. Young would not address rumors that a Frankenberg family illness was one reason for his departure.

"It appears to be another period of turmoil for the company, but it truly is not," explained Marengi, referring to the executive team that remains intact.

Marengi and Steve Markman, executive vice president of Novell's products group, both said what have been lax Novell marketing efforts will change under the new regime, an indication that the Novell braintrust may not have been pleased with Frankenberg's efforts in that area.

"Whoever comes in has significant obstacles," said Neil MacDonald, an analyst at the Gartner Group research firm. "Novell is not going to be this huge $2 billion company over the course of the next four years."

Novell has had a series of disappointing financial quarters, the latest coming last week with the announcement of a 30 percent drop in revenue and a nearly 50 percent drop in profits in the company's third quarter compared with 1995.

MacDonald said Novell needs to change course, from offering an operating system and related software for LANs (local area networks) to focusing on providing network services to customers. "There's going to be a role for Novell [in the future], but it's going to be a reduced role," MacDonald said.

Novell's NetWare operating system was built into the dominant operating system for LANs under Noorda. With NetWare king of the LAN, Novell was once one of the few companies to wield real political power in the industry. As Microsoft moved from the desktop to the network and encroached on Novell's territory with Windows NT Server, Noorda assumed that the technological strengths of the company and its long-held relationships with customers would carry the day. He decided to battle the Redmond, Washington-based giant on all fronts, not just in the networking operating system arena, but on the desktop with Unix and the acquired WordPerfect suite of applications.

Under Noorda, Novell bought WordPerfect for $1.4 billion in 1994 so the company could compete with Microsoft for dominance in personal productivity applications. After a brief period of speculation that WordPerfect would gain headway against Microsoft's Office, WordPerfect was sold to Corel in January of this year for $132 million. The deal was a financial loss for Novell and also diminished Novell's prestige in the marketplace.

Noorda also spearheaded an ill-fated excursion into the Unix operating system territory, buying UnixWare in one of several abortive efforts to unite all the flavors of Unix under one banner. That enterprise-level operating system was sold to the Santa Cruz Operation late last year after Novell put little research and development into the product.

Frankenberg joined Novell in April of 1994, arriving as a much-praised turnaround artist and hoped-for savior from Hewlett-Packard. But Frankenberg could not reestablish Novell's NetWare network operating system as the dominant file and print server software for LANs, nor did he anticipate the Internet revolution that would make that effort increasingly less relevant.

A series of high-level executive departures and restructuring also hurt Frankenberg's efforts. Once Novell did start paying attention to the Internet, its attempts to repackage its technologies for the new environment may have side tracked the company before it was ready to take on new challenges, according to industry observers.

Last week the company announced IntranetWare, a bundling of products for internal networks. During the announcement, a subdued Frankenberg left the stage. Moreover, the product itself suggested that the company has not reacted to the short cycles for Internet product introductions, according to some, since it is essentially a bundling of existing technology.

"I think [the announcement] showed a lack of vision from the top down," said MacDonald.

Paul Zagaeski, an analyst with the Giga Information Group consultancy, said Frankenberg was successful in making Novell personnel realize that having good technology is not enough. Frankenberg did not, however, replace that view with a new vision for Novell, he added.

"I think there was certainly a sense of frustration in trying to get the company on the course he wanted it to be on," added Dave Marshak, vice president of the Patricia Seybold Group consultancy.

"There is an argument to be made that his task was impossible," Marshak said.

So where does Novell go from here?

Frankenberg's departure has certainly blown the wind out of Novell's sails just as the company was set to announce a new version of GroupWise, its messaging product. An upgrade to NetWare, dubbed Green River, is also in the pipeline but the company's marketing and PR department will first have to recoup from today's announcement before it can refocus attention on the company's technology.

Novell still has a distinct advantage over Microsoft with its Novell Directory Services (NDS) and has started to package the technology as a feature set separate from NetWare. But Internet technology may still eventually spell doom for NetWare as network users increasingly use browsers and related applications to share files, instead of an optimized operating system.

Gartner's MacDonald said Frankenberg was a good "numbers" man for Novell but did not offer any new ideas. His successor will face daunting challenges at all levels, but articulating a vision for Novell may be the most important one of all.

Still, as one famous baseball player once said, it ain't over till it's over.

"I wouldn't tell anyone this is the beginning of the end," MacDonald said.

Related stories:
Novell battles for intranets
Novell stakes for success