Novell Cast as Underdog in Fight With Microsoft : Software: Competition between the two is nothing new, but the proposed merger would change the dynamics.
Novell Inc.’s plan to buy WordPerfect Corp. sets up a dogfight with Microsoft Corp. that could leave all sides battered. The question is whether Novell will survive the struggle.
“Both companies have no illusions,” said Jeffrey Tarter, publisher of Softletter, a software trade publication in Watertown, Mass. “There’s going to be a winner and a loser or, like World War I, years of trench warfare where everybody gets beat up over a few yards of territory.”
Novell shares took a pounding in Nasdaq trading Wednesday. They closed down $1, at $19, after losing $3.75 on Tuesday.
Seeking to defuse Wall Street’s criticism of the deal, announced Monday, Novell Chairman Raymond J. Noorda on Wednesday called Microsoft “almost indomitable” and played down some analysts’ concerns that Novell would wage a full-bore attack that could prove to be suicidal.
“There’s no way to compete head on with Microsoft,” he said in a telephone interview, explaining that Microsoft’s product offerings are simply too broad.
Competition between these companies in various niches is nothing new, of course. But the proposed union changes the dynamics.
Where Novell has a shot at prevailing, Noorda said, is in products that link computers and allow users to share information. Corporations are rapidly moving to such systems from stand-alone desktop computing.
Just as Microsoft dominates the global industry overall, Novell, based in Provo, Utah, is the undisputed leader in this key networking sector. Microsoft’s current network offerings haven’t had much success; a new Microsoft networking product, code-named Cairo, is still in development and due on the market late next year.
“Novell will be first to the party in ‘groupware,’ ” said Therese Murphy, an analyst with the Smith Barney Shearson investment firm in San Francisco.
By buying WordPerfect, publisher of the No. 2 word processing program, and Borland International’s spreadsheet business (a companion deal announced Monday), Novell seeks to deliver a package of products that would tie in smoothly with the desktop computer networks that run on its Netware and Unixware network software.
These new “suites” would aim to steal business from Microsoft Office and other offerings that are increasingly popular with corporate buyers looking for bargains.
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The idea of selling products bundled together at a deep discount was Microsoft’s. With such schemes, the Redmond, Wash., company has continually changed the rules of the software game and has ascended to the top of the global heap.
Its approximately $4 billion in sales this year will represent nearly 40% of the market for personal computer software. (A combined Novell and WordPerfect would move into a distant second place, with sales equal to about half of Microsoft’s. Lotus Development would be No. 3.)
Led by its hard-driving chairman and founder, Bill Gates, Microsoft also has used price as a weapon, helping to render the industry’s formerly cushy profit margins a dim memory. And it develops computer operating systems that tend to squeeze out smaller players that don’t adhere.
Gates’ relentless tactics and winner-take-all attitude have prompted government investigations. They contrast sharply with Noorda’s and Novell’s culture of cooperating with rivals to build a market, something Noorda calls “coopetition.”
Noorda is on his way out, having announced that he will step down as Novell’s chief executive in June, when he turns 70. His successor will inherit the challenges of merging the companies and grappling with the Microsoft juggernaut.
Microsoft views the potential disarray as an advantage.
“These are new businesses for them, and mergers are hard,” said Pete Higgins, senior vice president of Microsoft’s applications business.
Rich Edwards, senior analyst with Robertson, Stephens & Co. in San Francisco, gives the Novell-WordPerfect team a slim chance of success against Microsoft, even if it does have a head start with its strength in networking.
“Microsoft has made it very clear they’re going to be brutally punishing to anyone trying to occupy the same space,” he said. “(Novell) is having a good time in the desktop sandbox, (but) it’s Microsoft’s sandbox.”
* AMBITIOUS QUEST: Microsoft’s Bill Gates aims to be the John D. Rockefeller of the information age. A1
How Suite It Is
“Suites”--bundled packages of office software including a word processor, spreadsheet and other applications--came into their own in 1993. Price was the initial attraction, but customers also like the compatibility, consistency and integration. Suites could eventually make stand-alone word processors and spreadsheets obsolete.
1993 SUITE SALES* (millions of dollars) Microsoft: $762 Lotus Development: 120 Borland/WordPerfect: 14 * preliminary
THE SPREADSHEET MARKET Lotus Development (1-2-3): 46.1% Microsoft (Excel): 31.8% Borland International: (Quattro Pro): 18.1% Computer Associates (SuperCalc): 2.3% WordPerfect (PlanPerfect): 0.9% Other: 0.8%
THE WORD PROCESSOR MARKET Microsoft (Microsoft Word): 42.8% WordPerfect (WordPerfect): 36.7% Lotus Development (Ami Pro): 9.5% WordStar International (WordStar): 3.6% Software Publishing (Professional Write): 2.7% Other: 4.7% * Latest figures available
Source: Dataquest
