Novell to Drop 2 Lines; Bidding War Opens for Learning Co. : Computers: Actions are indicative of the PC software market’s shift away from business and toward the home.
The massive realignment now under way in the computer software industry picked up speed Monday as Novell Inc. announced it would shed two major product lines and fast-growing consumer software vendor SoftKey International initiated a bidding war for Learning Co.
Taken together, the two deals demonstrate the extent to which the action in personal computer software has shifted away from traditional business software packages--such as spreadsheets and word processors--and toward educational and entertainment programs aimed at the home market. They also show the challenges faced by anyone trying to compete with industry leader Microsoft Corp.
In announcing that it will sell most of its WordPerfect product line as well as the Quattro Pro spreadsheet program, Novell threw in the towel on its longstanding determination to compete with Microsoft across the board. Novell, the leader in PC networking, had acquired 17-year-old WordPerfect for $855 million and Quattro Pro for $145 million only last year in one of the final strategic gambits of former Chairman Ray Noorda.
Novell said it is talking to four suitors and hopes to complete a sale by January. Industry analysts--who cited International Business Machines Corp. and Oracle Corp. as the most likely buyers--believe it will fetch no more than $500 million.
SoftKey, based in Toronto, on Monday threw a wrench in Learning Co.’s plans to merge with Broderbund Software by launching a hostile offer valued at $606 million. SoftKey also announced it had agreed to buy Minnesota Educational Computing Corp. for $370 million.
Learning Co., based in Fremont, Calif., is a leader in educational software with such best-selling products as the Reader Rabbit series. It announced in July that it would merge with Broderbund in a deal currently worth about $424 million.
Broderbund, of Novato, Calif., publishes popular consumer and educational software packages including “Myst” and “Where in the World is Carmen Sandiego?”
Broderbund Chairman Doug Carlston said in a statement Monday, “We continue to be excited about the strategic benefits of the proposed merger between Broderbund and Learning Co.” The company did not say whether it would raise its offer or how else it might counter SoftKey.
In trading on the Nasdaq market Monday, Broderbund shares rose $1.25 to $69.50, Learning Co. jumped $4.875 to $60.375, and SoftKey plunged $6 to $32.125.
SoftKey, Learning Co. and Broderbund are all in the business of selling both educational software and a new breed of programs often referred to as edutainment: multimedia encyclopedias, games on CD-ROMs and sound-and-picture-rich software that allows children to explore.
With more and more consumers buying PCs for their homes, edutainment is among the hottest areas in the software industry. Whoever wins the bidding war for Learning Co. will face the delicate task of making the marriage work: The most valuable assets of any software company are its creative talents, who could decide to leave. Broderbund, which has a product line similar to Learning Co.’s, would appear a logical partner.
But SoftKey has a history of successful acquisitions and a strong presence in retail stores: It is one of the few companies to actually rent space in the stores so that it can better manage distribution.
“Because they own the shelves, they don’t have to wait for the retailer to tell them how a product is doing,” said Jeffrey Tarter, editor of Softletter, an industry newsletter based in Cambridge, Mass.
Novell and WordPerfect, for their part, are both in the most mature segment of the software business. Novell makes Netware, the leading software for connecting PCs into work groups, while WordPerfect makes what was long the most popular word-processing software.
But both companies have seen their fortunes sag as Microsoft has leveraged its position as the leading supplier of operating systems software--which controls the basic workings of a PC--to take a dominant position in applications such as word processing.
“It’s been very difficult,” said Joseph A. Marengi, executive vice president for worldwide sales at Novell. “Any time you do a big acquisition, it causes the company to focus inward. I’ve been to headquarters for meetings 20 times since January. I’m a sales guy. I should be out in the field.”
Novell has yet to ship an office productivity package for Windows 95, the Microsoft operating system introduced in August, a slip-up Marengi blames on distractions created by the merger. WordPerfect has a 9% share of the market for “suites,” software that combines the most-used office productivity applications such as word processing and spreadsheets. Microsoft has an 85% share of the suites market.
* COMPUTER PIRACY: A Chinese firm is found guilty in a software copyright case. D2
