Network Management Strategies for the CIO
We're delighted. The loss is only due to real estate and investment write-downs. We had an operating profit of $17 million and that includes swallowing $18 million in losses from the SilverStream acquisition [in June].
We increased our quarterly revenues from Q3 to Q4 substantially and our year-over-year bottom line revenue was up 8%. We have $636 million in cash.
How do the priorities change from here?
We're now extremely focused on the four categories (Nsure, Extend, Nterprise and Ngage). If people don't support that, we move them out. We're going to spend an enormous amount of money on a complete new positioning for Novell around these four new pillars. There'll be a worldwide advertising campaign.
This campaign is intended to address the positioning so that when you ask people next year they'll say, "Oh, yeah. They're the identity guys."
You said in March that you would spend much of 2002 reorganizing the company. Is that pretty much done?
The major functional areas of the organization have all been reorganized with new leadership. It's been a painful eight months and there's still churn in the sales force. We want to move from maintenance farming to a hunting environment where we compensate sales to find new customers. How does identity management relate to your entry into the application development
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market through the SilverStream acquisition? SilverStream provides a portal service and an integration tool that does all the transformation of a corporation's data into XML and then presents it in a business process workflow model.
You can sign on one time and access 15 different applications. We can set up roles so that each time you log in or a new application is brought up, it's provisioned instantly for the appropriate access.
That's a huge value proposition for large corporations. They spend millions on password resets alone. We automate the whole thing, soup to nuts.
Are you seeing any signs of improvement in the tech economy?
Secure identity management is a bright spot. We have reconfigured a lot of the company around that. The cities of Los Angeles, New York and Philadelphia as well as Lufthansa and Nationwide Insurance are [using our products for secure identity management]. They are living examples that we're doing something right. Microsoft says it plans to build an Active Directory that doesn't require Windows. How do you come back against that?
I don't pay attention. Remember that Active Directory is a fundamental part of the operating system. Even if they decide to take it out, it will take years. It wouldn't scale; it'll be a version 1 product and we're on version 8.
The only reason to use Active Directory is if you're all Windows. If you have any other platforms, then we're the natural choice.
What about the GroupWise e-mail platform? You're a distant number three in that market. Why stay in it?
We're not spending millions to become number two in the e-mail market, but we are continuing to add value to GroupWise because the [profit] margin is good, it's a good product and it's secure. And we're getting new customers because of the security benefits. One of the great things about GroupWise is that you can run thousands of GroupWise users on a single server. You can't do that with Exchange. Has Cambridge Technology Partners (CTP), which Novell acquired in July 2001, been a good fit? How are you positioning CTP so that you don't conflict with business partners like Deloitte and PriceWaterhouseCoopers?
For the first six to eight months after the acquisition, people couldn't figure it out. CTP was known for rapid application development and fixed price/fixed time solutions. That didn't necessarily go with NetWare. It wasn't until we focused the company around security identity management that we were able to parlay the expertise of the organization. So we now have global tiger teams around secure identity and application development.
PWC never thought of us as a competitor, just a boutique. We have a very close partnership with PWC, Deloitte and others.
You haven't talked much about NetWare except as a reliable source of income. Is there anything strategic about NetWare?
Yes, and we've re-branded that area as Nterprise. Rather that trying to push NetWare as an operating system to compete with NT or Linux, we're going to take the services and make them available on any operating system. A year from now, how should people measure your success?
If you were to ask a CIO what was their impression of Novell, and he or she said "identity management," I'd be happy. The second measure would be revenue growth of between 5 and 10%. Third is turning the corner on our consulting revenue with margins increasing from flat today. And we want to be one of the top five leaders in Web application development and security.
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Do people still ask about your viability?It comes up once in a while, usually because our competitors' salespeople raise it. But if we did nothing but sit here for 12 years, we'd still have cash and still be alive. We have a knack for building annuity businesses. Is that a sunset strategy?
It means the operating system isn't the issue; it's the services on top. We've seen NetWare revenue actually increase the last two quarters because people realize it doesn't go down, it works just fine and it would cost tens of millions of dollars to move.
We're porting the SilverStream application server to NetWare, so now all of the J2EE applications in the world run there. We still have a team that's enhancing NetWare. We came out with NetWare 6 about a year ago, and you'll see our next version of NetWare next June.
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