Novell pins hopes on Linux

The company's big vision now is technology's Holy Grail, a unified electronic world that connects servers, laptops, desktops, cell phones, personal digital assistants and other gadgets no matter what operating system they use. It's an idea even Microsoft considers inevitable.

Novell will keep selling its NetWare networking software, but the company now will build applications that work across all platforms. Novell is starting by crafting Linux versions of its menu of GroupWise e-mail, identity management and other business programs.

Combining its network talents and desktop ambitions is a smart move, said analyst Drake Johnstone of investment bank Davenport & Co. He said Novell will be able to show its many government and business customers how Linux works on computers powered by Windows or NetWare, making a switch easy.

But Standard and Poor's analyst Jonathan Rudy can't see what Novell is doing to stand out among other major firms offering Linux products.

"Other than a broad-based (information-technology) recovery, I don't know what will get them going," Rudy said.

Novell is debt-free and sitting on $739 million in cash and short-term investments. It estimates it will take 18 months before the new strategy pays off — something that hasn't happened since Novell struck gold with NetWare in the 1980s.

Noorda, the Novell founder whom Microsoft Chairman Bill Gates once called the "grumpy grandfather" of technology, has been bitter over Novell's failure to check Microsoft, said Ralph Yarro, an early Novell hire and chief executive of Canopy Group Inc., which Noorda founded after leaving Novell.

Noorda's successors at Novell also have taken too long to jump on the Linux bandwagon, Yarro said.

"They didn't want anything to do with Linux," Yarro said. "They were afraid of taking on Microsoft."