Shealah Craighead, Associated Press
Jack Messman, CEO of Novell, says the new strategy will transform the company.

PROVO — Through the 1980s, Novell Inc. was a software powerhouse, dominating the market for products that manage corporate networks and let individual computers share files and printers.

But then Microsoft Corp. came along and spoiled Novell's party in the mid-90s by releasing the Windows NT operating system, competing with Novell's NetWare product. Novell didn't help matters in making more than a few strategic mistakes.

Now, Novell is looking to Microsoft's biggest enemy — the open-source software movement — for renewal and profits. In its latest strategic shift, Novell is focused on developing software for the Linux operating system.

The company's long-term survival could depend on whether the strategy succeeds, and some analysts are skeptical.

Novell joins a crowd of companies that see potential payouts from building on free, community-developed software. Its executives hope to get a leg up on rivals with its August purchase of Linux developer Ximian Inc., a promising startup, for an estimated $30 million.

With Ximian, Novell gets a set of products that simplify Linux administration and expand its usefulness on desktop computers. It also acquires two of the Linux movement's programming luminaries, Nat Friedman and Miguel De Icaza.

And Novell will become steward of the Mono project, which is breaking down programming barriers between the Linux and Windows worlds.

"We think we have transformed Novell with a new strategy," chief executive Jack Messman said in a phone interview from Cambridge, Mass.

Messman is the product of previous efforts to bolster Novell. Messman helped create Novell and then left to head the Internet consultancy Cambridge Technology Partners. He came back when Novell bought the consultancy two years ago to diversify its Web-based products and services.

With 6,200 employees and major operations in the Boston area and Provo, Novell is losing money — $53 million from November through July alone — but living off the capital of its early earnings.

Its software used to run 70 percent of the world's computer servers. Microsoft, in part by offering cut-rate deals on its own technology, has whittled Novell's share in server operating systems to 17 percent.

Novell tried branching out in the early 1990s by buying the Unix operating system, the WordPerfect word processor and other products to compete with dominant Microsoft products. But those efforts failed, and founder Ray Noorda retired in 1994.

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."