Novell revving up

At the height of its popularity in the early 1990s, Novell's NetWare software controlled 70 percent of the market in network server operating systems — software that enables desktop computers to share files and communicate over a network. But for nearly a decade, the company has been losing market share to Windows NT, Unix and other programs at a rate of nearly 10 percent a year.

By 2002, NetWare's share of the market had shrunk to 7 percent. For the first nine months of 2003, the Provo-based company reported a loss of $53 million.

"People remember Novell as a company they used to buy things from in the 1980s," said Dan Kusnetzky, vice president for systems software research at IDC, a computing market research company.

But Novell made an effort at a recovery when it announced this month a $210 million deal to acquire Germany's SuSE Linux, the world's second-largest seller of the Linux operating system. In addition, IBM, which resells Linux from both SuSE (pronounced SOO-za) and Red Hat, the largest vendor of Linux, said it would invest $50 million in Novell.

With those deals, Novell is battling Microsoft on its home turf: the PC operating system.

"All those customers who thought Novell was gone can see that we're here, we're back," said Jack L. Messman, the chief executive and president of Novell and the former head of Cambridge Technology Partners, a consulting firm that Novell acquired two years ago.

The fight will clearly be different this time. Already, Microsoft has felt the sting of Linux, known by many through its Tux penguin logo and which many corporations see as a reasonable and less-expensive alternative to the Windows operating system. In only a few years, the program has gone from being a relatively obscure and largely unsupported program for technology enthusiasts to the fastest-growing operating system on the market, and it is acquiring some of Microsoft's traditional corporate customers.

Messman insisted that Novell's goal in acquiring SuSE is to develop the Linux market, not to win over Microsoft customers. But the distinction hardly matters. For Novell, the program gives NetWare customers more options.

"Now that we've got the migration path lined up, we are going to have a much broader following," Messman said.

Analysts say Novell's acquisition of SuSE, a company with $40 million in revenue and 400 employees, could help Linux win customers in the United States who might be wary of buying large volumes of software from a relatively unknown company with overseas headquarters. SuSE, while the top seller of Linux in Europe, stands to benefit from Novell's distribution network in the United States, where the Linux leader, Red Hat, is better known.

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