Novell faces setbacks in its open source strategy

My local newspaper, the San Francisco Chronicle, has a unique system for rating movies. Next to each review is a different version of the paper’s trademarkLittle Man icon. For a surefire hit, he’s leaping to his feet in uproarious applause. A lousy film has him slumped over and snoring. And for a real bomb, the only thing shown is an empty chair.

So who says enterprise IT can’t be that kind of fun? Let’s try a test. If I adopted the Chronicle’s system as my own, how would I rate Novell?

When I profiled the company in July 2004, I was cautiously optimistic. Novell had de-emphasized its legacy NetWare OS, had bought Suse and Ximian, had ported its core proprietary software to Linux, and had begun reinventing itself as a major player in the open source arena. Unfortunately, more than a year into the effort there’s little that inspires me to a standing ovation.

Of course, it doesn’t help when the company’s own investors are threatening to pull the empty-chair routine. In August, Novell reported a 5 percent drop in third-quarter revenue from last year and a whopping 91 percent drop in profits, and not everyone is convinced the current management team will be able to reverse the trend. Included in a Novell SEC filing in September were scorching letters from Blum Capital Partners that urged broad changes and criticized Novell’s senior management for its lack of vision and sense of urgency.

“Our conviction is firm in the future promise of the company,” one letter stated. “The question is whether the current management and board will execute.” (Coincidentally, my article last year concluded on an almost identical note.)

And Blum wasn’t alone. Also in September, Credit Suisse First Boston analyst Jason Maynard lambasted Novell for its “stagnant stock price and frustration within the shareholder base.”

Initially, Novell CEO Jack Messman rebuffed these complaints, insisting he had the situation well in hand. But as the weeks rolled on, he quietly began implementing many of the suggested changes.

His most dramatic move was to create some empty chairs of his own. Novell announced in early November that it would eliminate more than 10 percent of its workforce — roughly 600 jobs — and that it would divest itself of its 400-employee Celerant consulting division.

Despite the layoffs, however, Novell’s message to its shareholders and customers remains optimistic. In particular — and in keeping with the Blum letter’s suggestions — the server software vendor plans to redouble its efforts around Linux and open source. Too bad, then, that there’s one more empty chair at Novell these days.

Two weeks ago, Suse Linux co-founder Hubert Mantel announced his resignation on a Suse mailing list, saying, “This is no longer the company I founded 13 years ago.” His departure leaves a void that many in the Suse community believe will be hard to fill. Management turnover is common following corporate acquisitions, but Mantel had played a key technical role in packaging the Suse distribution.

So what will the final cut look like in this ongoing movie they’re calling the new Novell? Will it be a Novell that acquired some really interesting software or an open source company that acquired some really bad executive management? The Little Man’s chair isn’t empty yet, but if he isn’t snoring then he’s definitely looking at his watch.

Personally, I haven’t given up on Novell yet. But its trials certainly aren’t over. I have some ideas of what might come next, but I’ll save those for next week.