March 18, 1997 11:00 AM ET
Novell taps Schmidt as CEO
By Charles Cooper

 
Eric Schmidt
Eric Schmidt
Rest assured that the audience will listen very closely to the keynote speaker at Novell Inc.'s annual user conference, which starts next week.

Earlier today, the network software developer--with its stock hovering near a 52-week low--appointed Sun Microsystems Inc.'s chief technology officer, Eric Schmidt, as its new chairman and CEO.

Schmidt, a highly regarded executive in the industry, comes aboard at a critical juncture in Novell's history.

In recent weeks, Novell shareholders have staged an online revolt, slamming management for its inability to boost the stock price. They were not alone. In February, the $108 billion California Public Employees' Retirement System named Novell to its list of the 10 worst financial underperformers in Corporate America.

"He's not a [Scott] McNealy, [Jim] Barksdale, [Larry] Ellison or Ray Lane, but he is very, very competent and, from what I understand, quite hard-nosed," said Joe Antol, a private investor who helped lead the online shareholders' revolt.

Schmidt, who joined Sun in 1983, is credited with being a first-class technologist. Those skills will be tested as he takes over a company that critics have long taken to task for lurches from one strategy to the next and for being late. Most recently, they faulted Novell for taking so long to meld its product lines with the Internet. Seven months ago, Novell finally released IntranetWare, its first truly strategic venture into the Internet space.

But analysts attribute Novell's slide to fatal decisions made by former CEO Ray Noorda--some described it as an obsession--to challenge Microsoft Corp.'s Bill Gates. Under Noorda, Novell went on a disastrous buying spree, its biggest acquisitions being WordPerfect Corp. and AT&T; Corp.'s Unix Systems Labs.

When Robert Frankenberg took over the reins from Noorda in 1994, he proceeded to deconstruct the handicraft of his predecessor, selling off most of Novell's acquisitions. In January 1995, Novell sold WordPerfect to Corel Corp. for stock valued at $132 million.

But Frankenberg failed to steer the company back on course. After a series of weak quarters, he resigned in August 1996. The top job has been open until today.

During its most recent quarter, ended Jan. 31, Novell earned $51 million on $375 million in sales. The year earlier, the company posted a $64 million profit on revenues of $438 million. The year-earlier results included $61 million of sales associated with product lines Novell either sold off or discontinued, but it was still a sharp decline. The company's shares closed yesterday at 8 3/4, down from their 52-week high of 15 5/8.

Schmidt officially settles into his new role on April 7. He was not immediately available for comment, but in a prepared statement he described the job as "an opportunity of a lifetime."

John Young, who has served as Novell's chairman, will become the vice-chairman of the company.

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