The story
Founded by Dennis Fairclough in 1980, in Provo.1
Origins as a hardware company
The company began as Novell Data Systems Inc. (NDSI), a computer systems company located in Orem, Utah that intended to manufacture and market small business computers, computer terminals, and other peripherals. It was co-founded by George Canova and Jack Davis, two experienced computer industry executives. While some later sources place the creation of Novell Data Systems in 1979, more contemporaneous sources indicate August 1980. Canova became president of the new company and Davis was in charge of sales and marketing. The suggestion for the company's name came from Canova's wife, who thought it meant "new" in French (in fact the French word is either the masculine nouveau or the feminine nouvelle). Dennis Fairclough was not a founder of Novell Data Systems, but he did work with the company from its early days and later worked for Novell
A funding proposal was brought to Pete Musser, chairman of the board of Safeguard Scientifics, Inc., a Pennsylvania-based, technology-focused venture capital firm that was an offshoot of the older Safeguard Business Systems. Safeguard Scientifics believed a new computer systems company could help the Business Systems company automate their accounting systems. Accordingly, Safeguard Scientifics provided over $2 million in seed funding, and they became the majority owner of Novell Data Systems. Canova also owned a significant portion of the new company.
Novell Data Systems set up offices in a former carpet warehouse located in an industrial park near Geneva Steel. By November 1980, they advertising to hire staff.
At first the company began to grow rapidly. By mid-1981 the company was selling two products, the Nexus Series microcomputer and the Image 800 dot matrix printer. Orders began shipping during the second half of 1981. The computer product was based on the Zilog Z80 microprocessor and the CP/M operating system.
The company subsequently did not do well. The microcomputer produced by the company was late to an increasingly crowded market, and had limited popularity relative to competitors. According to one paraphrase of a Value Line report on Novell Data Systems as a whole during this period, their "revenue was minimal, but expenses were tremendous." Davis was fired from Novell Data Systems in November 1981.
In order to compete on systems sales, Novell Data Systems planned a program to link more than one microcomputer to operate together. A group of BYU students known as the SuperSet Software team began consulting for Novell in 1981: Drew Major, Dale Neibaur, and Kyle Powell. They developed a multiplayer video game, Snipes.
During the first calendar quarter of 1982, heavy costs continued to be incurred at Novell Data Systems, which resulted in management shuffles, organizational consolidations, and a significant layoff. Canova was fired and Jack Messman, representing Safeguard Scientifics, was named president. Seeing Snipes being played on three different types of personal computers persuaded Messman that SuperSet's networking technology was valuable. The poor performance of Novell Data Systems resulted in losses being announced in April 1982 for the publicly-held Safeguard Scientifics and put pressure on that company's stock price. However, by this point the computer-linking work that the SuperSet group had produced was drawing considerable interest and Novell Data Systems was describing themselves as a company that made not just stand-alone microcomputers but also products for local area networking (LAN). The dual emphasis on hardware and software products continued for several months. but continued to have troubled results, and in July 1982 another round of layoffs took place which resulted in the employee count being reduced from 50 people to 30.
At that time Safeguard reported that it would be writing down $3.4 million in losses due to Novell Data Systems' switch from being a hardware company to a software company. Throughout 1982 there were further management shuffles with other people being named president of the company. Major, Neibaur, and Powell continued to support Novell through their SuperSet Software group. As Major later said, "It was great that our hardware was so lousy because that gave us the idea that hardware wasn't really where the value was."
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Two other important NDSI employees were strategist Craig Burton and communications specialist Judith Clarke. Despite its struggles, Novell Data Systems had a presence at the COMDEX show in Las Vegas in November 1982. Engineer Ray Noorda saw the presentation and become interested in the company's potential.
A new company
On January 25, 1983, the company was incorporated under the shortened name of Novell, Inc. In April 1983, the appointment of Noorda as president and CEO of Novell, Inc. was publicly announced. Noorda was a veteran executive of General Electric and the past CEO of several other companies and had garnered a reputation as a turn-around expert. Messman was chairman of the board and continued to represent the interests of Safeguard Scientifics, which was still majority owner in the new Novell.
The new Novell started with around 15 employees. Noorda emphasized that the file server product acquired from Novell Data Systems would be the heart of what the new Novell would be doing. Later that same year, the company introduced its most significant product, the multi-platform network operating system (NOS), Novell NetWare.
Funding for the new company was still an issue, and Musser contacted two Safeguard investors and brokers, Barry Rubenstein and Fred Dolan, who were with the Cleveland brokerage house Prescott, Ball and Turben, in these efforts. Rubenstein and Dolan eventually came up with the idea of a rights offering to Safeguard shareholders. Accordingly, in January 1985, Safeguard Scientifics made an initial offering of shares in Novell, Inc. to its own shareholders, at $2.50 a share. The sale brought Safeguard more than $5 million in cash, and Safeguard's ownership in Novell went from 51 percent down to 24 percent. Novell, Inc. began trading as an over-the-counter stock.
NetWare
The first Novell product was a proprietary hardware server based on the Motorola 68000 processor and using a star topology. This, with the network operating system (NOS) on it, was known as Novell S-Net, or ShareNet, and it achieved some visibility; by April 1983, advertisements were seen in trade publications for third-party software products which stated they were compatible with Novell ShareNet.
The company realized that making a proprietary solution in this sense was disadvantageous and looked instead to the IBM PC as an alternative platform. Now called NetWare, the network operating system was ported to run on an IBM PC XT with an Intel 8086 processor and supported centralized, multitasking file and print services. By March 1984, Novell was putting out announcements about third-party products that worked with Novell NetWare.
NetWare came on the computing scene just as the IBM PC was emerging as a market force and applications such as the VisiCalc spreadsheet for the Apple II were showing what microcomputers could do for businesses. There was an immediate demand for local area networking that could make files and printers available across many PCs. In addition, the advent of the PC caused organizational changes within companies and enterprises and allowed Novell to find entryways into individual departments or regional facilities rather than having to convince upper management of the value of networking. Thus, Novell's timing was spot on. As the New York Times subsequently wrote, "Novell, in one of those instances of serendipity and visionary thinking that are the stuff of personal computer legend, found itself in the right place at the right time."
Partly in consequence of its design of running at kernel level ring 0 without regard for separate or protected address spaces, and thus not having the properties of a general-purpose operating system, NetWare was known for being very fast in operation. This trend continued into 1987 with the Advanced NetWare/286 release, which was well received within the industry. NetWare also excelled with respect to computer security considerations, supporting user- and group-based roles and volume- and file-level access restrictions, thus making it attractive to systems administrators.
Novell based its network protocol on Xerox Network Systems (XNS), and created its own standards which it named Internetwork Packet Exchange (IPX) and Sequenced Packet Exchange (SPX). These protocols were based on a client–server model. File and print services ran on the NetWare Core Protocol (NCP) over IPX, as did Routing Information Protocol (RIP) and Service Advertising Protocol (SAP).
Starting in 1987, Novell began selling its own Ethernet-based network adapter cards. These included the 8-bit NE1000, and then in 1988, the 16-bit NE2000. They priced them lower than cards from competitors such as 3Com, whose card Novell had previously been distributing. By 1989, Novell's cards were being sold at a rate of 20,000 per month, aggressively expanding Novell's market presence. At that point, Novell transferred the NE1000/NE2000 business to Anthem Electronics, the firm that had actually been making them, but the cards remained branded as Novell products.
As author James Causey would later write, "NetWare deserves the lion's share of the credit for elevating PC-based local area networks from being cute toys to providing powerful, reliable, and serious network services. NetWare was the first Intel-based network operating system to provide a serious alternative to mainframe-based server networks, providing critical reliability and security features needed in the modern enterprise."
Novell acquired Kanwal Rekhi's company Excelan in 1989; Excelan manufactured smart Ethernet cards and commercialized the Internet protocol TCP/IP, solidifying Novell's presence in these areas. The acquisition combined Novell's $281 million in annual revenue with Excelan's $66 million. Rekhi became a high-ranking Novell executive, and played an influential strategic and managerial role with the company over the next several years. Excelan was based in San Jose, California, and they, along with a couple of prior Novell acquisitions, formed the basis for Novell's presence in Silicon Valley going forward.
NetWare 386
By 1989 NetWare had an estimated 40-60% of the NOS market. That year Novell released NetWare 386, also known as NetWare 3.0, which gave NetWare more modern architectural qualities, in conjunction with new capabilities in the Intel 386 processor. NetWare maintained its character as a dedicated network operating system rather than containing network capabilities as part of a general-purpose operating system. The NetWare kernel's ability to dynamically load and unload drivers was greatly appreciated by users and the ability to write NetWare Loadable Modules (NLMs) in the C programming language was also a significant benefit. NetWare 3 supported interactions with Apple's Macintosh computers as well as with Unix-based workstations, thus enabling NetWare to expand upon file and print sharing towards accessing business-critical data within companies. This allowed NetWare to work with database products from companies such as Oracle Corporation and Sybase.
An analyst for Dataquest said that NetWare 386 "is truly a blow-away-the-competition type product". Overall, NetWare 3 was the most significant rewrite that the product would ever get, and proved very successful. By 1990, Novell had an almost monopolistic position in NOS for any business requiring a network.
There were competitor companies in the same space, such as Corvus Systems, Banyan Systems, and LANtastic, but none of them made much of a dent in Novell's business. Microsoft tried on two early occasions to take on Novell in networking, first with the MS-NET product and then with LAN Manager, but both failed badly. IBM similarly had limited success in this area. From 1988 to 1992, Novell's revenues rose almost three-fold, to $933 million a year, with about half of Novell's sales coming from North America and half from overseas. Earnings also rose to $249 million a year. From 1986 to 1991, Novell's stock price climbed twelve-fold.
With this market leadership, Novell began to acquire and build services on top of its NetWare operating platform. These services extended NetWare's capabilities with such products as NetWare for SAA and Novell multi-protocol router.
However, Novell was also diversifying, moving away from its smaller users to target large corporations and wide area networks. A marketing and development alliance with IBM announced in 1991 was part of this initiative. The company did later attempt to refocus with NetWare for Small Business. It reduced investment in research and was slow to improve the product administration tools, although it was helped by the fact its products typically needed little "tweaking" – they just ran.
Corporate ethos and "coopetition"
By early 1985, Novell was rapidly expanding, but many people were still unaware of either it or the role that local area networks could play, and consequently Noorda referred to Novell as "the most misunderstood company in the world." Nonetheless, in 1986 The Salt Lake Tribune was hailing Novell as another Utah success story in technology, likely to follow in the footsteps of Evans & Sutherland and Iomega. Novell was quickly outgrowing its original site in Orem, with some employees forced to work in trailers. A new, much larger site for the company was found in nearby Provo, Utah and construction was begun; by late 1986, employees were moving into the first building there while work on a second building was already underway. Eventually between 1986 and 1993 six buildings would be constructed for Novell's use there.
Under Noorda, Novell embraced the notion of "coopetition", or cooperative competition. The central idea was that whatever was good for networking in general would be good for Novell and took the form of encouraging the growth of an ecosystem composed of hundreds of suppliers of hardware and software networking products, even if some of those suppliers had products that competed with Novell's. 3Com, who had been an early competitor of Novell's, sold more instances of their Ethernet networking cards for use in conjunction with NetWare than they did for use with their own 3+Share network operating systems, and a similar situation existed for IBM and their Token Ring cards. It was due to this kind of industry vision that Noorda would become known as the "Father of Network Computing".
From the first years of the new Novell's success, Noorda was credited in the press with forging that path. The company reflected aspects of Noorda's personal background, such as his Mormon religion, which brought about what was termed "the Mormon work ethic" at Novell. As one account later put it, Novell was "reputedly staffed with lots of hard-selling but soft-drinking Mormons." Noorda himself was famous for his frugal ways and for working from a plain, small office.
In 1989 senior executives Craig Burton and Judith Clarke, whom many credited for much of Novell's past success, left Novell. Burton had been seen as Noorda's most likely successor while Judith Clarke had been instrumental in marketing and positioning Novell.
In April 1990, Novell and Lotus Development Corporation announced merger of equals based on a $1.5-billion stock swap that would have been the largest deal in the software industry to that time. But it collapsed the following month: when Lotus head Jim Manzi refused to give Novell an equal number of seats on the new board, Noorda pulled out shortly before the deal would have been completed.
At its high point around 1993, NetWare had a roughly two-thirds share of the market for network operating systems; one analysis put the figure at 63 percent. There were over half a million NetWare-based networks installed worldwide and some 55 million NetWare users on those networks. And networking itself was the fastest-growing segment of the computer market, increasing by 30 percent a year and reaching a $10 billion figure by 1993. Novell was the second largest maker of software for personal computers, trailing only Microsoft. Novell's employee base, which had been around 15 when Noorda joined, had risen to 4,335 by the end of 1993. Besides Utah, Novell continued to grow in San Jose, where many of the sales, marketing, product management, and executive functions were located.
Sales and channel practices
Equally important as technological factors to NetWare's growth was that Novell did not try to hire a large sales force to do direct sales of the product, but instead sold it through a broad channel of some 13,000 value-added resellers. Such resellers provided network education, installation, and subsequent maintenance, and included CompUSA and Egghead Software for very small businesses all the way up to sophisticated systems integrators like Andersen Consulting and Electronic Data Systems for enterprise-level projects. In this way Novell constructed a local area network franchise in literal terms, as Novell Authorized Education Centers were set up on a franchising basis. Credentialization programs were in place, such that becoming a Certified NetWare Engineer was an important step, one that could be furthered with levels such as Master Certified NetWare Engineer. As one industry analyst said, "They've done a wonderful job of farming distribution out. They train people who go out and train other people, and every time somebody gets trained, they get another Netware bigot, and make another dollar. They are getting paid to have people go out and be evangelists." The partnering approach also worked well in overseas markets, such as in Japan where Novell set up a subsidiary that major Japanese electronics firms invested in, or in South America and Eastern Europe where Novell set up authorized distributors.
Under Ray Noorda's leadership, Novell provided upgrades to resellers and customers in the same packaging as a newly purchased copy of NetWare, but at one third the cost, which created a gray market that allowed NetWare resellers to sell upgrades as newly purchased NetWare versions at full price periodically, which Novell intentionally did not track. Noorda commented to several analysts that he devised this strategy to allow front line resellers to "punch through" the distributors like Tech Data and Ingram and acquire NetWare versions at a discounted rate, as Novell "looked the other way"; this helped fund the salaries of Novell Field Support Technicians, who for the most part were employees who worked for the front line resellers as Novell CNE (Certified NetWare Engineers).
Noorda commented that this strategy was one he learned as an executive at General Electric when competing against imported home appliances: allow the resellers to "make more money off your product than someone else's".
Motivations
Noorda was nearing 70 years of age by the early 1990s, much older than peers in the computer industry. Furthermore, he was known for alienating high-level executives who might someday be in position to run the company. Stock market analysts were expressing concern that Noorda, whose personality was the basis for much of the company's culture, had no succession plan. At the same time, Novell faced a looming challenge from Microsoft's upcoming Windows NT operating system, which, after a huge investment of resources from Microsoft, featured bundled networking and more advanced OS capabilities and looked to be that company's first offering that could seriously challenge Novell's local area networking franchise.
From Wikipedia’s article on Novell, shared under CC BY-SA 4.0.4