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Novell CEO Frankenberg Resigns

Computers: Ailing networking company has seen its stock value drop by half over the last year.

August 30, 1996|JULIE PITTA | TIMES STAFF WRITER

SAN FRANCISCO — After little more then two years on the job, Novell Inc. Chairman and Chief Executive Robert Frankenberg resigned Thursday without explanation, leaving the struggling computer networking company rudderless at a time when the combination of Microsoft Corp. and the Internet is threatening to render it irrelevant.

Novell board member John A. Young, a former chief executive of Hewlett-Packard Co., has assumed the role of chairman. But in a conference call with reporters Thursday, Young, 64, made it clear that he has no intention of running the company long-term and said he will lead a nationwide search for a new CEO. Former sales executive Joseph A. Marengi was named president and will report to Young.

Novell's shares dropped 62.5 cents to close at $10.375 in Nasdaq trading on the news; the company's stock has lost half its value over the last year.

Since joining Novell in April 1994, Frankenberg, who had previously run HP's personal computer business, dismantled much of the already crumbling empire built by his predecessor, Raymond Noorda.

Noorda, who appeared obsessed with rival Microsoft's growing dominance of the PC software business after two failed attempts to merge with it, tried to compete head-to-head with its aggressive rival--a strategy that proved disastrous.

Just before Frankenberg's arrival, Novell spent more than $1.4 billion to acquire WordPerfect Corp. and productivity software from Borland International Inc. Frankenberg was forced to sell those businesses in January to Corel Corp. for $115 million in cash and stock. Royalties may eventually yield an additional $70 million to Novell.

Although Frankenberg proved adept with an ax, he was never able to seize market opportunities such as the Internet, causing the company's sales and profit to slide in recent quarters. Novell's revenue grew a meager 2% to $2 billion in the fiscal year ended Oct. 30, and it has fallen continuously this year.

"The company that was best positioned to take advantage of the revolution in computer networking managed to miss that opportunity," said Jeffrey Tarter, editor of Soft Letter, an industry newsletter based in Watertown, Mass. "A lot of the reason for that has to do with Novell's consensus approach to decision making. It is way too slow for this industry.

"This is a company that needs a dictator at the top," Tarter said.

Whoever becomes Novell's next chief executive will inherit a company that has struggled to find a follow-up to one of the biggest hit products in the PC industry. Novell's NetWare, a decade-old software program that enables PC users to swap data files and share often-scarce computing resources such as printers, is used by more than 55 million PC users, giving Novell about 60% of the market for local-area-network software.

But many of NetWare's functions are being incorporated into the PC's operating system, and today the Internet is often used to connect computer users into large networks that reach beyond company boundaries. Noorda's failure to beat Microsoft in operating systems and business applications such as word processing and spreadsheets forced Frankenberg into the difficult process of shrinking Novell, and blinded him to new markets such as the Internet, analysts said.

A recent survey of 50 corporate executives charged with computer purchasing dramatically illustrates Novell's problems. While 90% of the companies are using NetWare today, only 48% plan to do so in three years, according to the survey conducted by Forrester Research, a Cambridge, Mass., market research firm.

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