No magic bullets
Colin Browne, editor of Computer Reseller News looks at Internet Services and ASPs and asks where do Novell and Computer Associates think they are going?
I don’t believe in wild pendulum swings. I don’t believe in magic bullets to solve business problems, and I don’t buy into hype.
Common sense tells me what goes up must eventually come down, there are two sides to every story, and market growth figures are usually exaggerated because no-one will remember in five years what the original projections were anyway.
And so I think we had better be sure we are right about Internet services and the ASP model, because we’re going to lose some people along the way if we’re not.
Actually, we may just lose them even if we are; this transition is proving to be painful.
In particular, I am referring to Novell and Computer Associates and just where these guys think they are going.
Right now where they appear to be going is into a downward financial spiral as they try to redefine what it is that they need to do in the Internet services space.
To cut to the chase, in 1998, Novell was being referred to as takeover bait.
In 1999, the talk was that it was not only fixed, it was flourishing. In fact, analysts said that its share price which had wallowed at its sub-$10 low for an eon would hit an all-time high of $80, and it certainly looked like it was going there.
Today it is back at $10, making the cost of buying Novell, with a market capitalisation of just $3.5 billion, cheap, cheap, cheap, and the company’s sales revenues are sharply down.
CA on the other hand, watched its share price halve in a matter of weeks on the news that its traditional business isn’t a good place to be anymore—mainframe software sales are soft, and the ASP game is moving along without them.
CA CEO Charles Wang knew it was time for a change, stepping down in favour of his number two, Sanjay Kumar, and Kumar has set the company in hot pursuit of Internet services fortunes.
He may be right. Let’s hope so.
CA has bought itself some time, and with products such as Jasmine still promising untapped revenue streams for the company, the potential looks good.
But selling Internet services will demand that it is a lot more nimble than it has ever been before, and its ability to become that is still questionable.
For Novell however, I fear that time has run out. We’re back to rumours of acquisition, and this time, I think they make sense. Novell is a technology powerhouse, and very attractive because of it.
It’s inability to transition to a services firm will not matter one iota to IBM — it is the technology that matters.
But it is time to face the truth: perhaps a buyout is the only thing now that can save Novell from what looks increasingly like a demise.