March 18, 1997 2:15 PM ET

Schmidt can think, but can he lead?
By Margaret Kane

  One thing analysts agree on is that Eric Schmidt, the newly named chief executive of Novell Inc., knows his stuff.

Analysts described Schmidt, who played a key role in the development of the Java programming language at Sun Microsystems Inc., as a "visionary" and a "brilliant technologist."

But is that what Novell needs right now?

"They need a street-fighting product strategist, a sales leader. [Schmidt] is brilliant at what he does, but Novell really needs someone who's very good at marketing, and Dr. Schmidt is very good at thinking," said Gina Sokolow, an analyst with Wertheim Schroder & Co., in New York. "You have to put a spin on things so people understand why they need the technology."

Analysts were hoping that the company's president and chief operating officer, Joe Marengi, would do that when he replaced former CEO Bob Frankenberg last August.

"Certainly, the perception of the market was that [Marengi] was fire and brimstone. I detected a different kind of aggressive atmosphere [at the NetWorld+Interop show in Atlanta], but frankly, some months have gone by and it's the same thing," said Bob Lewin, a director and analyst at Dataquest Inc., in San Jose, Calif. "I haven't detected any renewed vigor."

Marengi and Novell's management have also been slammed for their failure to get the company solidly back on track.

During its most recent quarter, ended Jan. 31, Novell earned $51 million on $375 million in sales, a 20 percent drop in income, although some of the sales from the previous year were from businesses that Novell sold off or discontinued.

But analysts said Schmidt's technology background brings needed talent to bear in terms of developing new products and moving into new arenas.

"If he is the right choice, Novell will be completely reinvented as an Internet company," said Frank Dzubeck, president of Communications Network Architects Inc., in Washington.

Customers have been antsy about Novell because of the company's repeated inability to ship products on time. However, analysts expressed guarded optimism that an executive with strong technical talents could help prevent a customer exodus.

Over the last year, Novell has been hard pressed by Microsoft Corp.'s Windows NT Server. CIMI Corp., a market research firm in Voorhees, N.J., recently reported that NetWare's share has shrunk by 30 percent in large companies running mission-critical applications.

"There's been no new growth or new product ideas," said Neil MacDonald, an analyst at Gartner Group Inc., in Stamford, Conn. "What they need is a technical visionary, someone to reestablish the confidence of the installed base."

The announcement of Schmidt's appointment a week before the company's user conference was particularly well-timed, MacDonald said. "This is as much a marketing move as a technology move," he said.

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