Network Support Library/RoseWare - Network Support Library.iso/banpr/statem.asc

Text File | 1990-04-11 | 12KB | 248 lines

Observations and Responses On the Proposed Acquisition of Novell
              by Lotus Banyan Systems Incorporated

By now, you have heard that Lotus Development Corporation plans to
acquire Novell in July, and are probably wondering about the
significance of this move to Banyan and the industry. Banyan
believes that this move by Lotus to position themselves as a
network applications company will have positive benefits for the
industry, for our customers, and for Banyan.

It will be good for the industry because it focuses attention on
network computing as strategic to business. It will be good for our
customers because new network applications will result. Finally, it
will be good for Banyan because our demonstrated partnership with
Lotus should make it easier to meet our applications support
objectives for their products.

It is not expected to have major impact on Banyan's business for
the following reasons:

-    The acquisition is targeted for workgroup networks and
     applications.  Banyan is focused on corporate networks.

-    Lotus remains a strong Banyan partner in applications.

-    Banyan expects to support NetWare as part of its network
     interoperability strategy.

Note, however, that Banyan will closely track the acquisition to
see where we might best exploit some of the opportunities it opens
for us in the market.

In order to better understand the significance of this to Banyan,
let's take this opportunity to reinforce the ideas behind our
strategies for the market. Our strategy for the next three years
falls into several key areas relating to applications support,
strategic partnerships, and network interoperability.

                      Applications Support:

Banyan has always pursued -- and continues to pursue -- strategies
that ensure the support for the widest range of applications for
our customers. Historically this has meant working closely with
vendors such as Lotus, Microsoft, Oracle, and others. This move
will not change our strategy with regard to Lotus, or any other
applications developer.

However, one important side effect of the acquisition which will
likely benefit Banyan is renewed interest in the applications
developer community to work with a NOS vendor committed to their
success and not to competing with them. Banyan is perfectly
positioned to be that NOS vendor.


                     Strategic Partnerships:

Banyan has long recognized the need for strategic relationships in
meeting the needs of an increasingly multivendor network market.
This market is inherently cooperative; no single vendor can address
all of a customer's requirements. Even IBM has acknowledged that it
must cooperate with other vendors if they are to keep the customer
satisfied. Banyan has pursued a path of establishing strategic
partnerships (as with Oracle), but in a way that allows us to
maintain our integrity as an independent NOS vendor. In this way,
we minimize conflicts and competition between Banyan and those with
whom we have relationships. The acquisition is certain to elevate
Banyan's position as a potential strategic network partner, but
Banyan has no active plans to be acquired or to merge at this time.

                    Network interoperability:

Banyan's strategy for network interoperability is important because
it addresses the stated needs of large network users.  The key
network operating systems that we believe must be addressed are
LAN Manager (because of its influence on applications development)
and NetWare (because of its installed base).

LAN Manager interoperability remains our strongest focus, because
we believe that applications that must support OS/2 will be written
to this standard. In addition, Microsoft is strategic to Banyan
because of its direct influence over the DOS and OS/2 desktop
operating systems vital to our customers' businesses.  Our need for
strong IBM support is another reason why Microsoft is strategic to
Banyan.

NetWare, on the other hand, presents a different matter for Banyan.
Many of our prospective customers have expressed the desire for
Banyan to support NetWare for two reasons: They have outgrown what
NetWare can provide them in network functionality, and/or they may
need to support both environments simultaneously for their users.

Additionally, network interoperability is important because:

* As noted earlier, Banyan is well positioned to embrace the
applications developers who have historically written for Novell.
We expect some of these developers will be looking for ways to
reduce their reliance on Netware because they view Lotus as a
competitor with an unfair advantage.

* Our expertise in supporting corporate-wide networks, combined
with our network interoperability, positions us strongly to provide
a solution that ties the Lotus/Novell islands, as well as LAN
Manager islands, together. This represents a major opportunity for
Banyan.

In summary, Banyan's strategies remain for the most part unaffected
by the potential of a "new Lotus." If anything it has reaffirmed
our belief that they are the right strategies for us.

                           Commentary:

It is Banyan's position that this acquisition represents a major
move on Lotus' part that is no doubt designed to make both parties
more competitive in the workgroup marketplace, and, at least on the
surface, to better position them to compete with Microsoft.
However, their competitive position against Microsoft may be
illusory because the acquisition does nothing to wrest control of
the desktop from Microsoft.

It is also clear that the "new" Lotus will still have to deal with
the problem of large network support. Acquiring Novell gives Lotus
no immediate gain in either the product or the technology needed to
achieve that goal.

Culturally, the companies could not be further apart, and that
alone has historically been enough to make other acquisitions fail.
Novell's own recent history indicates a failure to create synergy
between it and the companies they have acquired which were smaller
and potentially addressed gaps in Novell's technology.

There is also the issue of how the two companies will bridge the
gap between their distribution channels. Novell has sold
exclusively through distributors and has given the channel account
control and the support revenue. By contrast, Lotus has sold
through dealers and has started to establish direct account control
and support. It is very unclear how the VAR channel should view the
acquisition.

Adding to uncertainty is the fact that both Novell and Lotus
products are routinely discounted, often heavily. There is an
obvious question whether the profit margins of their reseller
channels are going to be better, worse, or the same as a result of
the acquisition.

                  Some quotes from the trades:

CommunicationsWeek, 4-9, Paul Korzeniowski, CW reporter, "Customers
were immediately apprehensive. Some of their concerns rested on
Lotus' history of inadequately supported, expensive local area
network products. Network managers confessed that they couldn't see
much synergy between the two companies' product lines.... Network
Managers universally castigated Lotus for its lack of support for
local area network users."

CommunicationsWeek, 4-9, Jim Manzi, Lotus President, " Both Novell
and Lotus are executing identical cross-platform strategies; both
companies are heavily invested in networked and organizational
computing."

CommunicationsWeek, 4-9, Stan Gibson, CW reporter, "Analysts said
teamwork between the firms is not likely at first. 'I don't see
much synergy,' said Charlie Brown, Complete Systems, Herndon, VA.
'Long term they may combine to deliver network based
applications.'"

CommunicationsWeek, 4-9, Dave Mahoney, Banyan, "Banyan is not
solving a departmental workgroup problem, as are Novell and
Microsoft, but a corporate networking problem. Banyan already sees
a role in integrating LAN Manager and Netware islands."

CommunicationsWeek, 4-9, Craig Burton, CEO, Clarke Burton Corp.,
and former Novell Exec. VP, "It's hard to imagine how these
cultures will adapt. Ray (Noorda) comes from a different area of
the country, a different era, a different management style, and a
different upbringing."

CommunicationsWeek, 4-9, Tom Wilmott, analyst, "The common
denominator is that both corporate cultures are weird."

CommunicationsWeek, 4-9, Frank Dzubeck, Pres., Communications
Network Architects, "This is IBM/Rolm all over again. Lotus is
conservative. Novell is Silicon Valley in Utah."

CommunicationsWeek, 4-9, Mary Modahl, Forrester Research, "The two
firms are reflective of their local surroundings. Novell
programmers are more likely to have  clean-cut, conservative
appearance while some of their Lotus counterparts look like
hippies."

InfoWorld, 4-9, Bill Krause of 3Com: "This merger will create
greater competition for Microsoft. But it also shows that Novell is
strategically moving toward  the PC desktop software arena and not
the large corporate network."

InfoWorld 4-9, "Microsoft had no comment."

Network World, 4-9, David Perro, Dataquest: " The two companies
are quite a bit different. Lotus has rested on the laurels of 1-2-3
while Novell has been a high flyer. But if you look at the long
run, together they will probably be positioned to look a lot more
like Microsoft than anyone."

Network World, 4-9,  "Analysts said, 'For Lotus, the agreement
promises to boost its presence in the market for network
application software, which is critical to the continuing success
of its cash cow 1-2-3 spreadsheet product."

Network World, 4-9, Leo Speigel, LAN Systems, Inc. a New York
Novell reseller: "Novell is still doing great but their networks
are getting harder to sell."

Computerworld, 4-9, "Craig Burton, formerly Novell's chief
strategist, said Novell has been on Lotus' acquisition list for the
past two years."

Computerworld, 4-9, Phillipe Kahn, Borland International: " The
idea that this somehow makes Netware a more viable network
operating system is ridiculous."

Computerworld, 4-9, "Initial stock market reaction was somewhat
negative. According to Mary McCaffrey, analyst at C.J. Laurence,
heavy trading Friday of Novell stock - more than 38 million shares
- indicated some displeasure. On Friday, Novell closed down more
than $4, while Lotus slipped $2."

Computerworld, 4-9, "Industry analysts said the two face horrendous
cultural differences. Lotus Executive Vice President Frank King
operates on the rule that you release no product before its time.
Novell has a reputation for announcing products while they are
still grapes on the vine. They must also sort through several
conflicting strategic alliances."

PC Week, 4-9, "Many observers were skeptical that the two companies
could be smoothly merged. 'There's no synergy at all,' said Frank
Dzubeck, Communications Network Architects, 'It's a diversification
move by Lotus.'"

PC Week, 4-9, Robert L. Scheier, reporter, "PC and LAN managers
were fearful last week that alliance like the Lotus-Novell merger
will create monoliths that force customers to buy all their
software from a single, proprietary source."

PC Week, 4-9, "Industry insiders said Noorda, 65, has been quietly
shopping Novell around for some time. 'Noorda had built the company
and was looking to slow down,' said Richard Shaffer, editor of
Technologic Partners.