Novell's Unix purchase may help rival Microsoft

December 28, 1992|By Paul Andrews | Paul Andrews,Seattle Times

SEATTLE -- Novell's $350 million purchase of Unix Systems Laboratories from AT&T last week may unwittingly have aided the Provo, Utah-based software company's archnemesis, Microsoft Corp., in the latter's encounter with the Federal Trade Commission.

Analysts praised what they termed a gutsy move by Novell -- which dominates personal-computer networking software, with a more than 70 percent market share -- to combat the looming assault of Microsoft's Windows NT software next year.

"The implications in the long term are extremely positive for Novell in the sense that they are taking the Unix operating system into the desktop arena," said Cecilia Brancato at Oppenheimer.

But the action also gave Novell a big stake in two major non-Microsoft operating systems -- a position that could blunt any regulatory charge that Microsoft holds an unshakable monopoly on desktop-computer software.

"This makes Novell such a viable competitor it might get the FTC off Microsoft's back," said David Rothschild, a Piper Jaffray analyst. "It positions Novell as serious and possibly fearsome competition for Microsoft."

Microsoft was unruffled.

"It's pretty clear that Novell is trying to shore up a 1970s operating system technology to compete with an exciting new generation of technologies in Windows NT," said Dwayne Walker, Microsoft's director for Windows NT and networking products.

Last year Novell purchased Digital Research, makers of DR DOS, a "clone" of Microsoft's MS-DOS operating system. The latter runs on 100 million computers worldwide, but DR DOS has gained little market share.

The Unix laboratories purchase provided Novell with a strategic avenue to the workstation market also targeted by Windows NT.

Although it accounts for a minuscule 2 percent to 3 percent of desktop computers, Unix, invented by AT&T researchers in 1969, is far and away the system of choice for high-end scientific and architectural design computers.

Last year Unix sold about 1 million copies. Windows 3.1, the Microsoft graphical operating environment software that makes IBM-compatible computers easier to use, sells at the rate of about 1 million units a month.

Microsoft estimates that Windows NT will sell between 1 million and 1.5 million units its first year on the market. It is expected by analysts to sell anywhere from 3 million to 10 million units the second year.

Microsoft has promised the system for delivery the second quarter of 1993, but it is rumored to be late.

Windows NT has built-in networking. With the Unix purchase, Novell will be able to offer clients similar services in terms of linking computers together.

"Microsoft is trying to grow the business up [to high-end workstation tasks] with NT, and Novell is trying to grow the business up via NetWare 4.0," Mr. Rothschild said.

The market is considered strategic because huge numbers of corporations and businesses are replacing obsolete and costly mainframe and miniframe computers with linked workstations. The potential market has been estimated from $50 billion a year on up.

"Customers are starting to use PC [desktop] platforms for a lot of serious business applications, and indeed are running their businesses with PC-type platforms," said Microsoft's Mr. Walker.

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