A crackling good story! To go from a struggling startup with negative sales to a billion-dollar company with seventy-percent market share ... To go from going bust making printers and computers to making history selling an industry-standard operating system ... To go from having six presidents in one year to making dozens of millionaires ... This is a crackling good story!

Surfing the High Tech Wave

A story of Novell's early years, 1980-1990By Roger Bourke White Jr.

AuthorHouse

Copyright © 2010 Roger Bourke White Jr.
All right reserved.
ISBN: 978-1-4520-2303-8

Contents

Preliminaries..........................................................ixOverview...............................................................xiIntroduction...........................................................xiiEntertainment, Education, and Employees................................xiiThe Novell Story.......................................................xiiiA Brief History of Events Leading to PC-Based LANs.....................xivWhy Call This a Revolution?............................................xviiThe Burning Questions..................................................xviiThe Enigmax............................................................viiiPart One The Foundation Years, 1980-84.................................1Chapter One Building Ray's Stage.......................................3The Acorn Is Planted...................................................3The Sapling Grows......................................................10The Year in Review.....................................................54Chapter Two 1982: The Time of Six Presidents...........................57Summary................................................................57The First Crisis: Jack Davis Departs...................................58The March Massacre of '82..............................................61The People of 1982.....................................................62After the Massacre.....................................................66Novell Data Systems in Retrospect......................................71Chapter Three 1983: Vision Unchained...................................74The New Man............................................................74The Entrepreneur.......................................................83The Diamond in the Rough...............................................96From the Outside.......................................................105Chapter Four Crossing the High Sierras.................................107Tunneling through Granite..............................................107Evolving beyond S-Net..................................................116Parting the Waters: NetBIOS and DOS 3.1................................132Building a Company Mission.............................................134Comdex 84..............................................................136Part Two Novell Emerges, 1984-88.......................................141The Technical Thread...................................................143CHAPTER FIVE The PC-Based LAN Revolution Begins........................145Early Technical Goals for NetWare......................................145Background: What's Happening in 1986...................................152Meeting the Challenges.................................................153Other Developments.....................................................156Sales and Trade Shows..................................................158The State of Play......................................................162The Cultural Thread....................................................163Chapter Six Corporate Culture..........................................165The Cycle of Life at Novell............................................165Coming of Age Financially..............................................167The Culture of Growth..................................................170Education and Marketing................................................176Making Novell "Bricks and Mortar"......................................181... and West Is West...................................................183Chairman Ray...........................................................190Chapter Seven Corporate Decisions......................................198International..........................................................198NetWare Centers and NetWare Everywhere.................................205Part Three Novell Matures, 1988-94.....................................221Chapter Eight The End of the Visionaries, 1988-89......................223Chapter Nine The End of the Revolution, 1989-94........................232

Chapter One

Building Ray's Stage

Ray Noorda didn't start Novell, Inc., from scratch in 1983. He bought a company: Novell Data Systems, Inc. (NDSI).

Novell Data Systems was the hopes and dreams of other people. It had been founded in 1980 and grew to 120 people in 1981, but by the end of 1982 had collapsed to 15 people. Things were so bad in late 1982 that NDSI's products were being returned faster than they were being sold.

But those 15 people left at the company had a dream ... a dream for a revolutionary product that would save the company. And Ray found that dream so exciting and real that he was willing to invest his time and money in this otherwise losing proposition to make it happen.

The dream was a local area network product that would become NetWare. The founders of the Novell we know today included Harry Armstrong, Craig Burton, Judith Clarke, and the SuperSet group of programmers.

These people made Novell and NetWare. To understand them you need to understand the Novell that they watched grow and collapse. They learned a lot watching that happen. And between what they learned and the experience Ray brought, they developed a winning product and a company that made an industry. To understand Novell, Inc., you need to understand the stage that it was built upon, NDSI.

The Novell Data Systems story is also important as a contrast: The goals of the companies were almost identical, but the results of the implementations were dramatically different.

The Acorn Is Planted

In the summer of 1980 two seasoned computer industry executives got together to start a company, Novell Data Systems. Like all good high tech entrepreneurs they intended for that company to shake the world. Unlike many, their company actually did-but hardly in the straightforward manner that they had envisioned.

Those men were Jack Davis and George Canova. They had been building dreams, experiences, and expectations for several years. Those meshed with the reality of the early '80s to make Novell happen the way it did.

Jack Davis

Jack Joins the Job Market

Jack Davis was born in Utah. He graduated from Brigham Young University (BYU) in 1961 with history and French degrees. Jack first found work in the growing minicomputer industry at NCR, the start of a long career pursuing the Muse of Technology. He moved to Phoenix when he started working for General Electric's disk-drive division. Later in the '60s his career took him to southern California where he joined up with CalComp, a maker of plotters and other minicomputer peripherals, heading up international sales. From CalComp he moved to General Automation and headed international sales there, too.

These were the hotbed days for minicomputers, and southern California contributed no less to the industry's development than Massachusetts ("Route 128") or the northern California Bay Area ("Silicon Valley"-alias Silicon Gulch to wags in Massachusetts).

Jack had wide circles of acquaintances in the southern California industry in the '60s and '70s. These later provided him with the manpower he needed to start Novell.

In the '70s he moved to Utah and became Director of International Sales for Beehive International in Salt Lake City. Beehive at that time was one of the biggest independent manufacturers of CRT terminals. Jack sharpened his skills at selling peripherals and became experienced at dealing with marketplaces that required custom products.

The specialty terminal market had benefits and weaknesses: The benefits were high margins for the products and fewer competitors. The weaknesses were limited market size and higher development costs.

The constraints of these specialty markets caused controversy within Beehive. One engineer I talked with years after Jack left felt that Jack was a good salesman, but he was always bringing back orders for "terminals with purple reset buttons, or some such, when he should have been bringing back orders for the stuff we made already".

Jack's Habit of Electronic Entrepreneurship

Jack liked to start companies and projects. Novell was far from his first. In California he started a company to sell a protocol converter (a box that converts one electronic communications protocol into another). This endeavor was still-born when the company he chose to manufacture the box got wrapped up in legal battles and couldn't produce.

While no product came out of this project, it introduced him to Victor Vurpillat, a southern California hardware designer who had done some work for an East Coast outfit named Safeguard Scientifics. Victor introduced Jack to Adolf "Dolf" Pere and Pete Musser at Safeguard, and Jack did some consulting for them. It was one of many contacts Jack made in the '60s and '70s that would be cashed in on in the '80s.

Terminal Specialties, Inc. (TSI)

Jack's startup just before Novell was Terminal Specialties, Inc., a terminal distributing company. TSI met a need for linking terminal makers with their customers.

In the late '70s many companies from the East Asian "Four Tigers" countries (Hong Kong, Taiwan, Korea, and Singapore) were introducing new lower-cost CRT terminals into the US. This was partly why the price for "dumb" ASCII terminals declined from $1500 apiece in 1978 to $900 apiece in 1982. These East Asian companies knew a lot about manufacturing but very little about marketing in the US. Jack's TSI was providing the service of getting them in touch with their market.

And Jack was effective. He added value for these companies. One of the big companies TSI serviced was TeleVideo Systems. Jack negotiated a master distributor agreement with TeleVideo, then proceeded to introduce its people to big name distributors he had worked with previously, such as David Jamison Carlyle out of the LA area.

Jack also worked with TeleVideo on improving the product's features, big things as well as little things to make the product fit US market tastes-such as changing the case color to make it more harmonious with other computer equipment.

Jack was effective but he liked to play fast and loose, and sometimes this caught up with him. TeleVideo was one of those cases. The company prospered but in 1979 they underwent a management shakeup and ceased honoring the master distributor agreement they had with TSI. That had never been formalized with a contract, so TSI was out in the cold-left only with yet another "distributor dumped upon" war story to show for its efforts.

The TeleVideo episode is important because it helped convince Jack that he had to make his fortune somewhere besides distributing. Like many other players in the computer field he planned to migrate up the marketing chain: Customers dream of becoming retailers, retailers of becoming distributors and wholesalers, distributors and wholesalers of becoming manufacturers. Jack was going into manufacturing next.

TeleVideo was one of TSI's big customers. Among its smaller ones was Dobbs and Woodbury-a two-man terminal-designing company based in Salt Lake City that had designed a cutting-edge terminal for the Sperry/Univac marketplace. TSI's terminal was good but they were having trouble marketing it, which meant poor sales. As a result they were out of money.

Jack wanted to market their terminal, but Dobbs and Woodbury needed money right away and they were about to sell the rights to another company that was unlikely to deal with TSI. So Jack offered to buy the rights for the same price as the other company. Woodbury said yes, Dobbs said no. There were other convolutions, but the net effect was that Dobbs and Woodbury split. Dobbs retained control and Jack didn't get his terminal rights. What he got instead was a commitment from Rusty Woodbury to join Jack in his new enterprise when it started up.

Otherwise 1980 was not a good year for TSI. Jack discovered that in addition to losing TeleVideo as a revenue source and failing to acquire rights to Dobbs and Woodbury's specialty terminal, he had gained an unexpected expense: The company accountant had been dipping into the till.

With TSI fighting for its existence and in need of cutting expenses, Jack and his partner, Frank Richins, agreed that Frank would continue TSI while Jack sought his fortune elsewhere. Jack needed a new organization, and that organization would be Novell.

It was time to assemble the team.

George Canova

Jack's Heavy-Hitter

By 1980 Jack had informally lined up many people who were ready to help him start this new company, but he needed what all new companies find hard to come by: Money.

Jack called on George Canova to critique his business plan. He had seen George's handiwork at CalComp, the minicomputer peripherals maker where Jack had worked in the '60s. He knew George had started Century Data, a prosperous disk drive maker, and had made a lot of money when Century merged into CalComp. The merger agreement gave George some stock options based on CalComp's post-merger performance. It did so well that George ended up its largest stockholder.

In 1980 George had just finished an even bigger task. For the last three years as President and then Chairman of CalComp he had been turning the company around.

In the mid '70s CalComp experienced losses. In 1977 George replaced its founder as President and Chairman and worked hard to stem the "red tide". He reduced the debt load partly by selling off divisions. (One of the hardest cuts was selling off the memory products group, which had been the Century Data that George had founded.) He also controlled costs in other ways. For instance, he was the first to implement a four-day work week in a major (1200 employees) California electronics company.

In 1979 George had turned the corner and was thinking about future growth in a way that paralleled Jack's thinking. An article in Business Week, Dec. 4, 1978, talks not only about his turnaround efforts but also his vision for CalComp's future.

Canova's next move will be into an area that he considers full of growth potential: supplying a line of peripherals for minicomputer users, who can save substantially by assembling their own minisystem a la carte.... Canova predicts this miniperipherals business venture will produce sales of tens of millions a few years out.

Right Vision, Wrong Place

George's vision was controversial within CalComp. Instead of reselling peripherals, the company devoted resources to building their presence in the CAD/CAM (computer-aided design and manufacturing) marketplace, which was a more logical extension of their already established plotter business.

In early 1979 CalComp got an opportunity to tap a large financial source: Cash-rich Sanders Associates was willing to buy them up at a good price to extend their presence in the non-military marketplace. CalComp stockholders, including George, agreed to the sale. George was given a vice-presidency and a position on the board of Sanders. But in nine months, in the summer of 1980, he resigned from both positions to start up a new company "that wouldn't compete with Sanders or CalComp". That company was Novell.

Great Minds Meet

Although Jack approached George simply to critique his business plan, as George reviewed it he grew more and more enthusiastic. Jack was writing about George's own vision about minicomputer peripherals and the business computer marketplace! He was so enthusiastic he told Jack he'd like to be a part of it.

Jack was delighted. One of the key things he needed for this new enterprise was financing, and here was a man well-connected into the southern California venture capital community who could also bring a heavy-hitting rsum to the Novell effort.

George's price was high: He would come in as President. But Jack decided the promise of access to million-dollar financing made it worthwhile.

George Canova

Bio

George M. Canova, born 1931, was Chairman of the Board and President of CalComp, 1977-80. He was principal founder of Century Data Systems, Inc., in 1968 and served as its President until 1973, when the company was purchased by and incorporated into CalComp a maker of minicomputer peripherals. Before founding CDS, George was a Director of Product Development for Scientific Data Systems (now Xerox Data Systems) and was yet earlier employed in engineering and management positions at RCA and Burroughs Corporation.

Relevance

George Canova is important because he was Jack's partner in starting Novell and brought with him many important innovations to Jack's basic plan, such as adding a personal computer to the product line.

Timeline

George Canova founds Novell Data Systems and stays with the company until March 1982. He is one of the few people who walk away from Novell never to return. In fact, he says he never wants to think about it again.

Jack Davis

Bio

Jack Davis graduated from BYU in 1961. His first job in electronics was working for NCR as a programmer. He gained further experience at Hughes, General Electric, CalComp, Beehive International, and TSI before coming to Novell.

Relevance

Jack Davis pulls Novell Data Systems together to found it and later rescues it by bringing the company to Ray Noorda's attention. His and George Canova's actions in building NDSI provide a rich contrast to what happened at Novell, Inc., under Ray Noorda.

Timeline

Jack Davis stays with the company until November 1981. He then plays behind-the-scenes roles until Ray Noorda takes over in 1983.

The Sapling Grows

Picking the Name

Jack and George were thinking on parallel tracks, but parallel does not mean identical, and both were strong-willed people.

The day Jack and George went to incorporate, Jack got his first surprise. He had been using the name Macro Systems for the business. While they were waiting for the lawyer, George said, "You know, I talked to my wife about this new company and she thought of a nice name for it."

"What's that?"

"Novell."

Jack replied, "Sounds nice. What does it mean?"

"It means 'new' in French," George said.

Jack blanched a bit. In addition to his degree he'd spent two years in France on a Mormon3 mission and was quite fluent in the language.

"I don't think so, George. There's either nouveau the masculine or nouvelle the feminine-"

"Well, it sounds good anyway."

Jack, having just read a magazine article saying that the important thing about a business name is that the name isn't as important as what a business does, conceded.

"Yes, it sounds good, George."

For a long time after that the company name meant "new in French" when you asked George and "nothing at all" when you asked Jack.

Moving into the Truck Dealership

Novell started in a vacant truck dealership in an industrial park on the north side of Orem, Utah. From it one had a view of three spectacular sights: Mount Timpanogos, Utah Lake, and the Geneva Steel works, the largest steel mill between the Mississippi and the Pacific coast.

Jack, Sherrill Harmon, and Joe Maroney were the first to set foot in the building as employees of the new company. They started the cleanup and transformation of the building into an electronics manufacturing facility.

Picking the Products

Jack started Novell on the vision of manufacturing a multi-CPU minicomputer system and the terminals and printers for that system, and of reselling software for it. (CPU stands for central processing unit. It can be a chip, the board that the chip is on, or the box that the board is inside-what most of us call "the computer".)

Part of Jack's vision was to build a minicomputer that would offer more power for less price. That part was conventional. He was going to offer accessories for that minicomputer; that too was conventional wisdom for the time.

(Continues...)

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