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Netscape, Novell Team Up In New Software Venture

By Rajiv Chandrasekaran
Washington Post Staff Writer
Saturday, March 22 1997; Page D01

Netscape Communications Corp. and Novell Inc. yesterday said they would form a joint company to coordinate efforts in developing software that runs business computer networks. The move is aimed at industry giant Microsoft Corp.

The venture, to be called Novonyx, would make a special version of Netscape's popular "enterprise server" software -- which serves up information on the Internet and internal corporate networks. The product would run on Novell's network operating software.

Novell now has about 50 percent of the market for software that allows office computers to communicate with one another and Netscape has a commanding market share for enterprise server software.

But the emerging popularity of Microsoft's Windows NT operating system and BackOffice software, which provide similar functions, has been eroding those bases recently. Novell and Netscape's stock prices have taken a beating in recent months because of fears of increased Microsoft competition, analysts said.

Through the alliance, the companies hope to convince current Novell customers not to switch to the Microsoft products. At present, if Novell customers want to run Netscape server software, they have to switch to the Windows NT or UNIX operating systems.

"The fewer things they have to rip out, the easier it is for them to move forward," Jim Barksdale, Netscape's chief executive, said in a conference call yesterday.

Daniel H. Rimer, an analyst with investment bank Hambrecht & Quist in San Francisco, lauded the proposed venture. "It's a very strong and deep alliance to go up against the leader in the space," he said.

At the same time, analysts said making the new venture work could be tricky because the two companies have been -- and will continue to be -- competing in the corporate network software market. Novell, for instance, also makes enterprise server software. And both companies are trying to sell their own software to handle electronic mail and document sharing in corporations.

"It remains to be seen whether the relationship will be synergistic versus cannibalistic," said Marc Usem, an analyst at Salomon Brothers Inc. in New York. "On the whole, though, it seems to be a good thing for both of them. Novell gets more credibility and Netscape gets a new market."

Since the proposed venture could raise antitrust concerns, the companies said they would wait until they receive government approval before forming the new company, which would be based near Novell's headquarters in Orem, Utah. The companies did not disclose financial terms of the alliance.

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