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Novell Buys WordPerfect

The short lead time for electronic publications can be fun at times. I added the comment about Novell buying WordPerfect to TidBITS #218 after a friend mentioned it during a phone call around 10:00 PM Monday night. I’d already queued the issue for distribution to the Internet, but after hearing the news, I deleted the queued files and modified the issue before re-queuing for Internet distribution and uploading to the commercial services.

The main piece of news that I missed in our last-minute rush was that Novell also purchased the Quattro Pro spreadsheet for Windows from Borland for $145 million. I guess when you spend $1.4 billion for WordPerfect, what’s a couple of hundred million dollars to pick up a decent spreadsheet in the process? It seems that Borland hasn’t been the same since swallowing rival Ashton-Tate several years back, and the company plans to post a loss for the year and to restructure after divesting itself of Quattro Pro. Makes you wonder if Borland itself isn’t a target for acquisition from Novell or Lotus.

Obviously, neither Novell nor WordPerfect is primarily a Macintosh company, but with WordPerfect’s strong showing with the most recent release of WordPerfect for the Macintosh, Mac folks do have some stake in what happens. In addition, it’s foolhardy to ignore what happens in the PC industry, given the large number of cross-platform users and companies.

The acquisition makes Novell the second largest software company in the world, although its merged annual revenues of $1.9 billion are well below Microsoft’s $3.75 billion. Lotus, which has more or less completely disappeared from the Macintosh market once again, brings up third with revenues of $1 billion. Ironically, in April of 1990, in TidBITS #001, we reported how Lotus and Novell planned to merge. That merger fell through several weeks later, and you have to wonder what Lotus is thinking now. Just for reference, the merger of Adobe and Aldus places that company, whatever it will be called, in fifth place.

As to why Novell decided to buy WordPerfect, I’m sure executives on both sides will issue the usual platitudes (I’d rather they issued platypuses, personally), but I suspect the real reason is simple – Microsoft. After acquiring WordPerfect and Quattro Pro, Novell suddenly has second-ranked word processor and the third-ranked spreadsheet in the Windows market to add to the DOS that it acquired from buying Digital Research some time back and its own Netware network operating system. Suddenly Novell’s product line looks a significant amount more like Microsoft’s.

I asked (rhetorically, of course) last issue if all these mergers were indeed good for the industry or, more importantly in my opinion, good for us users, and that question continues to nag me with news of additional alliances and mergers coming in all the time. However, the Software Publishers Association reports that the software industry is growing rapidly, not shrinking, and the association’s president noted in Investor’s Business Daily that "For every merger, there are five new companies coming into the industry." I would be curious to hear how the death rate of software companies has changed in recent times, since that affects the overall number of companies as well, particularly if these new companies cannot compete with the megaliths. I’d also be interested to see comparisons of how the overall market share is distributed these days, since I’ll bet that all the money is starting to pool at the top among the Microsofts and Novells of the world. Perhaps a little trickle-down economics might be in order?

Just to give you an idea of what else is happening, here are a few bits I’ve pulled from various news stories. Microsoft and McCaw Cellular are planning a $9 billion wireless network using low earth orbit satellites to provide various voice, data, and video services. The project comes under a joint venture called the Teledesic Corporation, and is more than ten times the size of Motorola’s competing Iridium project, which itself has been called overly complex and expensive. In case one wireless network isn’t enough, Microsoft is working with the largest paging company in the U.S., Mobile Telecommunications Technologies, to create a $150 wireless paging network for bidirectional use with laptops, pagers, and personal communicators. Microsoft has also been talking in more general terms with AT&T (which is itself in the process of buying McCaw Cellular in a $12.6 billion stock swap), and although nothing has yet to emerge from those discussions, Microsoft reportedly wants AT&T’s help in distributing various information services. AT&T has been especially busy, as it and Lotus just announced AT&T Network Notes, which is a public Notes server using Lotus’s Notes workgroup software and a new low-cost client version of Notes for users to connect to the service.

In other words, everyone’s in bed with everyone else, and I doubt that anyone has a decent idea of what’s going to happen. I’m depressed that the trend is toward mergers of massive companies that come ever closer to violating anti-monopoly laws. I’d be more interested in seeing what could happen, as Robert X. Cringely suggests in his excellent book, "Accidental Empires," if the software industry worked more on the movie studio model, where independent firms develop software and a software studio markets and distributes it. Tech support could be handed off to a company that specialized in supporting users, and everyone could continue to do what they do best.

Think of a program as a movie, where the director picks the best talent and puts together a team to create just that movie. After it’s done, everyone goes their own ways, having been paid a fixed amount, or in the case of the major players, anticipating additional payment in the form of royalties. Each product stands on its own, and if it’s a flop, there’s no sequel, just as in the movies, though I hope the sequels would be better than the typical movie sequel. Hints of this model have appeared in the software industry, mostly from game and multimedia companies, which come the closest to movie making anyway. But could it work with the big programs, the Words, the WordPerfects, the PageMakers?

In his InfoWorld column this week, Cringely compares the current situation not to the movie business, but to the car industry, noting that in 1920 there were 300 U.S. auto manufacturers, whereas now there are essentially three. That makes Microsoft General Motors, Novell Ford, and Lotus Chrysler. But such a comparison raises the question of who gets to be Honda, Toyota, Nissan, Mercedes, Volvo, or even Hyundai. It doesn’t seem to me as though the American car industry is the healthiest model to emulate, given the powerful overseas competitors that appeared in the U.S. market after the consolidation of manufacturers. But even the software industry wanted to, could it switch models now that so much of the market is concentrated among so few companies? That is the $64 billion question.

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