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Courting Software Developers

Another strategic initiative begun in 1984 was to persuade independent software developers to write NetWare-compatible application programs. Ray and the team came up with the DIO (“Do It Once”) NetWare Affiliates Program. The idea was that developers could save themselves a lot of trouble by supporting NetWare. By “doing it once” (writing a NetWare-compatible program), developers would in effect support all the popular LAN hardware systems, because NetWare was hardware independent. Novell would give third-party developers the tools and information they needed to write for NetWare.

However, developers were concerned that LANs would cause their sales to drop, because single users would stop buying individual copies of software and share one copy with many users on their LAN. To allay these concerns, Novell created NetWare/MUSLS (Multi-User Software Licensing System) for NetWare-compatible LAN applications. MUSLS provided copy protection to help prevent piracy and usage restriction mechanisms that controlled the number of network users who could access a program.

In February of 1984, Ray and company attended Softcon in New Orleans, a trade show where software developers could exhibit their products. Novell did not exhibit but had a hospitality suite. Developers were invited to come to the suite to hear about the DIO Program. Judy recalled:

There were 30 companies … none of the big companies came. There were all these little tiny developers—really obscure companies. They were just anxious to get their software running on anybody’s hardware and compatible with any kind of operating system. If anybody would listen to them, they were thrilled.

Some of them, they came in suspicious and wanted to know why we were going to give them this software and hardware and what did they have to do for it. And then they went away understanding the value in it. We had a great response.

One of the developers that came to the hospitality suite was SoftCraft, a little company out of Austin, Texas, owned by Doug and Nancy Woodward. SoftCraft was pushing a database program called Btrieve. The Woodwards understood Novell’s vision of the LAN industry and enthusiastically agreed to support NetWare. Their relation with Novell grew closer over the years and in 1987 SoftCraft was acquired by its former partner.

Another early developer to become a NetWare Affiliate was Cosmos Incorporated, a company based in Seattle and devoted to moving the Pick operating system environment to the personal computer world. After working with Novell for several months, Steve Kruse, Director of Marketing for Cosmos, praised the DIO Program:

Novell’s approach to the LAN market has been interesting and in some ways revolutionary. They have not only shown that the real key to local area networking is software, but Novell has made the market much easier for vendors to enter. I like being able to do the development work once and have my package running immediately on all the major LAN systems.

By the end of 1984, about 100 software development companies were participating in the DIO Program, and on its 1984 Form S-1 filed with the SEC Novell estimated that as many as 1,000 multi-user application programs were NetWare-compatible. (In the first issue of LAN Times, for fall 1984, the number of applications is more conservatively estimated at 500.)

Getting Finances in Place

In addition to the strategic marketing and development issues with which Ray and his people contended in 1984 there was the problem of capital. But what a difference sales growth, profits, and credibility made to solving it! In addition to the $800,000 it loaned to Novell in 1983, Safeguard loaned the company an additional $450,000 in 1984. Although Ray contributed an additional $25,000 in March 1984, by June Novell was strong enough to pay him back the total $150,000 he had lent the company since the previous November.

In the fall of 1984, Ray met with Ron Eliason, a Vice President of First Security Bank in Salt Lake City, to discuss a line of credit. The manager of First Security’s Orem branch had called Ron to tell him that Novell seemed to be turning around and might be in the market for a loan. Ray reviewed Ron’s proposal and a proposal submitted by Zions Bank, and he decided to go with First Security. This was the beginning of Ron’s relation with Novell; less than a year later Ray would hire him as Chief Financial Officer.

The First Security line of credit relieved the cash crunches that periodically pinched the growing company.

When Novell was incorporated, its fiscal year was to have concluded on the last Saturday in January. This virtually guaranteed a weak fourth quarter, however, because orders tended to drop off during the holidays between Thanksgiving and New Year’s. So in October 1984, management decided to change Novell’s fiscal year so that it ended on the last Saturday in October.

At the end of October 1984, everyone felt good about the company’s performance, though it would take a few weeks to run the final numbers. For the first time in the history of Novell, clear back to the founding of NDSI, the company was in the black.

When the final tally did come in, even Ray was surprised. In the 12 months ended October 27, 1984, Novell had sales of $10.8 million—an increase of 182% over the previous year’s sales of $3.8 million. (Due to the change in fiscal year end, the quarter from November 1983 through January 1984 was included in both the 1983 results and the 1984 results. Even so, in the nine months from February through October 1984, Novell’s sales were $9.3 million.)

Better still was the bottom line: A profit of $958,700 compared to the 1983 loss of $996,800. And the company had an $800,000 backlog of orders.

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