January 1985: On a cold morning precisely like this just two years ago, Ray pulled into the same parking lot and entered the same Orem office building. The old Novell was still recognizable in the fixtures and many of the faces among the staff. But how the future had changed!
The giant south parking lot was now filled comfortably with the cars of employees. Survival was no longer an issue -- at least it was no longer a preoccupation. Still ridiculously puny with only $10 million in 1984 income, the company was nevertheless profitable, and Ray could see by annualizing the current monthly sales that 1985 would bring significant growth -- even a doubling of income was possible. The staff was in place and properly "incented," the access to capital was assured, and the products were moving.
The portents were all favorable. IBM had pronounced the benediction over file server technology, and there was no more eloquent articulation of file server technology than Netware. The waters had parted for Novell, then crashed down upon its pursuing competitor hosts, sweeping all (or most) away.
Most importantly, Ray and his team had defined a vision, not only for Novell, but -- what audacity! -- for the entire computer industry. This was a vision of world domination. In its way, the idea was every bit as preposterous as history's other long shots: that a small town on the Tiber might rule the world; that from the revelations of a crucified Jew might be the springboard for a new faith and world order; that eighteenth-century Frenchmen might vote for the execution of their king; that a tramp might rise from a Vienna flop house to rule the German nation and throw the world into war.
Novell's vision was that PC-based local area networks would supplant minicomputers and mainframes in many office functions.
There was a feeling among those at the office on these cold January mornings that Novell had placed its claim on the future. Now the task loomed large before them, and with pick, pan, and shovel, they set forth to extract the ore.
Safeguard invested in Novell to accomplish two things: invest profitably in high technology and gain a product they could offer as an automated enhancement to the One Write system. In January 1985 Novell conducted a public offering in which Safeguard sold it's interest for a considerable profit. As planned, they had spun off a high technology company from their investment. It may not have been as smooth or as fast as they wished, but thanks to Ray's intervention they weren't writing off millions, either.
Safeguard also got the automated accounting upgrade they wanted, but in an indirect way. The explosion of the PC-compatible standard had grown the personal computer industry and provided a hardware standard that was well-suited to become the platform for the computerized upgrade to One Write that Dolf and Pete were looking for when they first backed Jack Davis. This hardware platform was amply provided with service and accessories, all Safeguard had to add was software, marketing and support -- things they would have had to add even if Novell was providing the hardware.
One sign of the company's bright prospects was Safeguard Scientific's decision to create a public market for its shares of Novell. Since 1980, Safeguard had been investing in the venture. After four and a half roller coaster years -- where most of the ride had been a relentless downward plummet -- the white-knuckled Safeguard principals felt they could finally relax their grip somewhat. They guessed Novell was finally on track to some level of success and that the market would bid up the value of their holdings.
This initial public offering was also significant in that it reduced Safeguard's power over Novell and Ray Noorda. At the beginning of 1985, two of Novell's three directors and two of its six officers were Safeguard people. Over the next four years, Ray would work to dilute and eliminate Safeguard's influence over the company.
On January 17, 1985, Novell became a public company as its shares were first traded in the OTC marketplace. (Novell is listed daily in the NASDAQ list under the symbol "NOVL.") Safeguard's initial public offering of 2.15 million Novell shares immediately sold at $2.50 per share, and in a few months the market bid the price up to $18 per share. Although Novell did not receive the proceeds from this public offering, Safeguard got a good return on their investment and the Novell employees saw their stock holdings increase more than seven times in value.
The offering also gave Novell a higher profile in the PC industry and awakened interest in the financial community. Six analysts began to follow the company. These analysts were more curious than convinced -- they had no clear idea of what LANs were, how they differed from other networking solutions, or what niche they might carve in the computer marketplace. Indeed, in this and subsequent years, as growing numbers of analysts were attracted to the company, Novell had to spend considerable time and energy proselytizing LANs and educating the financial community about the significance of the technology it was creating.
In 1985, the idea of a "LAN industry" was so impossibly ambitious that it provoked laughter. Most industry observers considered LANs a "boutique" or niche market at best, serving mostly small, "mom-and-pop"-type companies -- the low end of the computer market. One of the early analysts at Smith Barney to follow Novell dismissed LANs as a mere "fad." Yet who, at that time, could prove him wrong? Ray used to say at that time, "We don't even have an industry; we have to build an industry." Noorda even welcomed competition: "If we have some competition, the whole thing will expand, and we'll sell more."
Even the leadership of Novell had doubts about the ultimate potential of its products. When Noorda hired Ron Eliason as chief financial officer in July 1985, Ray said he expected to develop Novell into a company with annual sales in the $100 million range and then leave to start something else. He told Eliason he would take him along in the new venture, providing yet another opportunity to make a fast fortune.
Eliason himself had doubts about Novell's success. "I just couldn't imagine when I joined the company that they could ever sell enough networks to make this a big company," he said. "I used to run numbers about, `How many pieces of networking software do you have to sell to get this much revenue?' I just couldn't see it, because, I thought, it's not like selling WordPerfect. Each machine needs WordPerfect; each machine needs DOS. But in a network, you can put 10 or 50 or 100 people on that piece of software. Of course, I've been totally surprised."