by Roger White, copyright 2003
Building Marketing Channels and Courting Software developers
Getting Finances and Personnel in place
The Technology Pieces fall in place: Advanced Netware
Building a company mission and Comdex 84
Surfing the high tech wave home (more chapters)
Besides the strategic marketing and development issues with which Ray and his people contended in 1984 was the problem of capital. 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 Eliason to tell him that Novell seemed to be turning around and may be in the market for a loan. Ray reviewed Eliason's proposal and a proposal submitted by Zions Bank, and he decided to go with First Security. This was the beginning of Eliason's relationship with Novell; less than a year later Ray would hire him as chief financial officer. The First Security line of credit also relieved the cash crunches that periodically pinched the growing company.
Besides wrestling with the enormous strategic issues facing Novell, Ray had to deal with the myriad operational issues that beset a growing company. For example, even though most employees put in so many hours that they practically lived where they worked, there was a physical limit to what they could accomplish. More bodies were needed. Eighty-three new employees were hired between January 1983 and December 1984, and most of those came aboard in 1984. Judy Clark helped with the hiring and administration at first, but by 1984 a full-time Human Resources person was needed. John Thompson was brought on to handle it.
Safeguard Scientifics wanted to keep a close eye on operations, and they insisted on having their own people fill the key positions of chief financial officer and secretary. Bill Gillan, the CFO, and Ray Kraftson, the secretary, accomplished their duties from Safeguard's offices in Pennsylvania and commuted to Orem as necessary. Corporate filings, insurance, stock incentive plans, and other similar operational matters were also handled by Safeguard. Novell agreed to pay .75 percent of its net sales ($64,200) to Safeguard in exchange for Safeguard's providing these and other administrative services to Novell.
By the summer of 1984, Ray thought it was time to reward the performance of some his key people by making some promotions. At the quarterly meeting of Novell's board of directors in August 1984, Craig Burton was elected vice president of marketing, and Dave Owen was elected vice president of engineering. During 1984, Burton and Owen and other valued employees received salary increases and additional stock. Considering the prior experience of these individuals and the still precarious financial situation of the company, Ray was generous. At year end, for example, Armstrong's base salary was $48,000, Burton's was $50,000, Owen's was in the neighborhood of $40,000 and Ray himself drew a base of $90,000. With commissions based on sales results added in, Armstrong received a total $72,666 and Burton $62,550 for their work in 1984. This was more than double their 1982 compensation from NDSI, and in Orem, it went a long way.
In July 1984, Superset was allowed to buy a total 140,000 shares for a dollar per share, of which three percent ($4,000) was paid in cash.
Another employee whom Ray rewarded in 1984 was Judy Clark. After her divorce from Reid, Judy went to Ray and asked for the Founders Stock that he had neglected to give her in the spring of 1983. Ray agreed that she deserved it, and Judy received her stake in Novell.
Judy reinvented herself after her divorce. She retained her married name of Clark, but to distance herself from her association with Reid she added an "e" to the end: Clarke. She also started referring to herself as "Judith" instead of "Judy" -- it was more in keeping with her new image. "Judith A. Clarke": It had a nice ring to it, appropriately serious and corporate. Her co-workers were instructed never to refer to her as "Judy" in public.
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 percent 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.
Building Marketing Channels and Courting Software developers
Getting Finances and Personnel in place
The Technology Pieces fall in place: Advanced Netware
Building a company mission and Comdex 84
Surfing the high tech wave home (more chapters)