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For much of the early part of this decade, network software maker Novell looked like a fading light of the technology firmament. Its network operating system, Netware, was globally successful in the 1980s and 1990s, and for 15 years provided the bedrock of the company's revenues. But once Microsoft's Windows Server operating system became established, duplicating many of Netware's functions, these revenues began to dwindle, leaving Novell with a loyal army of customers, but with an unconvincing strategy for replacing lost revenues.

Novell has made previous attempts at metamorphosis, including its attempt to reinvent itself as a web services company, with its $212 million acquisition of SilverStream Software. But Novell came late to the web services party, and struggled to carve out a niche for itself, amid the dominant presence of companies like Microsoft, IBM and BEA Systems.

By late 2003, Novell was attempting to reinvigorate itself by expanding in yet another direction - open source software and services, making several acquisitions in the process. The biggest was the $210 million purchase of Linux distributor SUSE, a rival to market leader Red Hat.

The first big result of this acquisition came in February 2005, when Novell released the combined version of Netware and SUSE Linux - Open Enterprise Server. It hopes this will reaffirm Novell's status as a major player. The combined product is unlikely to win any awards for innovation, but Novell believes the products will attract users for two reasons: first, core features of its network operating system will be available on Linux; second, Novell is including a management layer that runs on top of this platform, making it easier to use.

"There's a growing recognition of the maturity of Linux, and the addition of file and print helps. But to take that into the enterprise, you also need the management layer," says Steve Brown, Novell VP for the UK, Middle East and South Africa.

Novell's strategy relies on its ability to convince a large number of its existing Netware customers to make the switch to Linux. That will then give it a market for its more advanced management layer.

However, some analysts think Novell has lost credibility. "The critical question for existing customers is whether Novell is capable of delivering effective solutions from these strengths," says Earl Perkins, senior director at analysts Meta Group.

For any Netware users (and Novell claims to still have 90 million of them) considering migrating away from the platform, the choices are primarily Windows, Linux or a proprietary Unix system, says Brown. "We're confident that with our history in supporting customers, they'll have the confidence to make the move with us," he adds.

In its most recent financial quarter, ending November 2004, Novell reported just $7 million in subscriptions for its Linux Enterprise Server. That is tiny for a company of Novell's size, and analysts will expect to see a lot more Linux related revenue in the next several quarters.

Novell has been praised for its bold move to reinvent itself, but doubts remain over its ability to execute its plans. The concern stems in part from the departure of vice chairman Chris Stone.

Stone, well known for his strategic vision, is largely credited as the driving force behind Novell's product strategies. Analyst firm Gartner notes: "[Stone's] attempts to re-establish Novell's relevance in the market largely succeeded. However, his vision has not yet resulted in long-term financial growth, and his open-source strategy remains unproven."