Eric E. Schmidt Ceo, Novell Inc.

By most accounts, Eric Schmidt wasn't Novell Inc.'s first choice to lead the networking company back from the abyss. The Provo (Utah) software producer, once a pretender to Microsoft Corp.'s throne, combed the computer industry for nearly a year. Novell offered the top job to Ray Lane, Oracle's No. 2 executive who turned it down, before hiring former Sun Microsystems Inc. Chief Technology Officer Schmidt as CEO last March.

Nevertheless, with nearly 20 years of experience in computer networking and the Internet, Schmidt may be just the medicine Novell needs. He is best known for championing Java, Sun's hot Internet software," and for helping make it an almost universal computer language for writing software for the Net and for corporate intranets. Says Jonathan Feiber, a partner at venture capitalist Mohr, Davidow Ventures who worked for Schmidt for six years at Sun: "He probably understands Novell's problems as well as anyone they could have recruited."

Schmidt hopes to revive Novell's fortunes by making the company's software, which runs millions of personal computer networks, work much better on the Internet and corporate intranets. He also aims to have Novell, which stumbled after trying to take on Microsoft on its own turf with the 1994 purchase of WordPerfect Corp., improve its network products so they mesh better with existing software such as Windows and Java. Among his plans are establishing Novell's network directory, which makes it easy to find and communicate with others on a network, an Internet standard.

Still, Novell's NetWare software for running PC networks has lost ground to Microsoft's Windows NT operating software. And it has a long way to go to win back credibility and

keep its base of 55 million PC customers from defecting to Microsoft and others. "At best, they're holding their own," says Robert Lewin, an analyst at market researcher Dataquest Inc. "Time is running out." After posting a loss of $14.6 million on sales of $273 million in its second quarter, ended April 30, Novell plans to lay off about 1,000 employees, or 18% of its workforce, in the current quarter.

One thing Schmidt has in spades is the technical background to take Novell into the Internet era. A Ph.D. in computer science, Schmidt worked at two seminal technology labs, Bell Laboratories and Xerox Corp.'s Palo Alto Research Center, and at chip pioneer Zilog Inc. The Virginia native joined Sun in 1983, a year after its founding, and ran various software operations. As chief technology officer starting in 1994, he helped popularize Java as a potential alternative to Microsoft's Windows dominance. But during the past two years, he has done more talking at conferences than managing. He told

friends he wanted to get back into operational management.

He chose an extraordinarily challenging job for that. "It's a tough, tough, tough job," says Judy Estrin, CEO of Precept Software Inc. and a former colleague at chipmaker Zilog. "It's always harder to rebuild yourself." So far, Schmidt has made some tough decisions, such as eliminating nearly 20% of Novell's jobs in June and firing or allowing the departures of 30% of top executives. Next comes the big challenge: Can he manage a $1.4 billion company that has been wracked by internal squabbles as well asby competition from outside? Tune in next year to find out.