No End Predicted to Novell-Microsoft Rivalry : Computers: Despite talks, competition in networking will remain fierce, analysts say.

SEATTLE —  Novell Inc. and Microsoft Corp. will remain fierce competitors in computer networking and business applications despite the easing of hostilities between the two companies, analysts said.

Novell’s new chief executive, Robert Frankenberg, met with Microsoft Chairman Bill Gates last month for a broad discussion on cooperation between the two companies, Microsoft officials said Tuesday.

“There was nothing formal that came out of it,” said Bob Kruger, Microsoft director of strategic relations and standards. “They talked about getting together a couple of times a year.”

Nevertheless, some analysts said they were pleased to hear about the meeting after years of antagonism toward Microsoft by recently retired Novell Chairman Ray Noorda.

It was under Noorda that Novell actively encouraged investigations of Microsoft’s business practices. The probes by European and U.S. government agencies were settled last month with an agreement widely seen as a victory for Microsoft, the world’s largest software company.

Analysts said Frankenberg’s July 7 meeting with Gates at Microsoft’s Redmond, Wash., headquarters apparently signals an era of improved cooperation that could benefit customers who use products made by both firms.

But they said the companies will remain fiercely competitive, both in Novell’s core area of computer networking and in the word-processing and spreadsheet areas Novell recently entered through its acquisition of WordPerfect and Borland’s Quattro Pro spreadsheet products.

“These two companies are on a collision course, and it’s their destiny to be competitive with each other, but they also need to work together,” said Rick Sherlund, an analyst with Goldman Sachs.

He and others said customers such as big firms that use software made by both companies could benefit from any improvement in cooperation between Provo, Utah-based Novell and Microsoft.

“The level of complexity is increasing every day, and you want your vendors talking to each other,” said Paul Merenbloom of Piper Jaffray.

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Customers have complained that Microsoft’s Windows operating software does not work well with Novell’s Netware, which dominates personal computer networking with 80% of the market.

Microsoft’s Kruger acknowledged those complaints and said Microsoft is dedicated to improving the compatibility of Windows and Netware, including through the imminent release of Windows NT 3.5, the latest version of its advanced operating system.

He also said he hopes that with Novell being headed by Frankenberg, whom he described as “more level-headed and pragmatic” than Noorda, the two companies can make progress in other areas, such as providing better service to customers that have mixed systems.

Merenbloom noted that Microsoft and Novell have necessarily had professional working relationships for years despite the hostility between their top executives.

“This isn’t breaking down the Berlin Wall,” he said.

Nonetheless, he said the meeting was an example of Frankenberg’s determination to make changes “which go right down into the cultural fibers of the company.”

“I think what we’re seeing from Frankenberg is the beginning of a restructuring of Novell,” he said.