Developing NLMs for Novell Netware was my first job and here is my take:

I think Novell lost its focus and the other market factors also played a role. Novell's decline started when they also tried to compete with Microsoft for Wordprocessor market. Novell's then CEO became obsessed with beating Microsoft at everything . And also the Netware Directory services began losing to Active Directory as Windows 98 shipped with AD client built into it where as one had to manually install NDS clients on Windows. It was simply easier to manage your Windows deployments with AD than NDS. Moreover, IBM throwing in the towel with OS/2 ceded the desktop market to Microsoft Windows AD became the natural solution for managing and administering those desktops.