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03.02.10

Novell May be Going Private, Hedge Fund Has Cash

Posted in Finance, Microsoft, Novell, SCO at 7:01 pm by Dr. Roy Schestowitz

Elliott Associates logo

Summary: Novell is having a ‘SCO moment’ as takeover seems likely, courtesy of a funding pool whose money could come from anywhere

BIG news came in via reader “dyfet”. Just over a year ago, Canonical’s current COO (who worked for Novell) said that Novell should go private. According to this new report, it might happen shortly.

Elliott offers to take Novell private for $2 bln

[...]

This offer price represents a 21 percent premium to Novell’s Tuesday close on Nasdaq.

There will surely be a lot of coverage like this later on. Where do these funds come from? That firm seems somewhat dodgy, just just like those firms that proposed saving SCO (financial rescue of a trial against Linux).

The vulture wars

A New York hedge fund is in a court battle with the Republic of Congo over who is robbing the oil-rich but dirtpoor African nation.

[...]

Although he didn’t mention any names, the President was clearly referring to Kensington International, a Cayman Islands company that owns more than $100 million of Congo’s sovereign debt and is controlled by Elliott Associates, a $6.5 billion New York City hedge fund.

Cayman Islands? Congo? Control by proxy? What is this firm? According to this press release, it describes itself as follows:

Elliott Associates, L.P. and its sister fund, Elliott International, L.P. have more than $5.2 billion of capital under management as of July 1, 2005. Founded in 1977, Elliott Associates is one of the oldest hedge funds under continuous management. The Elliott funds’ investors include large institutions, high-net-worth individuals and families, and employees of the firm.

So in principle, a company like Microsoft too can lend some money for Elliott Associates to use that money. That’s just a theory. We’ll soon post today’s IRC logs which contain more information.

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7 Comments

  1. JohnD said,

    March 3, 2010 at 8:19 am

    Gravatar

    A little food for thought. A hedge fund isn’t going to invest in a company that’s a sinking ship financially. The same goes for any other company like M$ or SAP especially given that there are other companies out there who (according to you) are doing much better in the Linux business i.e. RedHat. Even if M$ were to make an offer for Novell I seriously doubt the DOJ would allow it to go through. Apple and most likely RedHat would make a huge stink about a company that already has a monopoly in the OS arena to expand into one of it’s only competitors’ arena. Let’s review the reasons for buying a company. Eliminate competition for similar products (usual M$ tactic), expand into new area(s), improve market share in existing areas. If Novell is circling the drain financially as you’ve tried to lead your readers to believe there is no reason to buy Novell – it will die on it’s own. For the last two Novell would only be considered if the purchaser thinks they can contribute positively to the bottom line. In short if you’re correct and Novell is purchased or taken private – you’ve been wrong about their financial status.

    Roy Schestowitz Reply:

    No, Novell still has assets.

    By the way, rumours about takeover have floated for quite some time. Novell tried to deny them, poorly (masterful phrasing).

  2. JohnD said,

    March 3, 2010 at 8:32 am

    Gravatar

    And before you start pointing to Elliot’s statement – the keyword in the article is “undervalued”. You have someone who doesn’t have a clue about technology looking to manipulate a company in such a way as to improve on it’s investment. This is what happens when you let bean counters make decisions. IBM just laid off how many people? The world wide economy is in the toilet and this guy is looking to make a quick buck and improve his bottom line.

    Roy Schestowitz Reply:

    IBM is probably moving jobs to India this month (I saw a report a few days ago). I’d call it offshoring/globalisation, not layoffs. Microsoft does that too to an extent (and many of its US workers are also imported).

  3. your_friend said,

    March 4, 2010 at 10:10 am

    Gravatar

    JohnD, Novell does not have to be in good financial shape or offer anything of value to society for people to want to keep it running. SCO is an example of a company that exists to harass competition through lawsuits and is mostly funded by Microsoft through intermediaries like Baystar Capital. SCO quit offering anything of net value to society about a decade ago and has been a money loser for most ofthat time. Boycott Novell noticed the same thing happening to Novell, a powerful former competitor being turned into a satellite of Microsoft and then proxy for harassing competitors. It should be pretty obvious by now that doing as Microsoft says and boosting Microsoft tech is a sure way to lose lots of money and ruin your tech business.

    Microsoft’s work with both SCO and Novell is classic anti-trust activity and the US DOJ should be acting against it. There are laws against this kind of “competition” because it offends and robs society as whole and specific companies in particular. There are limits to how well a free market serves society. Reasonable people make laws against obvious predation like mugging, high seas piracy and business trusts designed to destroy competition in markets. With Oracle eating Sun and Microsoft having devoured Yahoo, it looks like there are no free standing Unix companies left and precious few early internet giants not subjected by Microsoft. Google stands alone because Microsoft destroyed the rest. It is annoying but typical that Microsoft now screams “anti-trust” at Google because Google refuses to yield and is economically successful because of it.

    JohnD Reply:

    I’m willing to be that the last thing this guy/company wants to do is to keep Novell running. I’m betting that his goal is to take it private so he can sell off the pieces. Roy sent me some links last night about other things this guy has done and it looks like his motivator is money plain and simple.
    SCO isn’t so clear cut in the eyes of the law. M$ may have been giving money via back channels to help the lawsuits, but that’s a patent issue which is legal in the US. There is no direct assault on Linux in terms of removing it from competition – just that it “may” be infringing on patents. There is nothing for the DOJ to act on at this point. Now if M$ were to purchase Novell that would be an uphill battle because now they are gaining more market share by owning a company that sells (support) for a competing OS.
    If M$ is working behind the scenes it’s probably to get the Novell patent portfolio without having to worry about DOJ battles. They could then sell of all the Unix related stuff to trolls and God only knows what else.
    I saw the Google thing coming from a long way off. Turn about is fair play.

    Roy Schestowitz Reply:

    Microsoft did this to Google before (several times but not confirmed by Microsoft).

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