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03.03.10

Analyst Expects Microsoft Bid to Buy Novell

Posted in Deals, Finance, Microsoft, Novell at 7:42 am by Dr. Roy Schestowitz

Novell blinded by money

Original image from Wikimedia

Summary: Richard Williams from Cross Research believes that Microsoft or even its ally SAP might attempt to buy Novell for approximately $2 billion

LAST NIGHT we wrote about Novell's possibly inevitable fate as a private company, taken over by another. We have not prepared any detailed posts on the subject yet, but here is some food for thought:

Elliot offers to buy Novell Inc. for $2bn; Novell stock surge

[...]

“The deal price is on the low side compared to recent deals that were transacted in the enterprise software space,” said Cross Research analyst Richard Williams.

[...]

William said there could be more companies who would offer a similar bid for Novell as Elliot’s. HP, SAP, and Microsoft are expected to be the possible suitors.

Microsoft, already having a strong business partnership with Novell, sells Novell’s version of Linux to its customers.

This whole episode may explain why a lot of executives quit the company recently. At this stage, it seems unlikely that Novell will stay NOVL this year.

“Now [Novell is] little better than a branch of Microsoft”

LinuxToday Managing Editor

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12 Comments

  1. Danielh said,

    March 3, 2010 at 8:04 am

    Gravatar

    I cant imagine the antitrust being stupid enough to allow Microsoft buying Novell. Its the only serious competitor to Microsoft in the realm of LDAP, policy management and file services.

    Roy Schestowitz Reply:

    Yes, but Microsoft can enclose Novell using a shell like Elliot and SAP, whose interests can better align with Microsoft’s.

  2. JohnD said,

    March 3, 2010 at 4:26 pm

    Gravatar

    The only two areas of Novell that are worth a premium price tag are Identity Management and it’s patent portfolio. The legacy stuff isn’t worth the dough (even though I wish someone would buy and revive Netware). Groupwise doesn’t have enough market share to make it worth the money for IBM or M$. Anyone wishing to enter the space probably wouldn’t have enough cash for a serious bid. Groupwise also doesn’t have any real cutting edge technology to make it worth buying either. The only parts of the Linux area you can sell are support and the client list/support contracts. I think it’d be far cheaper to just generate FUD and go after the clients directly then to purchase the contracts. Identity is a hot topic these days so there would probably be more than a few companies interested in that piece. The real concern should be – where will the patent portfolio end up? Chances are it won’t be with OIN. Sometimes better the devil you know than the one you don’t.

    Roy Schestowitz Reply:

    I worry about the SCO lawsuit, the WordPerfect lawsuit, and other issues too.

    JohnD Reply:

    If the bean counters run the show, you can watch them disappear. Unless they are convinced that winning will more than cover the cost of litigation, they will find a way to end them quickly. Elliot’s only concern is cash – not long term consequences. Despite their assertions that they “know” about technology companies I really don’t think they have a clue what they are getting into. This situation is precisely why I never supported the boycott – you never know just how things are going to play out. We may not like the deal, but the industry needs Novell. Without it, M$ gets an even firmer grip on the industry. Now it’s up to the Novell directors, if they think they will do better by waiting they will say no. If they don’t they will take the payday and walk away.

    Roy Schestowitz Reply:

    Yes, there is that issue too, I acknowledge that. Remember that a boycott strives to change behaviour, not necessarily to destroy.

    JohnD Reply:

    Yes usually by depriving the offending party of something – usually money. Petitions, open letters, email and snail mail campaign can do the same thing without the financial impact. The colonies petitioned the king before they resorted to revolution. More recently there was the “Nuts” campaign by the fans of the TV show Jericho – the inundated the corporate offices with cans of nuts in an effort to keep the network from canceling the show. It worked if only for a season, but they did get a last episode that wrapped up the story. These other measures may have had a more positive, and possibly profound, impact on Novell. It’s doubtful that they would have backed out of the agreement, but they may have changed other practices going forward.

    Roy Schestowitz Reply:

    John, I could use your opinion on something. Do you know who’s behind the bid?

    http://hattie.typepad.com/hatties_web/2007/11/paul-e-singer.html
    http://www.sourcewatch.org/index.php?title=Paul_E._Singer
    http://www.nytimes.com/2007/11/22/us/politics/22singer.html?_r=3&oref=slogin

    I’ll write about this tomorrow. See what you can make of it.

    JohnD Reply:

    As a rule anyone who gets involved in politics has an agenda. It may be good and altruistic, or self serving, but they have an agenda. While this is just a snapshot of the man it seems that his focus is on making money at any cost. That he’s interested in Novell reinforces my opinion that Novell isn’t doing a poor as some (including financial pundits) seem to think. He’s offered 2 billion, but really it’s only a “risk” of a little over a billion because of the $900+billion in the bank. Quarterly revenues are around 200 million so they are bringing in around 800 million/year. Right now they are retaining about 10% so profit/net income should be around 80mil/year. If it goes private they will be making decent money while they figure out how to break it apart. I seriously doubt they will infuse capital in order to bolster it’s market position against M$ and Apple. They probably think the Linux stuff is something they can sell when in reality all they can sell is the support dept and contracts – I can’t see anyone forking over serious cash for that. Identity and patents are the best areas and I can’t see them going for over a billion dollars.

    Roy Schestowitz Reply:

    It’s not just politics though. I’ll show you tomorrow.

    JohnD Reply:

    I didn’t mean to suggest it was about politics, but more that he has an agenda even if it’s not completely clear yet.
    Get some sleep.

  3. uberVU - social comments said,

    April 7, 2010 at 9:07 am

    Social comments and analytics for this post…

    This post was mentioned on Identica by schestowitz: Analyst Expects #Microsoft Bid to Buy #Novell http://boycottnovell.com/2010/03/03/richard-williams-on-novl/

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