EditorsAbout the SiteComes vs. MicrosoftUsing This Web SiteSite ArchivesCredibility IndexOOXMLOpenDocumentPatentsNovellNews DigestSite NewsRSS

03.03.10

Ron Hovsepian Receives Another Large Lump of Cash as Novell Sale Looms

Posted in Finance, Microsoft, Novell, Ron Hovsepian at 5:04 pm by Dr. Roy Schestowitz

Steve Ballmer

Ron Hovsepian as Ballmer

Summary: Coverage of what seems like the inevitable sale of Novell (NOVL) to other hands

LAST YEAR we criticised Ron Hovsepian (Novell CEO) for the fact that he accepted about $6 million in bonuses while firing many SUSE developers whose combined annual wage would also be roughly $6 million. Novell is run by greedy managers mostly for their own benefit it would seem, not really for the interests of the company, its shareholders, its staff, and its vision (GNU/Linux).

A few days ago we found in YouTube this very new video from a nice chap who was laid off by Novell. He learned .NET towards the end of his days at Novell.

So Novell is laying off people. Tough time, eh? Well, not for the Hovsepian family. Ron is receiving an extra $5.7 million for 2009 [1, 2] as though he actually made something special happen. Novell's financial results disappointed investors last week. But anyway, here is where Ron stands:

Novell president and CEO Ron Hovsepian’s total compensation fell 17% in 2009, amid declining annual revenue and a wider net loss.

Hovsepian received compensation in fiscal 2009 valued at $5.7 million, compared to $6.9 million in 2008, according to documents filed late last week with the US Securities and Exchange Commission.

The poor guy. ‘Only’ $5.7 million. What it does not say is that his bonus from last year angered quite a lot of people. It was far too much for far too little in terms of achievements.

Did he perform well?

Well, not quite. In fact, his company is destined to accept a takeover [1, 2], based on most assessments that we found so far. We’ll go through them very quickly and as exhaustively as possible. We have looked at many articles and some general background. Here is what seems like a positive article:

Novell Soars on Takeover Offer

Add Novell (NASDAQ: NOVL) shareholders to the list of those who have figured out how to earn money from open source technologies.

But it has nothing to do with SUSE and the price is not high. Here are some other reports that came out first [1, 2, 3] (it’s a close call, so it’s hard to tell who broke the news) and some of the trailing ones that add:

Elliott is already one of Novell’s largest shareholders and owns 8.5% of the company’s stock.

The original headline from Reuters has the headline “Elliott Associates, L.P. To Acquire Novell, Inc.”

It didn’t quite turn out to be certain, so Reuters reported inaccurately. From the WSJ:

Hedge fund Elliott Associates LP, which holds an 8.5% stake in Novell Inc. (NOVL), offered to buy the rest of the software company for about $1.8 billion.

Hours later came a lot of coverage [1, 2] that characterised Elliott’s move as merely an offer (see the letter at the bottom of this post — a letter that Novell confirmed receiving).

From BusinessWeek we learn that:

Elliott Associates LP said it offered to acquire Novell Inc. for $5.75 a share in cash, 21 percent more than the stock’s closing price.

Microsoft's booster Eric Savitz wrote about it too and he obtained a copy of the letter to Novell.

As The VAR Guy points out, it’s not clear what this whole thing means to SUSE (he also refers to the recent results).

Just last week, Novell announced mixed financial results, but the company did mention that SUSE Linux business has reached the break-even point. The VAR Guy wonders: Was that break-even statement about SUSE Linux an open letter from Novell to other potential suitors? Hmmm… Either way, investors are betting Novell will soon get acquired: Novell shares surged about 26 percent after the buyout offer started making news.

[...]

Either way, two things are clear: Novell received an unsolicited takeover offer. And now that the takeover offer is public news, all eyes are on the future of SUSE Linux.

The Boston press heralds:

Waltham software maker Novell Inc. received an unsolicited takeover bid of about $2 billion from a major shareholder, hedge fund Elliott Associates. Novell said its board will review the offer.

The day after we learned about some more details [1, 2] and saw the effect on the stock. This one article is also of interest:

Elliott is ready to sign confidentiality agreements and begin its due diligence, and it says that the letter is not a legally binding obligation. As El Reg goes to press, Novell is working on a statement to respond to the offer from Elliott and would say no more on the matter.

Secrecy sometimes implies misconduct. Further details [1, 2, 3] add too little, so it remains difficult to know what’s going on deep inside the company and Matt Asay, a former Novell employee, only speculates. He mentions Elliott’s dodgy Congo affairs that we wrote about last night.

Would Elliott sell? Almost certainly. Elliott is an investment firm more known for its trades in Congo debt markets than technology securities and is likely already scouring the market for likely homes for Novell’s different divisions, with the Linux business the best of the bunch.

[...]

In sum, Novell’s legacy has weighed down its ability to push its Linux business into top gear, a problem that won’t afflict likely suitors for that business. These companies have largely relied on Red Hat to be a counterweight to Microsoft on the OS side. But with a healthy middleware and virtualization business, Red Hat starts to look like a credible threat to Oracle, VMware, and other erstwhile partners.

All of which positions Novell’s Linux business to play a critical role in the software industry. Let the bidding begin.

In Reuters Blogs, Elliott is described as “activist hedge fund” (yes, by Reuters), which is a familiar title because of raiders like Carl Icahn who fought Microsoft’s battles to take over Yahoo! (which they eventually did in a way, even cheaply).

Sean Michael Kerner believes that going private would be good for Novell.

In layman terms it basically means Novell is for sale and could be taken private by institutional stock holder/Hedge Fund Elliot Associates. In my personal opinion it’s likely a good deal for Novell and its shareholders.

What if Elliott decided to take over Novell in order to just sell it? That’s a possibility.

Anyway, Novell’s shareholders liked the offer [1, 2, 3, 4] and the market rallied.

The Utah press names other potential bids (as quoted before, as it involves Richard Williams).

Elliott’s bid could trigger more offers from companies such as Cisco Systems Inc., Hewlett-Packard Co. and Microsoft Corp., said Richard Williams, an analyst at Cross Research. Novell reported its sixth straight quarterly sales decline last week, and Chief Financial Officer Dana Russell predicted “muted” revenue in the current quarter.

Just as a reminder, Novell is a declining business. It is pointed out in IDG’s coverage of this latest bid:

Novell has struggled financially, recently reporting its sixth consecutive quarterly sales decline. Revenue fell 10% during its most recent fiscal year wrapped up in October and its net losses widened. CEO Ron Hovsepian’s total compensation fell 17% to $5.7 million.

IDG also has audio coverage of this major news.

AP puts it like this:

In the latest deal, private equity firm Elliott Associates offered to buy the 91.5 percent of software maker Novell Inc. that it doesn’t already own.

Market movement news incorporating Novell (NOVL) ended up as follows:

That pretty much sums up what we’ve found so far. It’s an interesting time because the SCO lawsuit, the WordPerfect lawsuit, and many other things are at stake.


March 2, 2010
The Board of Directors
Novell, Inc.
404 Wyman Street, Suite 500
Waltham, MA 02451
Attention: Richard Crandall, Chairman
Attention: Ron Hovsepian, Chief Executive Officer

Dear Members of the Board of Directors:

I write to you on behalf of Elliott Associates, L.P. and Elliott International, L.P., which collectively own, or have an interest economically equivalent to, 8.5% of the common stock of Novell and are currently one of the Company’s largest stockholders. Elliott is a multi-strategy investment firm with over $16 billion in assets under management focused on employing detailed research to address complex investment situations.

Based on our detailed review of the Company’s publicly available information and our substantial knowledge of the software industry, we are pleased to submit this proposal to acquire all of the shares of common stock of Novell for a cash price of $5.75 per share. This price represents a premium of 49% over the Company’s current enterprise value and 77% over the Company’s 90-day volume-weighted average enterprise value.

As the Company’s cash balance of nearly $1.0 billion represents almost 60% of its current market capitalization, we believe that a premium to enterprise value represents the most meaningful measure of the value that our proposal offers stockholders, valuing the Company’s cash at 100 cents on the dollar despite the fact that a significant portion of that cash is overseas and may not be realized in a tax efficient manner.

Importantly, this price represents a premium of 115% over the Company’s enterprise value on January 4, 2010, the last trading day before we commenced actively acquiring Novell’s common stock. This price also represents a 37% premium to Novell’s closing stock price on January 4, 2010 and a 20% premium to Novell’s closing stock price yesterday. By any measure, we believe our proposal represents a compelling opportunity that your stockholders will find extremely attractive.

Novell is a long-established company that we have followed closely for a considerable period of time. Over the past several years, the Company has attempted to diversify away from its legacy division with a series of acquisitions and changes in strategic focus that have largely been unsuccessful. As a result, we believe the Company’s stock has meaningfully underperformed all relevant indices and peers. With over 33 years of experience in investing in public and private companies and an extensive track record of successfully structuring and executing acquisitions in the technology space, we believe that Elliott is uniquely situated to deliver maximum value to the Company’s stockholders on an expedited basis.

Our proposal is subject to a confirmatory due diligence review of the Company and negotiation of definitive documentation. We are available to sign an appropriate confidentiality agreement and commence our due diligence review immediately. Elliott is prepared to devote considerable resources to completing this transaction and we are confident that, with your cooperation, we will be in a position to execute a definitive transaction agreement on an expedited basis. While we intend to work with financing sources, obtaining financing is neither a condition of our proposal nor a condition to completing the transaction.

We are prepared to meet immediately with you and your advisors in order to answer any questions about our proposal and to work out the details for moving toward a definitive transaction agreement. We also look forward to discussing with management its role with us going forward.

Of course, nothing in this letter is intended to create a legally binding obligation and no such obligation will exist unless and until a definitive transaction agreement is executed. As a result of our substantial share ownership in Novell, SEC rules oblige us to make the existence and contents of this letter public. Please feel free to contact me at (212) 506-2999 to discuss or clarify any aspect of this proposal.

On behalf of Elliott, we are very much looking forward to working closely with the talented employees of Novell to bring the Company forward to its next phase of growth.

Very truly yours,

Jesse A. Cohn

Portfolio Manager

Share this post: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Digg
  • del.icio.us
  • Reddit
  • co.mments
  • DZone
  • email
  • Google Bookmarks
  • LinkedIn
  • NewsVine
  • Print
  • Technorati
  • TwitThis
  • Facebook

If you liked this post, consider subscribing to the RSS feed or join us now at the IRC channels.

Pages that cross-reference this one

2 Comments

  1. NotZed said,

    March 4, 2010 at 9:08 am

    Gravatar

    “Secrecy sometimes implies misconduct.”

    Oh come now Roy. Publicly traded companies have strict rules about these things. It might sometimes imply misconduct, but other times it is simply the law.

    Roy Schestowitz Reply:

    See this followup. It smells bad.

What Else is New


  1. Links 28/3/2017: Linux 4.11-rc4 Kernel Released, Red Hat Surge on Sales

    Links for the day



  2. The Crook Goes to Brussels to Lie About the Unitary Patent (UPC)

    The person who spent years lying about the UPC and severely attacking critics (usually by blatantly lying about them) goes to Brussels for another nose extension



  3. The EPO's HR Roadmap Retrospective

    A look back at the terrible ‘accomplishments’ of the Jesper Kongstad-led Administrative Council, which still issues hogwash and face-saving lies, as one might expect from a protector of Battistelli that lies to national representatives and buries inconvenient topics



  4. Links 26/3/2017: Debian Project Leader Elections, SecureDrop and Alexandre Oliva FSF Winners

    Links for the day



  5. His Master's Voice, Jesper Kongstad, Blocks Discussion of Investigative and Disciplinary Procedures at the EPO

    The Chairman of the Administrative Council of the European Patent Organisation is actively preventing not just the dismissal of Battistelli but also discussion of Battistelli's abuses



  6. Heiko Maas and the State of Germany Viewed as Increasingly Complicit in EPO Scandals and Toxic UPC Agenda

    It is becoming hard if not impossible to interpret silence and inaction from Maas as a form of endorsement for everything the EPO has been doing, with the German delegates displaying more of that apathy which in itself constitutes a form of complicity



  7. With IP Kat Coverage of EPO Scandals Coming to an End (Officially), Techrights and The Register Remain to Cover New Developments

    One final post about the end of Merpel’s EPO coverage, which is unfortunate but understandable given the EPO’s track record attacking the media, including blogs like IP Kat, sites of patent stakeholders, and even so-called media partners



  8. Everyone, Including Patent Law Firms, Will Suffer From the Demise of the EPO

    Concerns about quality of patents granted by the EPO (EPs) are publicly raised by industry/EPO insiders, albeit in an anonymous fashion



  9. Yes, Battistelli's Ban on EPO Strikes (or Severe Limitation Thereof) is a Violation of Human Rights

    Battistelli has curtailed even the right to strike, yet anonymous cowards attempt to blame the staff (as in patent examiners) for not going out of their way to engage in 'unauthorised' strikes (entailing dismissal)



  10. Even the EPO's Administrative Council No Longer Trusts Its Chairman, Battistelli's 'Chinchilla' Jesper Kongstad

    Kongstad's protection of Battistelli, whom he is supposed to oversee, stretches to the point where national representatives (delegates) are being misinformed



  11. Thanks to Merpel, the World Knows EPO Scandals a Lot Better, But It's a Shame That IP Kat Helped UPC

    A look back at Merpel's final post about EPO scandals and the looming threat of the UPC, which UPC opportunists such as Bristows LLP still try hard to make a reality, exploiting bogus (hastily-granted) patents for endless litigation all around Europe



  12. EPO Critics Threatened by Self-Censorship, Comment Censorship, and a Growing Threat to Anonymity

    Putting in perspective the campaign for justice at the EPO, which to a large degree relies on whistleblowers and thus depends a great deal on freedom of the press, freedom of speech, and anonymity



  13. Links 25/3/2017: Maru OS 0.4, C++17 Complete

    Links for the day



  14. Judge and Justice Bashing in the United States, EPC Bashing at the EPO

    Enforcement of the law based on constitutional grounds and based on the European Patent Convention (EPC) in an age of retribution and insults -- sometimes even libel -- against judges



  15. Looking for EPO Nepotism? Forget About Jouve and Look Closely at Europatis Instead.

    Debates about the contract of Jouve with the EPO overlook the elephants in the room, which include companies that are established and run by former EPO chiefs and enjoy a relationship with the EPO



  16. Depressing EPO News: Attacks on Staff, Attacks on Life, Brain Drain, Patents on Life, Patent Trolls Come to Germany, and Spain Being Misled

    A roundup of the latest developments at the EPO combined with feedback from insiders, who are not tolerating their misguided and increasingly abusive management



  17. It Certainly Looks Like Microsoft is Already Siccing Its Patent Trolls, Including Intellectual Ventures, on Companies That Use Linux (Until They Pay 'Protection' Money)

    News about Intellectual Ventures and Finjan Holdings (Microsoft-funded patent trolls) reinforces our allegations -- not mere suspicions anymore -- that Microsoft would 'punish' companies that are not paying subscription fees (hosting) or royalties (patent tax) to Microsoft and are thus in some sense 'indebted' to Microsoft



  18. Links 24/3/2017: Microsoft Aggression, Eudyptula Challenge Status Report

    Links for the day



  19. Bernhard Rapkay, Former MEP and Rapporteur on Unitary Patent, Shoots Down UPC Hopes While UPC Hopefuls Recognise That Spain Isn't Interested Either

    Germany, the UK and Spain remain massive barriers to the UPC -- all this in spite of misleading reports and fake news which attempted to make politicians believe otherwise (for political leverage, by means of dirty lobbying contingent upon misinformation)



  20. Links 23/3/2017: Qt 5.9 Beta, Gluster Storage 3.2

    Links for the day



  21. The Administrative Council of the European Patent Organisation Has Just Buried an Innocent Judge That Battistelli Does Not Like

    An innocent judge (never proven guilty of anything, only publicly defamed with help from Team Battistelli and dubious 'intelligence' gathering) is one of the forgotten casualties of the latest meeting of the Administrative Council (AC), which has become growingly complicit rather than a mere bystander at a 'crime' scene



  22. Nepotism at the European Patent Office and Suspicious Absence of Tenders for Big Projects

    Carte blanche is a French term which now perfectly describes the symptoms encountered in the European Patent Office, more so once led by a lot of French people (Battistelli and his friends)



  23. “Terror” Patent Office Bemoans Terror, Spreads Lies

    Response to some of the latest utterances from the European Patent Office, where patently untruthful claims have rapidly become the norm



  24. China Seems to be Using Patents to Push Foreign Companies Out of China, in the Same Way It Infamously Uses Censorship

    Chinese patent policies are harming competition from abroad, e.g. Japan and the US, and US patent policy is being shaped by its higher courts, albeit not yet effectively combating the element that's destroying productive companies (besieged by patent trolls)



  25. 22,000 Blog Posts

    A special number is reached again, marking another milestone for the site



  26. The EPO is Lying to Its Own Staff About ILO and Endless (Over 2 Years) EPO Mistrials

    The creative writing skills of some spinners who work for Battistelli would have staff believe that all is fine and dandy at the EPO and ILO is dealing effectively with staff complaints about the EPO (even if several years too late)



  27. EPO’s Georg Weber Continues Horrifying Trend of EPO Promoting Software Patents in Defiance of Directive, EPC, and Common Sense

    The EPO's promotion of software patents, even out in the open, is an insult to the notion that the EPO is adhering to or is bound by the rules upon which it maintains its conditional monopoly



  28. Protectionism v Sharing: How the US Supreme Court Decides Patent Cases

    As the US Supreme Court (SCOTUS) starts delivering some decisions we take stock of what's to come regarding patents



  29. Links 22/3/2017: GNOME 3.24, Wine-Staging 2.4 Released

    Links for the day



  30. The Battistelli Regime, With Its Endless Scandals, Threatens to Crash the Unitary Patent (UPC), Stakeholders Concerned

    The disdain and the growing impatience have become a huge liability not just to Battistelli but to the European Patent Office (EPO) as a whole


CoPilotCo

RSS 64x64RSS Feed: subscribe to the RSS feed for regular updates

Home iconSite Wiki: You can improve this site by helping the extension of the site's content

Home iconSite Home: Background about the site and some key features in the front page

Chat iconIRC Channel: Come and chat with us in real time

CoPilotCo

Recent Posts