Summary: Novell’s proprietary software under the magnifying glass
Novell’s Pulse has received a lot of attention upon its debut as a beta [1, 2, 3]. Pulse seems to be proprietary (there is no official word that we can find) and apart from some older coverage that we missed [1, 2], there is this introduction to new users.
Summary: Novell BrainShare has the company’s CEO, Ron Hovsepian, avoiding the subject of Elliott Associates, which still wants Novell acquired
IN the news we keep hearing about Novell spurning a buyout offer but not ruling out an acquisition in general [1, 2, 3, 4]. In fact, based on the reaction of the vulture fund, there is expectation that another buyout offer is on its way. “Novell Says ‘No’ but Elliot Hears ‘Maybe’,” says ECT.
An offer of $2 billion just wasn’t enough for Novell’s board of directors, which rebuffed a purchase offer from Elliot Associates. The board says it’s considering other options, but Elliot says it will keep in pursuit. Novell has hinted that it would consider selling for the right price, either to Elliot or another suitor. If that comes to pass, what happens to Suse Linux?
After rejecting an unsolicited takeover bid on March 20, Novell had to communicate some quantifiable business progress during the Novell BrainShare conference this week in Salt Lake City, Utah. With that reality in mind, CEO Ron Hovsepian (pictured) and Chief Marketing Officer/Channel Chief John Dragoon offered The VAR Guy a financial and channel partner progress report on March 22. Here’s a recap.
Alas, this is longer than a simple recap.
During our discussion, CEO Hovsepian was careful not to say too much about the recent Elliott Associates bid for Novell. His standard statement: Novell will continue to fulfill its fiduciary responsibilities to shareholders.
If the negotiations with Elliott Associates were history, why would he avoid talking about them? Novell’s CEO only made one carefully-crafted statement over the weekend. It’s likely to suggest that he is keeping the door open; he does not want to speak badly about the vulture fund, maybe because he reckons that another bid will come with a different price, as expected right from the start (see the posts below). █
Novell Inc. said a $5.75-a-share acquisition offer from Elliott Associates LP is “inadequate” and undervalues the maker of Linux operating-system software.
Novell’s board is reviewing its alternatives, which include a stock repurchase, joint ventures, a cash dividend, a recapitalization and a sale of the company, the company said in a statement.
In the mainstream press, a lot of attention is paid to the word “inadequate”, which is included in many headlines [1, 2, 3, 4, 5, 6, 7]. It does not indicate an idealogical issue but one that’s to do with Novell being undervalued. According to the VAR Guy, Novell “Welcomes Other Bidders”.
Translation: Novell is willing to listen to more takeover bids. But is that really news? Shouldn’t Novell’s board always be looking for alternatives to enhance stockholder value?
Also, Novell’s rejection of the Elliott Associates’ bid mentions “Novell’s growth prospects.” Hmmm… Is Novell really a growth company? Top-line financial results suggest no. But individual product groups — particularly SUSE Linux — suggest yes.
There is a push for Novell to offer itself, maybe to another company like Microsoft. “Elliott welcomes Novell’s call to sell company,” says Reuters. There is an official statement.
Investment fund Elliott Associates, which had previously bid for Novell Inc (NOVL.O), said it welcomed the business-software maker’s decision to sell itself.
“We welcome the Board’s decision to conduct a sale of the company, which we believe is the best way to maximize shareholder value,” Elliott said in a statement.
It sounds rather fishy. It’s almost as though they just want another company to pick Novell up. Additionally, since Singer’s shell has almost 10% of Novell (in terms of shares), the surge of the stock has already made him money and publicity.
More in the New York Times (blogs): “Elliott Welcomes Novell’s Move to Put Itself in Play”
Elliott Associates said Monday that it was encouraged that Novell would consider selling itself after the business software maker rejected Elliott’s unsolicited $2 billion takeover offer as “inadequate.”
“We welcome the board’s decision to conduct a sale of the company, which we believe is the best way to maximize shareholder value,” Elliott said in a statement. “Our goal is to acquire Novell, and our cash offer to acquire all of the company’s shares for $5.75 per share provides shareholders with a substantial premium.” It added, “We look forward to the process and to actively pursuing an acquisition of the company.”
Novell is up on expectations of a sale [1, 2], which investors perceive as a positive thing. As we stressed before, Novell is just bargaining. The initial rejection does not mean that Novell opposes a takeover. It’s like an animal’s love dance. █
Summary: It’s rutting season for Novell’s Ron Hovsepian and Elliott Associates’ Singer as the company keeps diminishing but wants to be valued more generously
Based on this new post from Novell’s CMO (John Dragoon), Novell has just 3,600 employees. That’s about 300 employees less than last year and it exceeds the cuts which Novell announced last year, so the numbers surprise us somewhat. It wasn’t announced or disclosed based on what we could find (and we look very carefully at everything about Novell). Novell had laid off many developers of Linux. Luc continues to make good contributions to kernel space. It’s just a shame that Novell focuses more on Mono and Moonlight and less on Linux, so it let Luc go (despite his great value).
“Novell had laid off many developers of Linux.”Novell is a confused and schizophrenic company. If Novell keeps shrinking at this pace, its value in the eyes on the hedge fund is likely to decline, not increase. At the moment, Novell plays hard to get (as expected by Andy Updegrove for example) in order to change the bid/price. We cannot confirm if this is authentic (no verification yet), but the timing makes sense; it comes just ahead of BrainShare in order to instill confidence in the minds of attendees.
Someone called “FlyingGuy” writes “In an e-mail sent to partners and VARS ( of which I am one ), CEO Ron Hovsepian sent the the following:”
Dear Valued Partner,
As you may know, on March 2nd, Elliott Associates, L.P. announced an unsolicited, conditional proposal to acquire Novell. Today we issued a press release announcing that our Board of Directors has concluded, after careful consideration, including a review of the proposal with its independent financial and legal advisors, that Elliott’s proposal is inadequate and that it undervalues the Company’s franchise and growth prospects.
Additionally, we announced that our Board has authorized a thorough review of various alternatives to enhance stockholder value.
Our relationship with you is extremely important to all of us at Novell, and I want to assure you that you can remain confident that we are committed to serving you as we always have. I also want to reaffirm to you that it remains business as usual at Novell, and we do not intend for there to be any changes in our relationship with you. Please do not hesitate to contact me or other members of our team at any time; we always strive to be available to provide you the best solutions for your needs.
On behalf of the Board and management team, I thank you for your ongoing commitment to Novell.
Summary: Novell’s proprietary business assets and what they have been up to in the past week
NOVELL news coverage has recently been overwhelmed by the big bid [1, 2, 3, 4, 5, 6, 7]. Novell’s PR team has been very active despite all of this and it hardly even mentioned the bid, instead choosing to focus on fluff like SaaS and a survey that Novell was conducting itself in order to support its position, apparently.
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 confirmedreceiving).
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.
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.
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.
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.
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
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.
Summary: News touching on Novell’s non-Free/libre component of the business
THIS is the third part which covers Novell news from the first two weeks of February. This part covers Novell’s proprietary side, of which there is a lot (Novell is predominantly a closed-source company). What we happen to have found along the way this week is that Novell is not just a company that makes jewelry; there is yet another company called Novell Pharmaceutical Laboratories. Here is what we gather from the press release:
Summary: Novell’s CTO Jeff Jaffe and Zonker (the symbol of OpenSUSE) say their last words before leaving Novell, replacements are imminent
A Web site called “Boycott Novell” may be biased, but Novell does seem like it's crumbling these days. It is being said by a lot of people outside this Web site. The departure of managers ought to be self explanatory. This post covers just a couple of the latest (there are more), namely those whose last day or week at Novell is right about now.
Jeff Jaffe, Meet Externality
Just a year after he had joined Novell (November 2005), Jaffe played a role in hooking the company up with Microsoft. He gave a talk at the press event announcing the deal, where he explained its technical nature. We wrote about this before [1, 2] and also touched on his professional history (similar to Ron Hovsepian’s because of IBM). In addition, we wrote about his departure before, so it is not exactly news. Novell hid it under the banner of “reorg”, so Ben Kevan, for instance, knew nothing about it until Jeff Jaffe wrote a “goodbye” blog post.
A few days after the news from Zonker, we get the news that Jeff Jaffe, Novells CTO, is also leaving the company for new ventures in life after 4 years.
What does this mean to the company? What really is going on at Novell?
Actually, the news about Jeff Jaffe goes almost a couple of months back. It is surprising how quiet Novell has managed to keep it (same with the departure of Levy).
As we noted here many times before, former Microsoft managers become Novell managers [1, 2, 3, 4, 5, 6, 7, 8], so it will be interesting to see the professional history of Novell’s new CTO. Here is what Jaffe wrote in his last post:
Nostalgia. I’m writing as I complete my four years at Novell. A great deal achieved—but—as with any company still more to do. Here are my thoughts as I move to my next opportunity.
The Microsoft partnership has been the most fascinating. An arch-competitor. Building bridges between proprietary and open source. Enormous financial benefit for Novell. Viewed as controversial by some. Two companies kept their focus on the ultimate end goal—meeting customers’ needs—and struck an agreement for everyone’s benefit. My participation in the cultivation and creation of this relationship is my most lasting contribution to our shareholders and personal growth.
He says that Microsoft and Novell “struck an agreement for everyone’s benefit.” Wow, isn’t that a sweeping statement? He must never have heard of the notion of externality, has he? Especially one that punishes his very own suppliers. The deal with Microsoft was an utter failure, as his departure too serves to indicate.
Zonker is leaving Novell and his departure was covered by The H, which is not “big” press, but still, it’s something. “Novell loses Linux community manager” was the headline.
This week has flown by. Tomorrow will be my last “on duty” day with Novell. I’ve spent much of this week handing off tasks or information to co-workers and saying goodbyes.
Well, “goodbyes” is overselling it a bit — I hope. Since I telecommute, I’ll be just as close to everyone I’ve worked with on Monday as I have been the past two years, and hope to remain in touch with all of the friends I’ve made at Novell and in the openSUSE community long after I stop having an @novell.com address.