Summary: Novell takes the blow investors have been expecting for a while; S&P is downgrading Novell and analysts are concerned amid takeover expectations

NOVELL keeps looking for a way out of the mess it's in. Novell news got dominated by financial writings, mostly negative ones. S&P is downgrading Novell. It also downgraded Microsoft recently.

The report says: "Standard & Poor’s analyst Jim Yin this morning cut his rating on Novell (NOVL) to Sell from Hold after the company’s disappointing July quarter results after the close yesterday."

Another new article says that "Novell Inc. Falls Short of Analyst Expectation" and adds: "We'll have to see if this negative announcement hurts NOVL's stock price in the near term. NOVL has lost -0.08 percent during the past month and is currently above its 200-day moving average."

Here is some Novell coverage which came before the results [1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12] and some of the coverage which came afterwards [1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20]. Novell's stock took a dive, which some people took advantage of. The dive would have been worse had Novell not warned about poor results in advance. We have already covered these results twice before [1, 2]. Here are some numbers broken down by areas of operation:

Revenue from the Security, Management and Operating Platforms division, which includes the Linux business, fell from $110 million to $108 million. The Collaboration division had revenues of $69 million, a good $11 million less than in the previous year.

More recently these results were also covered in:

• Novell profit slips amid uncertainty
• Novell 3Q In Line, Revenue Slips
• Novell 3Q misses expectations as revenue dips (AP, so posted in many sites)
• Novell falls short in Q3
• Novell’s sales hit by uncertainty over its future
• Takeover bid gives Novell's Q3 a slight hit
• Novell Q3 net income decreases
• Novell Q3 misses Street
• Novell Q3 Profit Declines 6%, Misses Estimate
• Novell 3Q Earnings Miss Wall Street's View
• Uncertainty Over Novell's Future Takes Toll On Sales
• Novell Q3 net revenues down 8% to $199m
• Novell, J. Crew Group results on evening decK
• Novell Disappoints as Ownership Concerns Continue

A site filled with Microsoft boosters said, "Hey, Novell: No News is Bad News"

When pressed on the issue during last night's earnings call, Novell treasurer Rob Kain waved it away: "As soon as the Board has reached a conclusion, we will make a public statement on it." This is the second quarterly report since the failed buyout offer, and we're all still in the dark.

To Novell's credit, investors seem to have plenty of patience for the process. Share prices have wavered around the original buyout price, give or take about 10%. That's a much higher level than where the stock was trading before this drama started. Still, I'd like to remind CEO Ron Hovsepian and his team that not every play for a higher bid works out as planned.

Could VMware buy Novel as several sources have been guessing for months [1, 2]? It is said by Egbert that Novell's secrecy is not helping:

“We remain concerned over management’s silence in relation to the company's strategic review process. The prolonged process is weighing on sales. We think management is focused on selling the company, but as time goes by, the original offer of $5.75 is becoming increasingly attractive,” said Katherine Egbert, an analyst at Jefferies.

Piper Jaffray is just neutral on Novell. ⬆