12.12.08

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Novell Slides Days After the Financial Results

Posted in Finance, Microsoft, NetWare, Novell, SCO, UNIX at 2:12 pm by Dr. Roy Schestowitz

Novell's value slides

THE release of OpenSUSE 11.1 is less than a week away. While the project is marketed as though it’s independent from Novell (it’s not), the company is in poor shape following bad results (the partners at Microsoft are on the same boat). Here is a curious bit from the news:

“There are companies out there that used a huge chunk of their cash to make acquisitions recently, or they bought back their stock at two or three times its current level. Now that the time is finally right, they can’t do a buyback,” said Mark Murphy, a Piper Jaffray Companies analyst who follows Novell Inc. “They’re looking and saying, ‘Is this Armageddon? Is it the Great Depression, Part II?’ What exactly are they sinking into here? So they’re retrenching when ideally they should be doing the opposite.”

[...]

Novell’s stock buyback program has been a conservative one so far, designed to maintain value for shareholders as the company disburses stock-based compensation to employees, said CFO Dana Russell. But Russell acknowledged the company is feeling pressure from its shareholders to spend the cash it holds. In today’s interest market, cash earns only 1 to 2 percent, he pointed out. “People don’t invest in companies like Novell to get a 1 or 2 percent return,” he said.

Dana Russell is right. Some people invested in Novell only to see half of their money gone. That’s almost -50% ‘return’ to be precise, not “1 or 2 percent return.”

Then, there’s the series of acquisitions (recent example). That would be Novell trying to buy its way out of persistent losses while at the same time buying back its own stock [1, 2] to prevent shares from dropping into oblivion.

Novell is far too dependent on Netware [1, 2] and on Microsoft's mercy/giveaways. It’s very much like SCO with a dying UNIX business and cash infusions from Microsoft. SCO too used to contribute to Linux.

“…Microsoft wished to promote SCO and its pending lawsuit against IBM and the Linux operating system. But Microsoft did not want to be seen as attacking IBM or Linux.”

Larry Goldfarb, Baystar, key investor in SCO

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16 Comments

  1. Yfrwlf said,

    December 12, 2008 at 8:43 pm

    Gravatar

    Last time I said no one was doing very hot over the long period, and that’s obvious due to the recession and all, but after looking at the three month history for several companies, there’s actually an upward movement during the last 30 days for Yahoo, Google, and Red Hat but Novell and Microsoft are lower or leveled off.

    I’m not expert economist or anything, just piecing together what I see and I thought it was interesting. :P

    Either way, it’s a really great time for open source operating systems to become much more known.

  2. Roy Schestowitz said,

    December 12, 2008 at 8:54 pm

    Gravatar

    It’s happening, but not in the English-speaking world (and press); not just yet, anyway. Freedom comes from those that hunt for it, mostly in developing nations.

  3. Anonymous said,

    December 13, 2008 at 6:03 am

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    This is Journalism???

  4. Josh Bell said,

    December 13, 2008 at 8:41 am

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    You can’t read anything into 30 days unless you are day trading. Investing in any company takes a lot of patience. The market jumps around. Granted Novell and MS over the last 30 days overall have dropped slightly 7.5 % for Novell and 6.75 % for MS, while Red Hat and Google went up Red Hat up 6.75% and Google up 8.5%. If you look at the last 90 days though you will see that Red Hat has the largest drop, followed by Novell, then Microsoft and then Google. Red Hat in Mid November lost almost 60% of its value. Neither of the other three have seen that large of a drop in a one day period. Just another way to view it.

    Take that FWIW since apparently I am only here to heckle and I have no sense of humor.

  5. Roy Schestowitz said,

    December 13, 2008 at 8:47 am

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    Please show me where in this post I have Red Hat (RHT) or Google (GOOG) mentioned.

  6. Dan O'Brian said,

    December 13, 2008 at 9:01 am

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    Roy: that’s precisely the problem. You aren’t mentioning other companies, which takes the stock value of Novell out of context.

    It’s like badmouthing someone for only getting a 72% on an exam while failing to mention that everyone else in the course flunked it.

  7. Roy Schestowitz said,

    December 13, 2008 at 9:36 am

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    The problems of Novell are shared by many in a slumping economy. Readers who don’t live under a rock already know this.

  8. Josh Bell said,

    December 13, 2008 at 9:46 am

    Gravatar

    The response wasn’t to you Roy, the response was to Yfrwlf who mentioned those companies in the first comment.

    Last time I said no one was doing very hot over the long period, and that’s obvious due to the recession and all, but after looking at the three month history for several companies, there’s actually an upward movement during the last 30 days for Yahoo, Google, and Red Hat but Novell and Microsoft are lower or leveled off.

    I’m not expert economist or anything, just piecing together what I see and I thought it was interesting.

    Either way, it’s a really great time for open source operating systems to become much more known.

  9. Yfrwlf said,

    December 13, 2008 at 3:11 pm

    Gravatar

    @Josh: Yeah, I know all that, you basically said the exact same thing I said in an earlier article about the financial state of MS and Novell and such.

    Ultimately it’s very hard to assume anything, there’s a lot of jumping around, but one thing is clear and that is businesses aren’t doing so hot right now across the board. I think what may help to give the best picture will be seeing where everyone is at ratio-wise after the economy is over with, as well as seeing which ones rebound the fastest. Not that the stock market is a gold-backed bastion of truth or anything. You take what knowledge you feel you can.

    However, many analysts try to make predictions based off shorter-term events. I give them kudos for trying, but it’s certainly riskier to do so, you’re right.

  10. Roy Schestowitz said,

    December 13, 2008 at 3:20 pm

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    Remember that Novell and Microsoft are both buying their own stock very massively (esp. Microsoft). The share prices don’t tell the whole story.

  11. Yfrwlf said,

    December 13, 2008 at 3:37 pm

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    @Roy: True and that’s one great example of the unreliability of stock values, there’s a lot more you have to look at to get an accurate picture of how a company is doing. Obviously Enron is another good example, along with what’s-his-face you just reported on (didn’t care enough to try to remember!). :)

  12. Yfrwlf said,

    December 13, 2008 at 3:38 pm

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    About the guy, I mean, cause he was a jerk. :P

  13. Roy Schestowitz said,

    December 13, 2008 at 3:41 pm

    Gravatar

    Madoff?

    http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSLD12500520081213
    http://online.wsj.com/article/SB122910977401502369.html?mod=googlenews_wsj
    http://www.bloomberg.com/apps/news?pid=20601103&sid=aU0f02zh0mtc&refer=us
    http://www.reuters.com/article/marketsNews/idUSN1232707620081212
    http://www.nytimes.com/2008/12/13/business/13investors.html?em

  14. Roy Schestowitz said,

    December 13, 2008 at 3:48 pm

    Gravatar

    About the guy, I mean, cause he was a jerk.

    “Former Nasdaq chairman”

    That’s how high the corruption goes in FraudStreet.

    Microsoft (Public, NASDAQ:MSFT) has a little past of fraudulent activity as well. Never mind the tax evasion, the bribery, the bullying, and even the recent imprisonment (for fraud) of an ex-Microsoft manager.

  15. Yfrwlf said,

    December 13, 2008 at 6:20 pm

    Gravatar

    Yep, thanks, and yes they do, I think tax evasion and fraud of all sorts goes on all over and is pretty widespread, so it wouldn’t at all surprise me.

  16. Roy Schestowitz said,

    December 13, 2008 at 6:57 pm

    Gravatar

    When the economy is artificially awash with money, nobody minds what the neighbour does. People will hopefully stand up and demand truth now. There’s lots more to be found under the rug. I believe this to be only the beginning.

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