Novell Rejects Takeover Bid… But Welcomes Other Bidders
Novell’s board has considered and rejected an unsolicited $2 billion takeover bid from Elliott Associates, a hedge fund that wants to swallow SUSE Linux and Novell’s other core products. Novell’s rejection of the bid, announced March 20, answers some questions but raises others on the eve of BrainShare, the company’s big customer and partner event in Salt Lake City, Utah. Now the twist: Novell’s board essentially wrote an open letter to other potential suitors. Here’s the analysis from The VAR Guy.
First, the back story (in case you missed it). Elliott Associates already owns a chunk of Novell stock, and the hedge fund earlier this month offered to buy the rest of Novell for about $1.8 billion. At the time, The VAR Guy predicted Novell would address the takeover offer before BrainShare started on March 21 — in order to ensure the bid didn’t become a major distraction at the conference.
So, kudos to Novell for providing an answer to Elliott Associates and investors on March 20. In a prepared statement, Novell said Elliott Associates’ bid “to acquire the Company for $5.75 per share in cash is inadequate and that it undervalues the Company’s franchise and growth prospects.”
Novell: Up for Sale?
But now comes the interesting part. Novell also announced that its Board of Directors has:
“authorized a thorough review of various alternatives to enhance stockholder value. These alternatives include, but are not limited to, a return of capital to stockholders through a stock repurchase or cash dividend, strategic partnerships and alliances, joint ventures, a recapitalization and a sale of the Company.”
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.
More Chatter At BrainShare
The VAR Guy will continue covering this story when he lands in Salt Lake City later tonight, and starts covering BrainShare the rest of this week.
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Relax – a bit – this exact same dance was played out by CSC in responding to CA’s bid for them more than ten years ago. CSC also “authorized a full review..” yada yada – we’re still happily independent, so I see no reason why Novell, even after “authorizing a full review…”, can’t find a way to stay independent too – but then I’m just a programmer and not a business guy at all!
Martin: Fair points. Basically, Novell’s Board has to maintain a balancing act… assuring investors that there’s a growth strategy in place while also assuring investors that the company will carefully consider takeover inquiries. The VAR Guy will be listening closely during a series of Novell executive interviews at BrainShare today.
-TVG
The real deal here us that IT buyers have been leery of committing to buy important technologies from Novell for the last 2+ years. Likely a combination of concern about their ability to be viable over the long haul, as well as a fairly bland set of offerings.
Now, with this hanging over their head, even less people will be willing to commit to multi-year strategic investments for any of their technologies. They have nothing unique to offer, and there are safer bets to buy either Linux, or directory, or systems mgmt software from. What IT manager or CIO in their right mind would commit to deploying a bunch of Novell stuff with this situation now – and then possibly be fired in 3-6 months when something happens to their supplier, Novell.
Either someone swoops this thing up and hacks it to pieces and attempts to salvage some value, or all the computing vendors drive by this ‘accident on the side of the road’, looks and says “What a shame” – either way, there is no great way out for the Novell crew.
I would think that anyone competing with Novell could just show their revenue and profit for the last 3-10 years (ugly picture), and then show a few points from the Novell press release that the management is looking for options on how to sell the thing off, and one slide later Novell is eliminated from the conversation and consideration.
If I were a Novell sales rep or reseller, I would be running for the hills…
John, Jackson: The VAR Guy agrees… some customers are wary of Novell. And Wall Street analysts aren’t very familiar with Novell’s broader Intelligent Workload Management (IWM) strategy.
The overall Novell story is filled with legacy challenges.
But before you write off Novell, consider the bigger, balanced story here.
-TVG