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Hedge Fund Offers $2 Billion For Novell

Soulskill posted more than 4 years ago | from the large-potatoes dept.

SuSE 144

CWmike writes "A hedge fund that is already one of Novell's largest shareholders offered on Tuesday to acquire the struggling, cash-rich enterprise software maker for $2 billion. The unsolicited offer, from New York-based Elliot Associates L.P., is for $5.75 per share in cash, a dollar per share more than Novell's closing price Tuesday of $4.75. The offer caused Novell's stock to leap 29% to $6.15 in after-hours trading. Because Novell is so cash-rich — it had $991 million in cash and equivalents at the end of January (PDF) — Elliott says the deal values Novell as an enterprise alone at about $1 billion."

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It's been a while, but... (-1)

Pojut (1027544) | more than 4 years ago | (#31345248)

...are Novell products still well thought of in the enterprise sector? I know Norton became a bloated piece of crapware a while ago (just like most of their products), but I haven't really paid attention to them in...shit, almost 5 years.

Are they still producing bloated piles of crap, or have the leaned their products down and made them worthwhile again?

Re:It's been a while, but... (1)

Clover_Kicker (20761) | more than 4 years ago | (#31345260)

WTF does Norton have to do with Novell?

Re:It's been a while, but... (3, Funny)

Anonymous Coward | more than 4 years ago | (#31345314)

They both start with 'N' you clod!

Re:It's been a while, but... (1)

billcopc (196330) | more than 4 years ago | (#31345734)

They're both "old" companies that had a decent foothold in the LAN market, back in tha day. Very different products, but they were the two names you were almost sure to find in any network.

Re:It's been a while, but... (1)

TheyCallMeBruce (1100313) | more than 4 years ago | (#31347042)

What else is Norton gonna do ? M$ assimilating everything Norton has done. Perhaps Norton will finally have something to slay the Borg with.

Re:It's been a while, but... (2, Insightful)

Pojut (1027544) | more than 4 years ago | (#31345280)

OMFG I'm stupid. Got confused with Symantec :-/

Re:It's been a while, but... (2, Funny)

idontgno (624372) | more than 4 years ago | (#31345326)

Novell is widely admired and lauded for having nothing whatsoever to do with products from Symantec. And also for being secretly run by Chuck Norris.

Oops, I guess it's not secret any more.

Re:It's been a while, but... (2, Funny)

goombah99 (560566) | more than 4 years ago | (#31345850)

ANd the hedge fund is secretly in cahoots with Daryll McBride. They plan to leverage "certain" IP that Novel owns.

Re:It's been a while, but... (5, Interesting)

poetmatt (793785) | more than 4 years ago | (#31345472)

beyond that norton is not novell, novell actually has a pretty strong enterprise presence. A hedge fund buying novell is a really bad sign, to be honest. Novell is doing fine. Them trying to label Novell as unsuccessful is basically a flat out BS.

What I suspect this means is that someone's trying to stop Novell before the Novell v. SCO case comes around. They're trying to see if the Novell board is greedy enough to do it, and I suspect they aren't and neither are the shareholders.

A hedge taking over a company if that hedge has no experience managing in the sector of the company they're taking basically means they're going to tack on association/management fees onto novell and dump them to someone else.

Re:It's been a while, but... (1)

berwiki (989827) | more than 4 years ago | (#31346806)

A hedge fund buying novell is a really bad sign, to be honest.

Yea, because all those hedge funds like to buy companies that are going straight down (???)

They might be interested because they expect the company's value to go up (gasp!!).

I realize you are an expert, but when was the last time you didn't do heavy investigation before spending 2 billion dollars?

Re:It's been a while, but... (1)

Bysshe (1330263) | more than 4 years ago | (#31347112)

At this point, hedge funds are unable to flip companies for a quick profit. Cash rich does not mean capital asset rich that they can sell off and leverage the company to a decent debt/equity ration. So I would guess that a hedge fund that is already a major shareholder and has been for several years is certainly in this for a 5-7 year stretch while they buy up a few other companies, merge them, and probably re-list the new enterprise.

but then again, who am I. I just do this for a living.

Re:It's been a while, but... (1)

poetmatt (793785) | more than 4 years ago | (#31348028)

Yes, cash rich does not mean capital asset rich. However, novell is not a LP, so you know, they have a ton of capital assets. I'm not saying they're doing gloriously, but they're not exactly nearing bankruptcy as a company either right now.

However, that part about hedges being unable to flip? BS. It still happens, still exists, and is still legal on the books. So I don't know where you make your shit up. But what do I know? Family members are CPAs and others are risk analysis and confirmed it's still common. It'll be unable to be done when people are unable to cook the books, which last time I checked, still goes on constantly and in many ways via strategic acquisitions.

Yes, there are ways they can take over the company anyway, but they have not positioned themselves accordingly in this case.

The timing for this being so close to the SCO vs Novell case is no accident.

Re:It's been a while, but... (0)

Anonymous Coward | more than 4 years ago | (#31348512)

I only work tangentially with finance, but doesn't a hedge fund being interested in meddling with a business imply that they think that some form of restructuring would improve the value of the business?

Novell has a number of different lines of business that don't appear to be particularly well integrated. Isn't it possible that chopping Novell up and selling these different lines to companies that can better merge them into their strategy would be a net increase in value?

They have some things that are worth something, but the company as a whole is stagnant from what I can tell.

Re:It's been a while, but... (0)

Anonymous Coward | more than 4 years ago | (#31347180)

A hedge fund buying novell is a really bad sign, to be honest.

Yea, because all those hedge funds like to buy companies that are going straight down (???)

They might be interested because they expect the company's value to go up (gasp!!).

I realize you are an expert, but when was the last time you didn't do heavy investigation before spending 2 billion dollars?

one word: Chrysler.

Re:It's been a while, but... (4, Informative)

poetmatt (793785) | more than 4 years ago | (#31347942)

Umm? Do you even realize who this hedge fund is? I'm going to copy from groklaw here.
Sounds like no, my sarcastic friend. Elliott is run by Paul Singer [sourcewatch.org] . Link states:

Paul E. Singer, a former corporate lawyer, is "the founding partner of Elliott Associates, a $7 billion hedge fund with a conservative, risk-averse bias that has been in business since 1977, making it one of the oldest funds around. A reserved, private man who would answer questions only via e-mail, Mr. Singer is a self-described conservative libertarian who has given millions of dollars to Republican organizations that emphasize a strong military and support Israel."

Singer is a member of the Board of Trustees of the neo-conservative think tank the Manhattan Institute for Policy Research; a "member of the boards of the Jewish Institute for National Security Affairs and of Commentary Magazine, and is on the Board of Advisors of the James Madison Program in American Ideals and Institutions at Princeton University", and a member of the Board of Fellows of Harvard Medical School.

Also from the NYT [nytimes.com]

Paul E. Singer is the founding partner of one of the oldest hedge funds around. And while he has become a major donor to Republican and conservative causes in recent years, he has largely managed to stay out of the limelight, even avoiding having his picture appear in newspapers. [...]

Howard Dean, the chairman of the Democratic Party, questioned “Paul Singer’s involvement in this dirty trick aimed at stealing the White House.” A group of Democrats filed a complaint with the Federal Election Commission charging that Mr. Singer had been acting on behalf of Mr. Giuliani in his efforts to change the California law — which Mr. Singer and the campaign deny. And the Democratic National Committee drew attention to the part of Mr. Singer’s business that involves buying the debt of poor countries at a discount and then seeking repayment in full — prompting an article in The Times of London labeling his firm, Elliott Associates, a “vulture fund.”

.

I didn't have to read either of those to already know that. Notice from the NYT: Vulture fund.

Meanwhile, what's the kicker?

The shareholders are pissed already and think it's BS/hostile takeover. [prlog.org] from that link:

An investigation on behalf of current long term shareholders in Novell, Inc. (Public, NASDAQ:NOVL) concerning shareholder claims over potential breaches of fiduciary duty and other violations of state law in connection with an alleged unfair takeover was announced.

So umm, whoops?

Re:It's been a while, but... (1)

neurovish (315867) | more than 4 years ago | (#31345872)

...are Novell products still well thought of in the enterprise sector? I know Norton became a bloated piece of crapware a while ago (just like most of their products), but I haven't really paid attention to them in...shit, almost 5 years.

Are they still producing bloated piles of crap, or have the leaned their products down and made them worthwhile again?

No. If anything, they are making them more bloated.

That's funny... (1)

rickb928 (945187) | more than 4 years ago | (#31346066)

I just saw the Altiris agent pop up on my work machine this morning. Our network weasels are busy virtualizing application installs. Good for them.

But Novell ZenWorks was doing this via layered imaging 7-10 years ago. Not to mention volatile Windows accounts, a Godsend in school environments. And other cool thing Novell did that Microsoft didn't.

But what caught my eye was that Altiris seems to have been gobbled up by Symantec. How sad. Now we fear the worst...

Re:That's funny... (1)

RulerOf (975607) | more than 4 years ago | (#31346502)

Altiris has had application virtualization for a while now, but after comparing the products, I found Softgrid (which was acquired by Microsoft and rebranded as App-V) to be a more compelling one.

It's kind of odd, but it seems to me that products gobbled up by the Symantec overlords tend to turn pretty crappy with age, whereas those acquired (and usually rebranded) by Microsoft, when focused on of course (and App-V is getting very heavily used by them, check out the Office 2010 beta "Click to Run"), tend to mature into even better and usually more seamless solutions.

...I'm starting to hate Symantec.

Re:That's funny... (1)

ElmoGonzo (627753) | more than 4 years ago | (#31346924)

You're _starting_ to hate Symantec? I've been hating them for 7 dog years.

Re:It's been a while, but... (1)

castironpigeon (1056188) | more than 4 years ago | (#31346198)

I'm forced to use Novell enterprise software at work and while I'm not sure how it compares to other enterprise email/scheduling bundles I can tell you that it is far inferior to Google's offerings. The calendar is excessively clicky and unintuitive with an interface that looks like it hasn't been updated since the 80s. Contacts are equally strange. Email... I'm really not sure what a cabinet is supposed to be, why there is a separate folder for documents, and why sending emails into an archive throws them into a bottomless pit whence they rarely return. I'm reasonably sure that if companies weren't locked into Novell software and had more competent management so as not to get sucked into using Novell in the first place that Novell would be out of business.

Re:It's been a while, but... (1)

operagost (62405) | more than 4 years ago | (#31346326)

The cabinet is just where you place your own user-created folders. Stuff placed in archives shouldn't just "disappear". It sounds like your IT department just isn't doing a great job of administrating Groupwise or training their users. Trust me, it's way better than Notes and a lot more stable than Outlook. Just the fact that most users can actually figure out how to set their out-of-office message when they go on vacation is amusing. Doing this in Outlook is laughably difficult.

Re:It's been a while, but... (1)

ElmoGonzo (627753) | more than 4 years ago | (#31346940)

Our operation uses GroupWise because it would cost too much to switch to Exchange.

Re:It's been a while, but... (0)

Anonymous Coward | more than 4 years ago | (#31347456)

Your Calendar is not as bad as Oracle Calendar, Period.

Re:It's been a while, but... (1)

jayhawk88 (160512) | more than 4 years ago | (#31346304)

Working for a medical university that still uses Novell:

It's a mixed bag, honestly. Groupwise is still pretty great as a messaging/collaboration platform, but for some reason Novell seems bound and determined to ignore it as much as possible. The latest Webmail version is pretty nice, but conversely, the Groupwise Mobile component is floundering, after trying to implement a version of Intellisync and getting cut off at the knees by Nokia. Novell has been moving the file system/server stuff to SUSE for some time now, but on the other hand, no one seems to really know exactly what to do with all those damn Windows clients long term. As for eDirectory, it's great and all, but if no one's using Groupwise or moving to SUSE, what future does it really have?

If I live a thousand years I'll never understand why Novell didn't open source Groupwise several years ago, and in one move come to dominate the Linux Groupware market. Perhaps smarter people than me at Novell foresaw the move to online services, but I doubt it; at the very least they could have spun it off to another company and made some bucks on it. It would arguably still be a good idea, as I could see it filling a niche, but probably the real opportunity has been lost.

We're moving away from almost all things Novell. Investigated the possibility of both Outlook and Outlook@EDU, and while those stalled, the writing is on the wall. NDS client will probably be off all workstations within a couple years, file sharing/password management will be moved to Windows servers. eDirectory/Novell Services may linger on for a while, as we've got a semi-complicated identity management system going on it, and we've rolled out some SUSE as necessary, but we're almost being forced to move things Windows-way out of necessity/attrition.

I wish I had (2, Funny)

Anonymous Coward | more than 4 years ago | (#31345264)

a struggling cash rich enterprise.

Re:I wish I had (1)

timeOday (582209) | more than 4 years ago | (#31345902)

Well, you can always buy one, assuming you have $2e9.

Already Under Investigation (4, Insightful)

eldavojohn (898314) | more than 4 years ago | (#31345282)

A law firm is already investigating [prlog.org] 'potential breaches of fiduciary duty and other violations of state law in connection with an alleged unfair takeover.' Basically seems to allege that should this deal go through, it would be unfair for current long time shareholders of Novell as Elliott's takeover would be underpaying and ripping them off. I'm not sure if this is standard operating procedure or not but one would think that the stock market would offer a good estimate of Novell's true worth. Apparently someone thinks 20%+ on top of that is unfairly low.

Re:Already Under Investigation (1)

idontgno (624372) | more than 4 years ago | (#31345376)

In my typically uninformed and cynical manner, I'll speculate that the phrase "potential breaches of fiduciary duty" is lawyer-ese for "your bid is too low". This would qualify as "leverage" in the course of "haggling". And also a damn fine occasion to use "lots" of gratuitous "scare quotes".

ObDisclaimer: I am neither a lawyer nor a... whatever you call a financial dude. Just a student of human behavior.

Fiduciary duty (5, Insightful)

sjbe (173966) | more than 4 years ago | (#31345772)

I'll speculate that the phrase "potential breaches of fiduciary duty" is lawyer-ese for "your bid is too low".

No speculation needed. That is exactly what it most often means. The board of any company has a duty to maximize the return to any shareholders. Selling the company might be the best way to accomplish that - or it might not. Everything in finance is essentially a guess as to what will make the most money. It needs to be a well researched and reasoned guess but it is still a guess at the end of the day. If shareholders think they are getting a bad price it is entirely reasonable and proper for them to lawyer up and say so.

I actually researched Novell as a possible investment about 5 years ago and came to the conclusion that the company was in a slow death spiral. Not an inescapable one but I don't see them doing anything that gives me confidence they could escape it and their stock price hasn't budged since then. The price being offered is approximately the current market capitalization. (the market cap rose yesterday once the offer price was announced - arbitrageurs bought in to bring the price close to the offer price) Novell has a lot of cash and they have some decent products that have high switching costs which is keeping them in the game. But they aren't capturing much new business. Basically I think they'll end up getting sold in whole or in parts to Oracle, IBM or HP after the hedge fund is done stripping out all the cash from the company. Novell likely has undervalued assets that are worth more separately than together.

Disclosure: I am an accountant and I've worked on due diligence for the sales of companies.

Re:Fiduciary duty (2, Informative)

wintercolby (1117427) | more than 4 years ago | (#31347678)

Novell really needs to ramp up their marketing, a la the Goldfish/David Bowie "Change" commercial. SuSE is a solid product with a much more mature configuration interface than RedHat, at much lower support contract fees. It is used in quite a few large organizations which I am not at liberty to discuss (non-disclosure agreements and what-not.) They are in the best position for Active Directory/Linux integration products, and would do very well to very broadly advertise their companies new direction.

I have used SuSE for years, it did indeed take a hit in usability when Novell bought it. It has since been developed and become a very stable and refined platform.

Novell is one of the top contributors to the Linux kernel [lwn.net] . The OSS community, as much as they dislike Novell's interactions with Microsoft, would see less development with it's break up and the distribution of its parts.

Re:Fiduciary duty (1, Funny)

Anonymous Coward | more than 4 years ago | (#31348054)

I actually researched Novell as a possible investment about 5 years ago and came to the conclusion that the company was in a slow death spiral. Not an inescapable one but I don't see them doing anything that gives me confidence they could escape it and their stock price hasn't budged since then.

Maybe they can license some more patents from Microsoft?

Re:Already Under Investigation (1)

ottothecow (600101) | more than 4 years ago | (#31345796)

I think it is more like...anytime anything happens related to the shares of a public company, there is going to be at least one law firm filing suit.

It is mostly filed just in case something bad happens with the deal and there is a big class action suit with the shareholders (and by filing early they have a better shot at being lead plaintiff)

Re:Already Under Investigation (0, Flamebait)

N3tRunner (164483) | more than 4 years ago | (#31345424)

Yeah, the offer isn't ripping anyone off. Novell is worth practically nothing as a company, they don't really have products that anyone is interested in purchasing anymore. Maybe for headhunting purposes their programmers are worth something?

That lawsuit seems way off base though. I've owned Novell stock for years and this buyout is a real blessing.

Re:Already Under Investigation (3, Interesting)

Anarke_Incarnate (733529) | more than 4 years ago | (#31345704)

You MUST be dense. Novell has SUSE Linux, which is the preferred Linux to run on Z series. The consulting services alone for such a venture would be pretty expensive, but worth every penny. SLERT is used by some of the best brokerage houses on wall street and other places as well. They own Ximian, they also have their extensive IDM suite as well as lots of other group and middleware products. The problem with Novell is that they don't market well enough. Given the chance to replace Red Hat with SUSE I would jump at the chance.

Re:Already Under Investigation (1, Informative)

neurovish (315867) | more than 4 years ago | (#31346006)

You MUST be dense. Novell has SUSE Linux, which is the preferred Linux to run on Z series. The consulting services alone for such a venture would be pretty expensive, but worth every penny. SLERT is used by some of the best brokerage houses on wall street and other places as well. They own Ximian, they also have their extensive IDM suite as well as lots of other group and middleware products. The problem with Novell is that they don't market well enough. Given the chance to replace Red Hat with SUSE I would jump at the chance.

No, the problem with Novell is that their products are shit, and their support is even worse. IDM *might* be good, but I don't have enough experience with it to say one way or the other. I wasn't given a chance to replace SUSE with Red Hat, I fought a two year battle for that opportunity, and my enterprise is better for it. I haven't had to fix a server that was badly broken by an update or service pack since kicking out SLES.

Re:Already Under Investigation (1)

uvsc_wolverine (692513) | more than 4 years ago | (#31346692)

No argument there. I work for one of Novell's largest customers and we're about 2 minutes down the freeway from their HQ in Provo, UT. We were having some serious Netware issues (we're finally moving to AD this summer because of this crap) and a bunch of us IT geeks drove to their campus and wouldn't leave until we got some real help.

Re:Already Under Investigation (2, Informative)

PalmKiller (174161) | more than 4 years ago | (#31346710)

The trick on sles is to do the critical updates first, then the recommended ones if you want after. I can assure you that if you "select all" and update, you will indeed break something in sles, but it is not that the product is crap, it is the nut behind the wheel. It might be good that you went to redhat in your shop though, as it might not be a pretty picture if the hedge fund ends up with sles. I find their support pretty good, and their people bend over backward to help you even if your service contract is not in order. What kind of problems did you have with the support?

Re:Already Under Investigation (1)

wintercolby (1117427) | more than 4 years ago | (#31347880)

I've had YUM arbitrarily uninstall 600+ packages during an update on an RHEL 5.3. I don't mean to snub your anecdotal evidence with my similar anecdotal evidence, but I've seen SuSE to be at least as reliable as RedHat, and both more reliable than Windows.

Re:Already Under Investigation (0)

Anonymous Coward | more than 4 years ago | (#31346046)

If Novell was valued on the basis of its Linux business, the bid wouldn't be anywhere near $2B. The backbone of the company is still all those old Netware and eDirectory installations.

Re:Already Under Investigation (1)

toastar (573882) | more than 4 years ago | (#31346496)

If Novell was valued on the basis of its Linux business, the bid wouldn't be anywhere near $2B. The backbone of the company is still all those old Netware and eDirectory installations.

Novell still has a good name, to be honest I still think of them like they used to be... More of a competitior to Cisco then Red Hat.

On A Semi related note... IPX is evil

Re:Already Under Investigation (5, Informative)

Fnkmaster (89084) | more than 4 years ago | (#31345442)

The share price jumped *because* of the takeover offer. The market valued the company at less than the takeover offer until the offer came in. There's nothing inherently wrong with a fund offering to buy out the minority shareholders if they think they can see a way to make the company worth more by owning it all themselves (perhaps they intend to break it up and sell the products off to people who would value them more highly in their enterprises, perhaps they just think management sucks and the best way to replace them is to take over the firm in its entirely, then flip it to a private equity firm or strategic buyer).

The point is the market was already saying the enterprise value of Novell was less than $1B. Some guy who runs a fund thinks that's overly pessimistic and made an offer to buy out the firm.

The fact that the market price for the shares jumped higher than the offer price only means that the market, on average, thinks this is the first offer in a potential bidding war and the price is likely to go higher than that before a deal closes. That is also very common in the case of an unsolicited offer when nobody was thinking "this company is for sale" prior to that offer coming in.

BTW, nobody in the finance industry really thinks the market always offers a fair estimate of a company's worth to all potential owners. Even believers in the weak-form efficient market hypothesis wouldn't state that - they would acknowledge that the value to a private market buyer might be higher than the public market value, which more likely represents the market's estimate of future discounted cash flows to equity owners of the company. Actually, to be more accurate, the public market value represents a consensus estimate of what people think *other* people would estimate the future discounted cash flows to equity owners of the company would be.

If you find that confusing, welcome to the science and art of valuation.

Re:Already Under Investigation (0)

Anonymous Coward | more than 4 years ago | (#31346188)

Even believers in the weak-form efficient market hypothesis wouldn't state that - they would acknowledge that the value to a private market buyer might be higher than the public market value, which more likely represents the market's estimate of future discounted cash flows to equity owners of the company.

I see your point here, but I'm failing to understand how that statement would be contradictory to the weak-form school of thought? The word 'even' might be throwing me off. Did you mean strong-form instead?

Weak-form advocates would already acknowledge a disconnection between public and private prices along with asymmetry of information.

Re:Already Under Investigation (1)

Fnkmaster (89084) | more than 4 years ago | (#31347464)

You are right, I just think it was awkward phrasing on my part. My implication was that the weak-form school of thought agrees that public and private ownership prices could be different, but that the existence of such discrepancies (or rather, the ability of people to capitalize on them and earn excess returns through simple changes of ownership) seems out of line with strong-form efficiency.

Re:Already Under Investigation (1)

khallow (566160) | more than 4 years ago | (#31345590)

A law firm is already investigating 'potential breaches of fiduciary duty and other violations of state law in connection with an alleged unfair takeover.' Basically seems to allege that should this deal go through, it would be unfair for current long time shareholders of Novell as Elliott's takeover would be underpaying and ripping them off. I'm not sure if this is standard operating procedure or not but one would think that the stock market would offer a good estimate of Novell's true worth. Apparently someone thinks 20%+ on top of that is unfairly low.

They're probably looking to get a piece of the action. A lawsuit like that might be able to hinder a takeover and there's at least $2 billion involved. Even if they just get $1 of every $1,000 in play, that's $20 million.

Nortel Pensioners Will Be All Over This (0, Offtopic)

CmpEng (1123811) | more than 4 years ago | (#31345604)

I expect that this will be tied up in the Canadian court system for a bit as well. I work a few kms from the former Nortel campus here in Ottawa and Nortel has been in the news for the past few months as it pensioners are basically receiving nothing as the company short funded the pension and eventually claimed bankruptcy. I fully expect that the legal team representing Nortel pensioners will do everything in their power to have a say in what happens to this company and should it be sold have existing pension liabilities settled.

Re:Nortel Pensioners Will Be All Over This (1)

Anarke_Incarnate (733529) | more than 4 years ago | (#31345744)

WTF is with people's reading comprehension? When did Nortel become Novell?

Re:Nortel Pensioners Will Be All Over This (2, Funny)

Rogerborg (306625) | more than 4 years ago | (#31345948)

Not people - Canadians.

Re:Nortel Pensioners Will Be All Over This (0)

Anonymous Coward | more than 4 years ago | (#31347302)

We are blinded by gold

Re:Already Under Investigation (0)

Anonymous Coward | more than 4 years ago | (#31345946)

$4.75 is the price to buy a small (relatively) number of shares. If instead, you went on the market and started buying up all the shares you can get, you would drive the price way up, so the price for all the shares may be much more than 5.75 each.

Re:Already Under Investigation (1, Troll)

Hurricane78 (562437) | more than 4 years ago | (#31346194)

All stock market prices are by their very definition imaginary and unrelated to the true value. That’s the reason that we have a bursting bubble every 30 years. Scientifically it’s even proven, that in a market that does not deal with physical goods, there must be a bursting bubble about every 30 years.

So the whole question is pointless.

I think I know what they're going to do with it. (0)

Anonymous Coward | more than 4 years ago | (#31345324)

From a pure financial play I don't see how paying 2 billion for 990+ million cash makes sense. The rest of Novel isn't really worth anything UNLESS, they turn Novel into another FLOSS services firm like RedHat.

That's what I think is planned.

Re:I think I know what they're going to do with it (3, Interesting)

jelle (14827) | more than 4 years ago | (#31345838)

Or Microsoft is behind this and they want full control of Novell...

Eh, the story is about Novell, and nobody has used the word Microsoft and Linux yet, and they usually go together with 'Novell'...

Oh, and the SCO vs Novell trial is still on the 'todo list' for the courts...

Who knows what is really going on here... People tend to think long and hard before offering to spend $2B of their own money...

Re:I think I know what they're going to do with it (1)

fritsd (924429) | more than 4 years ago | (#31348040)

Or Microsoft is behind this and they want full control of Novell...

It's too early.. IIRC the Microsoft--Novell "I won't sue your customers[*] with my massive patent portfolio which you had to publicly agree was valid, for a limited number of years" agreement only runs out next year.
Curious what will happen though.. maybe even nothing!
[footnote *: a patent is a grant of monopoly, you can sue, or withold a license, or charge very much for a license, to whomever you pick. End-users are NOT exempt unless indemnified.]

Worth more in pieces than together (4, Insightful)

sjbe (173966) | more than 4 years ago | (#31345880)

From a pure financial play I don't see how paying 2 billion for 990+ million cash makes sense.

Basically because the hedge fund is probably betting they can sell the assets of Novell for more than $1.1B. Groupwise alone in the right hands (HP or Oracle maybe?) is basically an annuity that might be worth that much. Novell has other products that are decent and probably worth something to the right party. My guess is that the hedge fund will strip out the cash and then sell the assets of the company to the highest bidder on the theory that the assets are worth more than the whole company.

The rest of Novel isn't really worth anything UNLESS, they turn Novel into another FLOSS services firm like RedHat.

Doubtful. Novell's value is in its installed base of software - not in their services. I don't think it could turn itself into a successful service company - better to sell to a large service company (HP, Oracle, IBM). I don't think they have the resources to transform themselves like that and if they tried I'd expect the shareholders to be pissed. Selling the company is probably the right play - the only question is what price can they get?

Sold! (1)

N3tRunner (164483) | more than 4 years ago | (#31345388)

Novell's stock was up above $6 this morning, and I finally unloaded that sucker. Why would people be buying at above $6 when the buyout offer is $5.75? I guess people enjoy losing money.

Re:Sold! (0)

Anonymous Coward | more than 4 years ago | (#31345574)

Novell's stock was up above $6 this morning, and I finally unloaded that sucker. Why would people be buying at above $6 when the buyout offer is $5.75? I guess people enjoy losing money.

It's the traders and the "hedge funds". They did the same thing when GM was in bankruptcy. They traded the common stock even though, when a company is in bankruptcy, the stock becomes worthless. They were literally trading worthless pieces of paper. The traders have shit for brains.

And I wish traders would stop using the term "hedge fund". They're NOT hedge funds: they're speculators.

Wall Street has lost its meaning....I could really go on about this.

Re:Sold! (3, Insightful)

malchus842 (741252) | more than 4 years ago | (#31345736)

The stock trades higher when the street thinks that the bids are too low. Nobody is going to tender their shares @ $5.75 when they can get a better price by selling at market. If the above the offer price is sustained, then either the bid will have to be increased or withdrawn. This happens all the time, and is a normal function of a stock market. The value of a company may be more or less after it is taken over - the goal of the bidder is to bid as low as possible. The goal of shareholders is to get the highest bid possible. The goal of management is to maximize shareholder value, which can involve sale, profit improvement, or a host of other things.

Re:Sold! (0)

Anonymous Coward | more than 4 years ago | (#31346704)

The stock trades higher when the street thinks that the bids are too low.

They may think it's too low because they think another trader will pay more. Another trader will pay more becuase HE thinks someone else will pay more. Nothing is based upon real value. It's just the "greater fool theory".

Nobody is going to tender their shares @ $5.75 when they can get a better price by selling at market. If the above the offer price is sustained, then either the bid will have to be increased or withdrawn. This happens all the time, and is a normal function of a stock market.

Obviously. But the thing is Wall Street "value" have become disconnected with the actual value of the underlying company - as was illustrated with the GM example.

The value of a company may be more or less after it is taken over - the goal of the bidder is to bid as low as possible. The goal of shareholders is to get the highest bid possible.

Of course. But the thing as was pointed out by the OP, the offer was lower than the current market price and considering that the offer was a whole dollar above previous market price, buying at its current price is a money losing proposition unless you believe someone out there will pay more for it - which is possible because traders are NOT trading based upon company fundamentals but based upon someone being dumb enough to pay more. Traders don't base their trades on the underlying value of the company; they base it upon the hope, gamble, speculation, that someone else will pay more for whatever reasons - which is usually another trader who's buying for gambling purposes. In other words, the price of a stock is based upon nothing to do with the company's prospects, financials, or future - it's all gambling for the sake of gambling.

The traders are just playing with one another, trading based upon "momentum" or charts - basically fantasy and it just distorts the true market price of any given security. And as in the case of GM trading in the pink sheets, it offered no value, the "liquidity" it offered was pointless because the stock was worthless. It was an example of how nonsensical much of Wall Street has become.

Traders have shit for brains.

The goal of management is to maximize shareholder value, which can involve sale, profit improvement, or a host of other things.

That's whole different topic. Management's goals have nothing to do with traders goals. Sure, if management does something to increase the value of the company (and their options and bonuses in the process), traders will use that information to be factored into their price targets, but all in all, management and the companies for that matter are just an excuse for trading with most of those people.

Anyway, that's the theoretical goal of management. In reality, for the rare exception, management's goal is to enrich themselves at the expense of shareholders.

Wall Street has lost its way. It's not so much as a vehicle to match capital with economic productivity - its pretty much become one big MMORPG using real money.

Re:Sold! (1)

maxwell demon (590494) | more than 4 years ago | (#31345836)

Well, it's named hedge fund because a hedge is a good place to hide behind. :-)

Re:Sold! (0)

Anonymous Coward | more than 4 years ago | (#31345732)

Sometimes after a bid, negotiations start and the bid is sweetened. Some in the market must have been hoping for that to happen in this case (still may)...

Re:Sold! (1)

larry bagina (561269) | more than 4 years ago | (#31345820)

same thing happened when MS did a bid for yahoo. I'm not sure who was the bigger biden -- new shareholders that bought at the top or old shareholders that didn't cash out when they had a chance.

Re:Sold! (1)

supremebob (574732) | more than 4 years ago | (#31345940)

They're hoping for a bidding war with another software company to drive up the price of the shares further.

I'm curious who would want to buy them, though.

Short squeeze (1)

sjbe (173966) | more than 4 years ago | (#31345990)

Why would people be buying at above $6 when the buyout offer is $5.75?

Several reasons. Some of it is very likely a short squeeze [wikipedia.org] which often happens when a stock suddenly appreciates significantly. Also there probably is some speculation that the final price will be a bit higher. I'd expect the price to quickly settle at just at or under the offer price.

Re:Sold! (1)

TheRaven64 (641858) | more than 4 years ago | (#31347220)

If there is an offer of $5.75 then this defines the minimum value of the stock. Someone is definitely willing to pay $5.75 for it. Other people may be willing to pay more, but there's no point selling to anyone who would pay less because you can definitely make more. People buying at above this value think that the offer is too low and that there will eventually be an offer that is higher than the current trading price. The initial offer was $1/share above the market price. The market price then climbed 40/share above the offer price. If the offer is increased by 50 then everyone who bought shares after the increase makes money. If it isn't (and no one else makes a better offer), then they lose money as the share price returns towards its old value, unless they hold onto the shares for a long time and the value of the company grows (seems unlikely in Novell's case, but stranger things have happened).

There's a reason that it's called 'speculation'...

Value of a company... (1)

dargaud (518470) | more than 4 years ago | (#31345398)

If I have 5000$ in the bank, I certainly hope that my 'value' is at least 10000$, whatever than means, not being a resalable slave...

Re:Value of a company... (0)

Anonymous Coward | more than 4 years ago | (#31345466)

...what?

Re:Value of a company... (1)

Opportunist (166417) | more than 4 years ago | (#31345552)

Depends. If there is Dargaud software, and if there are still people who deem it good software, i.e. if your name has a ring to it, you might well be worth 10k if you only have 5k.

Names have a value in the business world. People buy $item because it is of $brand.

Re:Value of a company... (1)

AvitarX (172628) | more than 4 years ago | (#31346216)

What I find funny is how low Novell's name has fallen (Nortel and Norton both being the subject of posts).

Re:Value of a company... (1)

Opportunist (166417) | more than 4 years ago | (#31346378)

Novel used to be the synonym for sensible networking. You wanted to have a reliable network architecture, you got a Novell server. Things sure have changed in those last 20ish years.

Then again, the same applies to a lot of brand names that grew and waned over time. Mercedes used to be a synonym for a very reliable car. Sony used to be a name associated with reliable consumer electronics (the ancients here might remember). Lego used to stand for toys that are limited only by your imagination. Maxis used to be a name that pretty much ensured a great simulation game. Microsoft used to be the syn.. erh.. never mind, the point is, certain brands used to be associated with good products.

They all suffered at the hands of management that was more interested in a good quarterly report than a strong, lasting brand name.

Re:Value of a company... (1)

BigBlueOx (1201587) | more than 4 years ago | (#31348178)

If I have 5000$ in the bank, I certainly hope that my 'value' is at least 10000$, whatever than means,

Let me take a semi-serious stab at this for ya. If you have $5000 "in the bank" that means that you're getting a return of, at *most*, 3% per year. Someone who can do math might look at that and say "Hell, Paychex freakin common yields over 4%, I can do a lot better with that money than this fool" and offer to buy you out to get his hands on the caysh.

Ok, ok, I admit, it's not going to happen to you or me (and if someone did offer to buy me it probably wouldn't be Veronika Zemanova, it'd be Betty White's grandfather) but there are very, very large companies that are sitting on gobswallops of cash earning, essentially, zip. Some of them earn zip on all that cash while their core businesses print money. Apple and Microsoft come immediately to mind.

Whether that business is sitting on non-performing cash out of deep-seated paranoia and inferiority complexes (Jobs) or just out of gross stupidity and lack of business sense (Ballmer), sooner or later someone who can do math is going to run the numbers and want access to that dragon's hoard of money that's sitting around and, presto, a buyout offer will appear.

Novell is just the current one. Not the first. Not the last.

$2 Billion?! (4, Funny)

Rik Sweeney (471717) | more than 4 years ago | (#31345548)

Where the hell did they get that kind of money? I guess that even during a recession people still need their hedges pruned and their bushes trimmed.

Re:$2 Billion?! (1)

supremebob (574732) | more than 4 years ago | (#31345800)

I'm trying to figure out how in the hell Novell has 900 million dollars in available cash! They must be selling a ton of SuSE support contracts and Platespin licenses in order to bring in that kind of money!

Re:$2 Billion?! (0)

Anonymous Coward | more than 4 years ago | (#31345942)

..+ GroupWise (Still #3 enterprise mail system, albeit a distant 3rd), IDM Suite, etc

There's still quite a bit of calue in Novell, but management seems unable to capitalize on it. It might ac

Re:$2 Billion?! (1)

mrfantasy (63690) | more than 4 years ago | (#31346204)

Novell's basically had $1B cash for over a decade now, and through several acquisitions (SUSE, Ximian, Platespin, others).

I think $1B for the rest of the company is a low bid. Again, it's worth more in pieces, which I would guess would be the primary interest of the hedge fund. They're not delivering much shareholder value with a bid $1 above the current trading price--the stock has fluctuated that much in the past few months. The letter implies they intend to grow the company, but that wouldn't provide additional shareholder value if the company is privately held, would it?

Re:$2 Billion?! (0)

Anonymous Coward | more than 4 years ago | (#31345908)

> Where the hell did they get that kind of money? I guess that even during a recession people still need their hedges pruned and their bushes trimmed.

If they got their hedges pruned and bushes trimmed then they may end up like the couple in the other article who got sued for various yardwork.

Re:$2 Billion?! (1)

larry bagina (561269) | more than 4 years ago | (#31345914)

I, for one, welcome our trimmed bush ladies.

Re:$2 Billion?! (1)

ottothecow (600101) | more than 4 years ago | (#31346094)

I am imagining (without looking at either financials) that they are planning to buy it wit a whole ton of leverage and then raid the available cash and future income streams to pay down their debt.

That is usually about how this works and an example of reasons why having a big pile of cash (vs investing in capital or paying dividends) can be risky for a company small enough to be picked up easily.

Re:$2 Billion?! (1)

introspekt.i (1233118) | more than 4 years ago | (#31346574)

Money doesn't grow on trees, after all.

mod 3own (-1, Offtopic)

Anonymous Coward | more than 4 years ago | (#31345824)

I hope nothing substantial changes (3, Interesting)

blind biker (1066130) | more than 4 years ago | (#31345974)

Novell has been taking good care of Suse Linux. Since Novell bought them, they continued working on what I think is the best Linux distro, without hindrance, boosted their marketshare and helped in giving Linux a corporate-friendly image. I hope the new owners of Novell (should such takeover really take place) will have a hands-off approach and let things chug along nicely, as they have been.

Re:I hope nothing substantial changes (1)

PalmKiller (174161) | more than 4 years ago | (#31346960)

Yes, and sles is pretty good on the enterprise side of things...though I really don't think you get much extra for your dime besides support. I would like to mention that sles + oes2 (netware on linux) is pretty darn good from a file server standpoint...much better than a windows based solution for serving files to windows clients.

They really do need to work on their xen tools that come with sles though...you would think they would give some goodies from their platespin product for management instead of relying on redhats free tools for xen management...but then that is a money maker selling platespin I guess, but for me just the free tools are enough since I only run a 4 servers with about 3 VMs each (not including dom0).

corporate-friendly Novell ? (0)

Anonymous Coward | more than 4 years ago | (#31347188)

"Novell has been taking good care of Suse Linux. Since Novell bought them, they continued working on what I think is the best Linux distro, without hindrance, boosted their marketshare and helped in giving Linux a corporate-friendly image. I hope the new owners of Novell (should such takeover really take place) will have a hands-off approach and let things chug along nicely, as they have been"

Didn't a third party, some time back express 'intellelectual property' claims over all versions of Linux, signing an exclusive deal with Novell, wherein the third party would exchange 'vouchers' in exchange for Novell acknowledging that the third party IP claims had validity. In publications on it's website, Novell recommends Microsoft Windows and advises customers to use SuSE for IP peace of mind [novell.com] . And while Novell provides cross-platform interoperability, it only provides it with Windows and denies it with other Linux distros. In short, they have conspired with Microsofts in its IP extortion racket against the Open Source community.

"Technical solutions spur continued success of joint effort to advance cross-platform interoperability and deliver IP peace of mind"

Buy our stuff, or someone we don't know will sure your ass off !

Re:I hope nothing substantial changes (1)

eggnoglatte (1047660) | more than 4 years ago | (#31347556)

A hedge fund taking a "hands-off approach"? Dream on.

they are going to rob Novell blind (3, Informative)

alen (225700) | more than 4 years ago | (#31346054)

if they do the normal "private equity" deal what is going to happen is they will buy the company and then "lend" it money from another one of their legal entities along with declaring special dividends. that cash is going to leave Novell and go into the hedge fund. a lot of people will be fired to free up cash that will go to the hedge fund. Once the IPO market becomes better they will sell the company to someone else or if Novell goes belly up they will write it off for the tax benefits.

i just had a chat with a sales rep and the big thing to sell this year is services. everyone is trying to sell services. probably because there is no more profits in hardware since everything is commodity. Services are high margin products and very cash rich. you pay some guy $40 an hour and pimp him out for $200 an hour.

Re:they are going to rob Novell blind (0)

Anonymous Coward | more than 4 years ago | (#31346640)

Novell has 1B in cash and a patent portfolio, I assume. Companies are often worth more in pieces, and patents are pieces.

Interesting how fortunes turn (3, Interesting)

ErichTheRed (39327) | more than 4 years ago | (#31346112)

Anyone who's been a systems administrator for many years has probably dealt with Novell at one point or another in their career. Before Windows NT came on the scene, NetWare was pretty much THE PC file-and-print server solution. I remember one of the good things about it was that it was lightweight - command line UI, simple admin tools. Microsoft brought back this idea of command-line-only server consoles with Windows Server Core in the last version. Novell also has some pretty neat tools like ZenWorks. That said, it's interesting to see this potential deal on the table. Even 10 years ago, you'd never see Novell ready to throw in the towel.

I wonder why their acquisition of SuSE and the interoperability initiative with Microsoft didn't change their fortunes...they had a good plan for migrating all their NetWare customers to Linux. I know NetWare is still heavily used in European companies and in the health care sector, so you would think they have a willing customer base to pay the bills with. I guess they couldn't compete with Red Hat for distirbutions and IBM for support services in the Linux world.

It's a good lesson though -- no matter how much of a market dominator you are, you're always a few steps away from being destroyed.

Re:Interesting how fortunes turn (1)

alen (225700) | more than 4 years ago | (#31346626)

i remember 10 years ago i had to move about 300 people's data from a Novell file server to a Windows NT server. we divided the task between myself and a UNIX/Novell admin. It took me 3 hours using all the mouse/keyboard and GUI shortcuts i knew. This guy spent 3 days writing a script that ran for 30 minutes to copy the data.

i still deal with UNIX people sometimes and they want to write scripts for the simplest things that Windows will let you do in a GUI in seconds

Re:Interesting how fortunes turn (0)

Anonymous Coward | more than 4 years ago | (#31346830)

There are many things that are easier to do on Unix/Linux than Windows. I prefer the former (though I have a Windows server installed due to a client request), but I hate having to work with the windows box. Sucker has to reboot all of the time, and is a thorn in my side.

Re:Interesting how fortunes turn (2, Insightful)

MightyMartian (840721) | more than 4 years ago | (#31348080)

Some things are easier in Windows than *nix, and some things are easier in *nix than Windows. Probably the single best thing Windows has going for it is Active Directory, and in particular the group policies. I haven't seen anything in the *nix world that is as easy to manage large numbers of workstations and servers.

At the same time, being a long-time command line guy, I find *nix to be easier to navigate. I often find the GUI simply gets in my way. Microsoft seems to have figured it out to some degree with Server 2008, but I find PowerShell pretty awkward, and prefer the sh variants. Maybe it's familiarity, but what I could do in a few minutes with a shell script usually takes me three times as long with any of Microsoft's CLI tools. When it comes to the CLI, the old axiom "Those who don't understand Unix are doomed to reimpliment it badly." Microsoft's CLI toolset has always been a poorly thought-out hodge podge.

Re:Interesting how fortunes turn (1)

rs232 (849320) | more than 4 years ago | (#31346972)

i still deal with UNIX people sometimes and they want to write scripts for the simplest things that Windows will let you do in a GUI in seconds

Yea, these uNIX people don't know nothing .. but how long did it take you to read this one hundred page document [microsoft.com] . And what would a 'UNIX/Novell admin' be even doing migrating to a Windows box. And why can't you type the personal pronoun in upper case. It gets curiouser and curiouser .. :)

Re:Interesting how fortunes turn (1)

moonbender (547943) | more than 4 years ago | (#31347818)

This tells me that a) you're good at doing extremely repetitive work and b) he probably wasn't very good at writing scripts (yet). However, the next time a similar job comes around, you'll still take the same time, while he can either simply re-use his scripts or write a new one within a shorter time because he hopefully has learned from past experience.

Re:Interesting how fortunes turn (1)

fritsd (924429) | more than 4 years ago | (#31348218)

i remember 10 years ago i had to move about 300 people's data from a Novell file server to a Windows NT server. we divided the task between myself and a UNIX/Novell admin. It took me 3 hours using all the mouse/keyboard and GUI shortcuts i knew. This guy spent 3 days writing a script that ran for 30 minutes to copy the data.

So what you're saying is, if you'd have a similar situation but with 30000 people's data, it would cost you 2 months and give you RSI, and it would cost that Unix guy 3 days work + 2 days run-time.
Unless it's the exact same situation in which case the script is already written so it's more like 2 days run-time.

Re:Interesting how fortunes turn (1)

Anarke_Incarnate (733529) | more than 4 years ago | (#31348546)

By all means, deploy your GUI tools on 3000 servers and have them all automate. Many people can type faster than they can click this, and this and this, as well as check for logical conditions that the GUI may not have considered.

Re:Interesting how fortunes turn (0)

Anonymous Coward | more than 4 years ago | (#31348590)

It took me 3 hours using all the mouse/keyboard and GUI shortcuts i knew. This guy spent 3 days writing a script that ran for 30 minutes to copy the data.

The difference is that the second time you did it, it still took you at least two of those three hours. The second time the UNIX guy did it, it took him 30 seconds. The script ran unattended for the next 30 minutes while the sysadmin did something else.

back to the future .. (0)

Anonymous Coward | more than 4 years ago | (#31346736)

"I wonder why their acquisition of SuSE and the interoperability initiative with Microsoft didn't change their fortunes..."

Because Microsoft stole Novells customer base from Windows95 onwards. Basically by duplicating Netware functionality and being less [edge-op.org] than [edge-op.org] co-operative [edge-op.org] in giving [edge-op.org] Novell access to technical [edge-op.org] information. That they failed to suceed with SuSE owes a lot to bad management. The Microsoft deal being the end game as far as Novell ever becoming a serious player again.

Re:Interesting how fortunes turn (1)

Acer500 (846698) | more than 4 years ago | (#31346910)

Anyone who's been a systems administrator for many years has probably dealt with Novell at one point or another in their career.

And Novell NetWare was ROCK SOLID as a file server. I have good memories of that. OTOH, it was basically not very flexible, and GroupWise sucked when last I saw it.

another view? (0)

Anonymous Coward | more than 4 years ago | (#31346476)

with china being the biggest debt buyer, chances are pretty good that
most of the money in this hedge fund belongs to china.
so buying the "novell-cow" and chopping it up is probably a pretty
good way to make "more" money and the american internet less secure ...
i hope that chameleon can blend

Strip down costs and resell (1)

GargamelSpaceman (992546) | more than 4 years ago | (#31347764)

I heard a story on NPR about companies that use leverage to buy out companies with a good name, and somehow have the company they are buying go deeply into debt to finance it. The company cuts costs like mad to quickly come up with the cash to pay off their huge debt, cutting things that were substantial to what earned them a good name. ( the example was matress companies moving to one sided matresses which don't last as long to cut costs, destroying their reputation for producing products that last. But the company is then resold before the impact of it's cost cutting causes it to lose value. Novell is cash rich, so maybe it could use that cash to pay for much of it's own aquisition cost, but then it loses it's ability to think in the long term ( need to make money NOW ).

It was too bad since suse linux is really nice. Way better than redhat.

Still I don't know if that is what's going on here. It just seems suspiciously like it.

I heard... (1)

srussia (884021) | more than 4 years ago | (#31348260)

J.K. Rowling is raking in the bucks, but this is ridiculous!
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