Hedge fund to Buy Novell?

I think for once, I am very, very lucky.

Like many former Novell employees I’ve held Novell stock for over five years and it’s languished at $3 — $4 for almost all of that time (apart from a brief $12 blip when SuSE was purchased).

Last night, tired of holding this stagnant stock for several years and wanting some cash for some upcoming expenditures, I logged onto eTrade & put in a limit sell at $5 for all my NOVL stock.

I came in this morning and the order hadn’t executed.

Less than 2 hours later I received this e-Mail from an insider:

From: Ron Hovsepian CEO
I am writing to let you know about a recent development regarding
the Company.

Late today we received an unsolicited, conditional proposal from
Elliott Associates, L.P. to acquire Novell for $5.75 per share in
cash. Elliott is an investment firm that holds shares of Novell
stock. As you will see in the news release, we anticipate the
Company’s Board of Directors will review Elliott’s proposal in
consultation with our financial and legal advisors.

On behalf of the Board and management team, I thank you for yourcontinued hard work, focus and commitment to Novell.

Ron

Novell logo

© Novell, Inc. All rights reserved. For internal use only.
Novell, Inc. | 404 Wyman Street, Suite 500 | Waltham, MA 02451

The question is . . . did I get lucky? What will happen at trading on the NASDAQ today? Will the stock shoot up above $5 or will it plummet to the depths of $3? Or will Google step in and buy Novell for $45 a share?

People often say trading the stock market is for professionals and schmucks like me should stay out if they can’t handle the heat. Well, the kitchen is getting hot . . we’ll see what happens.

Update #1: 1600 GMT

The stock is at $6.

One important point in all this . . . in Elliot Assoc’s press release they refer to Novell’s strong bank balance. A fact confirmed by this public filing by Novell in January 2010:

NOVELL-CASH

The problem is, for as long as I can remember the phrase “a billion in the bank” has been doing the rounds within and without Novell. At what point though, does this stop being a statement of strength and a glaring beacon drawing attention to the fact that nobody in senior management — from Frankenberg to Schmidt (via Marengi) to Messman to Hovsepian — ever really capitalised on that massive head start, that gargantuan chunk of change?

Check out US gazillionaire Mark Cuban’s blog from a few days ago (it’s a repost of an old one he did a coupla years ago):

So what should you do to get rich ?

The first step to getting rich is having cash available. You arent saving for retirement. You are saving for the moment you need cash. Buy and hold is a suckers game for you.

The 2nd rule for getting rich is getting smart. Investing your time in yourself and becoming knowledgeable about the business of something you really love to do

Novell has consistently done the ‘Cuban’ part 1. . . . Did anyone ever step in and do part 2. . . . ? The time is ripe.

Update #2: 4/3/10

It looks likely that any acquirer of Novell would break it up. Many have asked what form that would take? Assuming a VC fund or large company like Microsoft is interested only in the money-making parts of a business, what does that mean for anyone getting hold of Novell? Let’s start with a sarcastic Venn diagram:

novellproductsvenn

There is a kernel of truth to this. BorderManager was a superb product which took advantage of the fact that NetWare was essentially the fastest protocol-engine out there. Nothing could take a packet in on one NIC and splurt it out the other side quicker . . even once you added some firewall-type processing on there it was still lightning. BM users knew that and as far as I know there has been minimal development on it for the past decade and yet it still brings in a shedload.

Incidentally, the fact that NetWare was and probably still is (maybe with a few updates), super-fast, could be the secret to its future. Will it be open sourced and make its way into some fancy open source routing hardware? CISCO hardware + the CISCO OS is a compelling offering but OSS-optimised Net~Ware sitting on some nearly-as-good-as-CISCO hardware could just make a niche for itself?

Of course I’m missing out ZenWorks which was/is responsible for a large chunk of revenue for many years. Is it still the cash-cow it was? I’m not so sure but all eyes will be on the SuSE Enterprise server offering and what any VC fund plans to do with it. Is there room in the IT world for Red Hat and Novell/SuSE?

It was said in the past that two enterprise-ready Linux offerings were just about right but does that hold for today? What about Novell’s Identity Manager offering? I worked on it for many years and I have to say it is technically brilliant but very hard to configure. Is the fact that I, as a consultant, earned hefty rates for Novell by designing and installing product in the workplace a good thing or indicative of the fact that Novell loses market share to technically-inferior products which are a doddle to get up and running? Remmber the early days of NetWare 3.x when the first manual in the box was the guide to the manuals?

Comments

5 Responses to “Hedge fund to Buy Novell?”
  1. Ken Lenihan says:

    Ditto,
    I’m been lurking in the shadows watching the price and wondering when to dump the last few that I’ve got.
    It is so tempting to bale instantly the moment that trading opens today – but I reckon that 24/48 hours won’t make much difference – at least not in a negative direction.

  2. pcoletti says:

    So Ken . . .is that a HOLD recommendation from the Lenihan contrarian ???

    Who else is gonna jump in here . . ? I’ve heard Microsoft mentioned . . surely the utmost irony or ironies?

  3. BigLou says:

    Paul,

    Double check the SEC rules…. looks like you are publicly posting “insider information”… just be careful…

    -Lou

  4. Ken Lenihan says:

    I’ve always taken the position that the value of NOVL shares can go down or can go down very fast.
    I still have bad memories of an option swap process that matured just weeks after the SuSE purchase and meant that the options were pointless from an exercise position. So pointless that I abandoned them when I left Novell.

    As usual, I’ll do my own thing – and leave others to take their own position :-) My only advice is “Don’t gamble what you can’t afford to lose.”

  5. pcoletti says:

    Lo0u, it’s the same infor as in the press reelease. I’ve taken out the press department’s phone number though . . . wouldn’t want them getting swamped.

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