Novell officially turned down the purchase offer of $5.75/share from Elliott Associates in a letter and press release this past Saturday. So what does this mean for the software company?
The rejection comes as no surprise. Any board would value their company more and would want top dollar. Note in the letter that: “Novell's Board is committed to enhancing value for Novell stockholders and believes that an exploration of alternatives is in the best interests of the Company and its stockholders.” And that the paths they are pursuing to enhance stockholder value “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.”
In short, Novell is saying: “Come on Elliott – or anyone else out there – you can do better than that!” However, I think this is exactly what Elliott was hoping would happen. Start a bidding war. But most people would think that Novell isn’t worth that much, but that’s where they are making a mistake. Novell has more assets and than most people realize – and most importantly, in ways that most people don’t realize. I’ll blog about those in an upcoming blog.
Novell is open to any tactic to increase shareholder value, but they know not to jump at the first opportunity. Most of these negotiations and possibilities will occur under the covers. So what do I think should happen to Novell? I’ve told Novell executives on a number of occasions that they need to find the right technology company (not investment firm) to merge with or be acquired by. Novell continues to produce great technology, but they have never been able to market themselves out of a paper bag. Even during the years I was there, each new chief marketing officer (CMO) came with glorious plans to improve Novell’s image. That was the root of the problem, the Novell brand isn’t bad, it’s just become irrelevant. The analogy I like to make to help people understand is that they need to think of how the IT world regarded Digital Equipment Corporation (DEC) in the mid 1990s. It was known as a great technology company with excellent mini-computer systems, but the needs of the market shifted making them all but irrelevant. The same thing has happened to the Novell brand: regarded with thoughtful awe from a past era. The company needs to surface its technologies under a different more relevant brand today. Note: Novell has done this with some products (eg Platespin Orchestrate was originally going to be called Zenworks Orchestrator but they latched onto a more modern relevant brand for that product) – but the crux is they need to lose the Novell name for new technologies and products. The name needs to go down in the history books and remain revered for its past legacy.
Tell me what you think should happen to Novell?
[Posted by: Richard Jones]