Novell: We're Not Selling Out (Yet)

Novell's board of directors rejects a $2 billion bid for the company as "inadequate."

By Sean Michael Kerner | Posted Mar 22, 2010
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Software vendor Novell isn't going to be sold to hedge fund Elliott Associates, at least not today.

Over the weekend, Novell's (NASDAQ:NOVL) board of directors rejected Elliott Associates' unsolicited $5.75 a share, an offer that valued the company at $2 billion. Elliott's March 2 bid for Novell triggered a 28 percent rise in the company's stock price.

In a new statement, however, Novell's board of directors said that the Elliott offer is inadequate, undervaluing Novell and its growth prospects.

That doesn't necessarily mean that Novell is averse to selling the company, though.

"Novell also announced that its Board of Directors has authorized a thorough review of various alternatives to enhance stockholder value," Novell said in its statement. "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."

Novell's board added that even though they are considering their options, there is no guarantee that any kind of transaction will actually take place. Novell's board members also noted that they won't be disclosing their plans until they have actually approved a course of action.

At least one of Novell's major shareholders has voiced its approval of the board of directors' move to reject the Elliott bid. The Blue Harbor Group, an investment firm owning 4 percent of Novell, issued its own statement over the weekend in support of the decision.

"We agree with Novell's management and Board of Directors that the company's value significantly exceeds Elliott's proposal," Blue Harbour Group CEO Clifton S. Robbins said in a statement. "Blue Harbour has been in active and constructive discussions with Novell's management in recent months on various alternatives to create and unlock value, and we support the company's decision today to pursue a formal review process with the assistance of its advisors."

Novell's most recent financial results began to show some upside in certain parts of its business. For instance, Novell's Linux business broke even during its first quarter of fiscal 2010. However, that achievement had been tempered by the fact that Novell's overall revenues declined on a year-over-year basis, coming in at $202 million, down from the $215 million reported for the first quarter of 2009.

Sean Michael Kerner is a senior editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.

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