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Will Larry Ellison buy Novell?

Thursday, March 4, 2010

For the first time in years, shares of Novell were in high demand yesterday as investors sensed a possible feeding frenzy over the beleaguered company after private equity firm Elliot Associates made an unsolicited bid for Novell of $5.75 per share. NOVL stock promptly jumped $1.33 to $6.08, on astronomical volume (137 million shares were traded, more than 28 times the trailing three-month average volume).

I worked for Novell from 2002 to 2007 and watched it falter under some of the worst executive leadership in memory. This is a company, let us not recall, that even Dr. Eric Schmidt (currently head of Google, but onetime president of Novell) couldn't turn around.

This is a company that owned DrDOS and couldn't monetize it.

This is a company that owned WordPerfect and couldn't monetize it.

This is a company that owned (and still does) NetWare, a fabulously profitable operating system, but that turned off the NetWare profit spigot immediately after buying SuSE Linux (which it has still failed to monetize except for a short-lived comarketing agreement with Microsoft). SuSE Linux was the number-two Linux distribution in the world when Novell bought it. It's now what? Number four or five?

This is a company that spent $200 million to acquire SilverStream, then promptly ran the business into the ground.

This is a company that spent an equally astronomical amount of money to buy Cambridge Business Partners, and then all but disbanded it.

The litany of business failures under Jack Messman and Ron Hovsepian is a veritable catalog of business horrors.

Novell's great success in recent years has been in obtaining $500 million legal settlements from Microsoft.

But those days, too, are over.

Novell, however, does still have one plum asset under its control that few people seem to remember. It still owns AT&T UNIX.

And that's precisely why Oracle's Larry Ellison will make a last-minute bid for Novell. If he doesn't, he'll miss a great chance to own UNIX and one of the great Linux distros of the world (SuSE), along with a Gartner Magic Quadrant Identity Manager product, and the sadly aging cash cows GroupWise and NetWare -- a combo that's surely worth a quick cash bid of, say, $6 a share.

If Oracle wants to be in the Operating System biz, now's the time.

Your move, Larry.

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