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Novell Rejects "Inadequate" $2B Takeover Bid
alphadogg writes "Novell's CEO wrote to customers Saturday telling them that the software company has rejected a $2 billion bid by hedge fund Elliott Associates to take it private. He called the offer 'inadequate' and said Novell will review alternatives. Novell has struggled financially even as it has reinvented itself from its NetWare network operating roots into an open source (SUSE and Ximian) and management and security software company. Revenue fell 10% during its most recent fiscal year (wrapped up in October) and its net losses widened. CEO Hovsepian's total compensation fell 17% to $5.7 million."
There are companies that really should resist being taken over at low-ball prices. I'm very skeptical about any assertion that Novell is one of them; I'd suspect this is a seriously high-ball price, and yes I mean that in several different senses :-)
That doesn't mean it's easy to work at a company that's been bought for too high a price - I used to work for Company N, which was bought by Company A for (IMHO) about 3x what they should have paid, and 2.5x what Company A could have gotten if they'd started out with a low enough offer and ignore Company N's CEO ranting about hostile takeovers. It was a great deal for the stockholders of Company N, but for the company itself, paying 3x what the company was worth meant that the buyers were expecting to get 3x as much revenue from owning Company N as was realistically available. So they went into radical cost-cutting mode, sold off a couple of divisions, tried a bunch of new things using the skills they imagined that Company N would have if a few people from Company A came over to "help", and when that failed, laid off a bunch of people (including me, but I found another job at Company A about when my severance pay ran out, so basically I got a vacation that was long enough I should have goofed off much more seriously than I did.) Eventually they stopped doing most of the things they were bad at (including some of their main product lines that were being eclipsed by the technology boom), went back to doing the things they actually were good at, and got spun off for a stock price that was about what they were actually worth at the beginning of this whole charade.
Bill Stewart
New Fast-Compression-only CPR http://preview.tinyurl.com/dy575ks
These days most private equity firms are basically vultures - I offer case in point, Chrysler Corporation. They buy out a firm, gut it, wreck it, and then try and unload a few pieces. Rarely does a private equity firm actually ever improve that which it buys.
This is my sig.
Companies like this is exactly what Elliot et al. wants, liquidize and suck out the billion dollars and throw away the empty shell and all the workers, these hedge funds are the scum of this earth
Liabilities are not debt.
They are the short term costs of doing business, and will be reflected in next year's financial statements as being fully paid out of operating revenue.
Debt is simply that ... money you borrowed and will have to pay back some day.
Examples of liabilities are ... employee wages, rents, utilities, paying the contractor who painted your office building, invoices for product delivered (last week) but not yet paid for (once every 30 days, etc), etc. Another (Big) example is shareholder's equity. That is money you technically owe, but never have to pay; if the stock goes to zero there is no payment required to cover that.
It's ongoing business accounting, with the payment coming out of your ongoing sales.
Enterprise services are big business, IBM make $13 billion profit every year selling crappy software that does what people need.
Novell has a huge asset (besides their pile of cash), and that is their customer base. If they can create an attractive way for their customers to move forward, they have strong potential for profitability in the future. All they need to do is figure out what their customers need, stick it in a pretty package, and the sales will basically take care of themselves.
My understanding (from talking to employees at the company) is that Novell is a very bureaucratic company, and it is hard for new ideas to get backing inside the company. If they want to succeed they will need to overcome their inertia and become more nimble. There is no reason they can't do this: if they die, it will be because they got caught in their own tarpit and didn't have the will to change.
Qxe4
Easy money.
T
Laws are horrible moral guides, moral guides make even worse laws.