Author's Opinion

The views in this column are those of the author and do not necessarily reflect the views of iTWire.

Have your say and comment below.

Friday, 05 March 2010 10:37

Are these the last days of Novell as we know it?

By
After the hedge fund Elliott Associates made known its bid for Novell, at some kind of bargain basement price of under a billion US dollars, it seems unlikely that the company will not be acquired by either the fund or some other suitor who is waiting in the wings.

Elliott's offer of $US2 billion boils down to actually paying about half of that price as Novell is cash-rich and has nearly $1 billion in cash, cash equivalents and short-term investments.

As the former editor of Linux Today, the erudite Brian Profitt, points out, Elliott, like quite a good many other hedge funds, behaves like a vulture. It buys companies, dismembers them and sells them for a profit.

There will be no emotion where Elliott is concerned; the fund even purchased debt in a poor country like Costa Rica when it was possible to make a few million there, Profitt writes. In this respect, Elliott appears to follow in the grand tradition of asset management companies like the legendary Kohlberg, Kravis and Roberts.

Free software and open source types may agonise over a sale, since one of the better known GNU/Linux distributions, SUSE Linux, is one of the main assets that Novell still possesses.

But Elliott can probably only see dollar signs when it looks at Novell and if the commercial SUSE distribution suffers as a result, I doubt that there would be any tears shed.


Novell's shareholders and the bosses too would be happy to see a suitor emerge at last - Novell has been expecting some kind of offer for a long time.

This became evident on April 1 last year, when my colleague, Linux expert David M. Williams, wrote a spoof that claimed Microsoft had acquired a majority share in Novell. A number of people called the US office to inquire if this was true and the the company's public relations chief, Ian Bruce, called iTWire to demand that the story be retracted.

There are some questions which present themselves at this juncture: Will Elliott's bid be accepted? Who else will throw their hat into the ring? And what happens to some of Novell's products if a sale goes through? This is a column that largely deals with free and open source software, hence one will concentrate on software of those genres which are in Novell's possession.

It is highly unlikely that the first bid from Elliott will be accepted. That generally does not happen. Novell will hold out for a better offer. But after three years of a patent-licensing deal with Microsoft - Novell's last desperate bid to turn a profit - not showing any concrete results but merely bringing the company to the break-even point, one cannot blame the Novell management if they are keenly awaiting further approaches from Elliott or any other prospective buyer.

And who would those be? Microsoft? It would be an advantage for the folk at Redmond to think of such an acquisition if only not to waste the amount of work that has been done on interoperability, for example getting SUSE Enterprise Linux to run on Windows Hyper V as a guest operating system.

The money that Microsoft has put into its joint efforts with Novell is mere pocket money, given its cash reserves; apart from the interoperability effort, what matters is projects like Mono and Moonlight which are bringing Microsoft technologies to GNU/Linux and also giving Microsoft the chance to occasionally raise the spectre of patents in its technologies causing problems for GNU/Linux users down the line. As it has done again recently.


But I doubt that Microsoft will venture near Novell because of the possible anti-trust issues involved. And if it buys SUSE, it will be unable to point to the distribution as a possible competitor when the question of operating system monopoly is raised by people in power.

That leaves open the possibility that Redmond will recruit a patsy to put up a bid - and there are plenty of companies, especially in the current financial climate, who wouldn't mind making $US10 million or $US20 million for acting as a front.

IBM is another likely suitor, chiefly because it benefits greatly from having a healthy SUSE Linux Enterprise distribution. SUSE is certified to run on practically all IBM's hardware and Big Blue has a vested interest in seeing that it is kept alive. Were Novell's assets to be hived off separately after a sale to Elliott, I'm pretty sure that IBM would be standing in queue, hand in deep pockets.

If IBM were to become the owner of SUSE, it seems unlikely that there would be half the encouragement for Mono and Moonlight as exists now. But this would not bother Miguel de Icaza, the Novell vice-president who is behind these projects. De Icaza made his pile through the sale of Ximian to Novell and he could easily join Microsoft for whom he functions more or less like a proxy these days.

Oracle is a third possibility. Not that it needs SUSE Linux; Oracle makes its Linux dollar off Red Hat in the guise of Unbreakable Linux. But being in charge of SUSE would give it some control over the pace at which its competitors, like IBM and HP, progress. Oracle has a complete vertical stack of IT assets after its purchase of Sun and there is nothing better that Larry Ellison would love than to be top dog. Lest we forget, egos are very important in the tech industry.

One more interesting aspect of the Elliott bid is that it comes just before the case which Novell and SCO are fighting is due to begin hearings before a jury. Novell was declared the victor and given ownership of the UNIX assets but the judgement was overturned and a jury trial ordered. That IP is very valuable and if Novell wins - as it is expected to - it may be worth fighting over.

But I doubt Elliott is looking that far. The hedge fund is more likely to be looking at making money from dismembering Novell, and making more from the parts than it spent on the whole.

Subscribe to ITWIRE UPDATE Newsletter here

GRAND OPENING OF THE ITWIRE SHOP

The much awaited iTWire Shop is now open to our readers.

Visit the iTWire Shop, a leading destination for stylish accessories, gear & gadgets, lifestyle products and everyday portable office essentials, drones, zoom lenses for smartphones, software and online training.

PLUS Big Brands include: Apple, Lenovo, LG, Samsung, Sennheiser and many more.

Products available for any country.

We hope you enjoy and find value in the much anticipated iTWire Shop.

ENTER THE SHOP NOW!

INTRODUCING ITWIRE TV

iTWire TV offers a unique value to the Tech Sector by providing a range of video interviews, news, views and reviews, and also provides the opportunity for vendors to promote your company and your marketing messages.

We work with you to develop the message and conduct the interview or product review in a safe and collaborative way. Unlike other Tech YouTube channels, we create a story around your message and post that on the homepage of ITWire, linking to your message.

In addition, your interview post message can be displayed in up to 7 different post displays on our the iTWire.com site to drive traffic and readers to your video content and downloads. This can be a significant Lead Generation opportunity for your business.

We also provide 3 videos in one recording/sitting if you require so that you have a series of videos to promote to your customers. Your sales team can add your emails to sales collateral and to the footer of their sales and marketing emails.

See the latest in Tech News, Views, Interviews, Reviews, Product Promos and Events. Plus funny videos from our readers and customers.

SEE WHAT'S ON ITWIRE TV NOW!

BACK TO HOME PAGE
Sam Varghese

Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

Share News tips for the iTWire Journalists? Your tip will be anonymous

WEBINARS ONLINE & ON-DEMAND

GUEST ARTICLES

VENDOR NEWS

Guest Opinion

Guest Reviews

Guest Research

Guest Research & Case Studies

Channel News

Comments