● 12.12.08

●● Novell Slides Days After the Financial Results

Posted in Finance, Microsoft, NetWare, Novell, SCO, UNIX at 2:12 pm by Dr. Roy Schestowitz

THE release of OpenSUSE 11.1 is less than a week away. While the project is marketed as though it’s independent from Novell (it’s not), the company is in poor shape following bad results (the partners at Microsoft are on the same boat). Here is a curious bit from the news:

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“There are companies out there that used a huge chunk of their cash to make acquisitions recently, or they bought back their stock at two or three times its current level. Now that the time is finally right, they can’t do a buyback,” said Mark Murphy, a Piper Jaffray Companies analyst who follows Novell Inc. “They’re looking and saying, ‘Is this Armageddon? Is it the Great Depression, Part II?’ What exactly are they sinking into here? So they’re retrenching when ideally they should be doing the opposite.”

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Novell’s stock buyback program has been a conservative one so far, designed to maintain value for shareholders as the company disburses stock-based compensation to employees, said CFO Dana Russell. But Russell acknowledged the company is feeling pressure from its shareholders to spend the cash it holds. In today’s interest market, cash earns only 1 to 2 percent, he pointed out. “People don’t invest in companies like Novell to get a 1 or 2 percent return,” he said.

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Dana Russell is right. Some people invested in Novell only to see half of their money gone. That’s almost -50% ‘return’ to be precise, not “1 or 2 percent return.”

Then, there’s the series of acquisitions (recent example). That would be Novell trying to buy its way out of persistent losses while at the same time buying back its own stock [1, 2] to prevent shares from dropping into oblivion.

Novell is far too dependent on Netware [1, 2] and on Microsoft's mercy/giveaways. It’s very much like SCO with a dying UNIX business and cash infusions from Microsoft. SCO too used to contribute to Linux. █

“…Microsoft wished to promote SCO and its pending lawsuit against IBM and the Linux operating system. But Microsoft did not want to be seen as attacking IBM or Linux.”

–Larry Goldfarb, Baystar, key investor in SCO

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