More Rumors Emerge About A Novell Acquisition

by Ostatic Staff - Sep. 15, 2010

For some time now, we've been writing about how the war drums are beating around Novell. Countless rumors have swirled about the company's woes, and its business results have been poor, with few signs that its Linux business is going to become healthy any time soon. In the latest rumor, courtesy of The New York Post, there is allegedly a two-part bid for the company. Whether Novell's eventual fate comes in this form or another, it's almost certain that it won't continue as an independent company, which would leave only Red Hat among U.S.-based public companies focused on open source.

The New York Post reports: 

"A strategic buyer will buy the piece of the software provider that develops and delivers Linux SUSE systems, with a private-equity firm picking up much of the rest. Both deals are expected to close simultaneously and the company will be de-listed, according to one source, who noted that the talks are in a sensitive stage and could fall apart. "

 ZDNet's Dana Blankenhorn notes that, technically, this is not really news. In many ways it isn't, because Elliott Associates wrote to the company offering to buy it for $1 billion months ago, which prompted all kinds of analysis on Elliott's intentions. As we noted then, it appeared likely that Elliott might buy Novell just to flip its Linux business and sell of its remaining parts.

What you have to remember about Novell is that when it comes to "remaining parts" it has substantial legacy assets. Novell is one of the longest-standing public software companies in the U.S. and has a huge portfolio of patents, software assets and more. So the notion that it might be bought and sold in parts is really not news.

Is Elliott Associates the private equity buyer referred to in the Post story? Who knows, but a scenario where the company is bought and then sold in parts is very believable.

Back when Elliott Associates made its offer to Novell, Matt Asay wrote a good piece on the likely outcome of a Novell acquisition. He noted that Novell's Linux business is a distant second to Red Hat's leading Linux server business. Still, there could be buyers interested in that Linux business. At this point, an acquisition would probably be the best thing for Novell and its board probably knows that. If it does get snapped up, only Red Hat will remain among independent, public, U.S.-based companies focused on open source goals.