Novell Declines Elliott Takeover Offer

Earlier this month, the hedge fund Elliot Associates offered $1.8 million to take over storied software maker Novell—Elliot already owns about 8.5 percent of Novell, but believes the stock has underperformed and that it can maximize the company’s value to its investors if it takes over Novell and “restructures” the company…which is usually industry slang for tearing the company apart and selling the pieces to the highest bidder.

However, Novell appears to be digging in its heels: the company’s board of directors has rejected Elliot’s offer as “inadequate,” saying the unsolicited offer undervalues both the company’s current assets and its growth prospects. Novell’s board has also authorized a number of initiatives aimed at improving the company’s financial profile to investors: options include simply giving its investors a bunch of money through a stock repurchase program or dividends, going into partnerships or joint ventures with other companies, recapitalizing Novell, or even selling the company entirely. However, Novell says it’s not going to talk about any of these options until its board approves a specific plan of action.

Novell’s star in the technology industry has certainly dimmed from the days when it was a serious competitor to Microsoft in both organizational networking (via its Netware system) and office productivity (via WordPerfect as its peers, which were eventually sold off to Corel). Novell has since become a serious player in the Linux world, defending a long-running copyright suit from SCO that threatened the foundations of the operating system (SCO has been thoroughly trounced, although it hasn’t given up) and entering into a long-term partnership with Microsoft in which its SUSE Linux operating system is shielded from any patent litigation Microsoft may—or may not—bring against Linux in the future.

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