There is an important enterprise software investment strategy behind the proposed takeover of the failing Novell (NOVL), the grand old dame of the 1980s.
The idea is that the pieces of Novell are worth more than the sum of the parts. I don't see it. Novell's in a lot of commodity software markets. A lot of mature commodity software markets such as operating software, other infrastructure software and collaboration applications.
Can Elliot somehow spin SUSE back out and make it compete better with Red Hat (RHAT)? Maybe that would have been possible before Oracle (ORCL) began offering the same value proposition with not one but two alternative operating systems. Can Elliot take Novell up against CA in the infrastructure software world? Maybe it could have before CA got its act together. As for collaboration, they were great products in their days but...
There's another important enterprise software strategy, maybe the most important: Be in the right place at the right time. Novell isn't. In fact, it should be in Provo not up the highway from me in Waltham.
Another way to look at it, from a market dynamics perspective, is to give some thought to what enterprise software companies or products (in the case of a further acquistion) emerged healthy and more valuable from a private equity firm takeover. DoubleClick by Google (GOOG) via Hellman and Friedman may be a good example. And Seagate in Silver Lake might be better off (but was it was public when Silver Lake bought into it?). And the other private takeovers that come to mind (e.g., SSA, etc. to Gores and back and into Infor by Golden Gate; Nortel into Avaya via Silver Lake) are busts. It's not that you as an investor get to participate in that stage but it helps determine the current worth. It doesn't sound like many were especially good deals for anyone execpt those that bailed out early. (The jury is out on Sungard, Serena and others as the trend accelerates.)
So I also don't see someone else coming in to raise the bid, especially in these times. Take the offer and move on.
-- Dennis Byron
Comments