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November 22, 2010

Novell exits public status stage left, to face a dismembered future

Novell has given up the battle – sold to Attachmate for $2.2bn. Gary Flood looks at what went wrong for the tech stalwart


Following a long period of decline and uncertainty, Novell – once a stalwart of the network operating industry and indeed computing itself in the 1980s and 1990s – has removed itself from the status of a publicly-traded organisation by selling itself to Attachmate and ended a lineage of independent software innovation that goes back to 1979.

Ron Hovsepian Novell CEO

As part of the deal the company becomes two operating units of the latter, with the company’s non-Linux OS business in one arm and its SUSE business as another.

Attachmate, which is owned by private equity investors, has paid $2.2bn for the struggling firm, which does at least return some value (just over 9%) on the final day’s trading stock price, or $6.10. That ends a long attempt by the firm to find a better price it had than the first shot in what turned out to be less a long bidding siege, as opposed to war, March’s offer of $5.75 a share.

On that metric, one can say that Novell President and Chief Executive Ron Hovsepian has had a sort of victory. But was it worth eight months of uncertainty and eroding marketplace conviction in him and his company? Was it also worth him having to pony up some of his firm’s precious IP to a consortium of technology companies headed up Microsoft by for $450m as a sweetener for the deal?

No. This is a loss for Novell, which now passes into ICT industry history and from now on is a footnote. Yes, the products and indeed SUSE will live on to some extent and boost Attachmate’s catalogue and let that firm offer more convincing information security and cloud offerings.

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For his part, Hovsepian said in the statement to the market that he and the board, after a "thorough review of a broad range of alternatives," had concluded the twin Attachmate-MSFT consortium dismemberments were the best deal that could be found.

We have been on his case for a while, lamenting as far back as August’s report on its very poor Q3 figures that the guy was in danger of becoming like "our friend at Lehman Brothers, Dick Fuld, who just refused to wake up and smell the coffee in time and sell when he should have".

We implored Hovsepian and the board to "make a deal happen, make it happen fast, buy the damn yacht and let’s all move on". Well, he sort of did, but this doesn’t feel like victory to us.

Hovsepian is also the last in a long line of Novell CEOs who have been major hitters after the ousting of founder and original visionary Ray Noorda. In 1997, Ray Lane, at that time still chief operating officer of Oracle Corp (and now of course over at HP as non-exec chairman) was pipped for the job by then Sun Microsystems Inc’s CTO, Eric Schmidt, who shortly after went over to the company whose name ends in ‘Oogle’. There was a time when running Novell was as choice a job as you could want in Premiership High Tech, basically; no longer and not for some time.

What went wrong? Novell didn’t have the guns to fight the big guys and it looks like there isn’t enough room in the market for two Linuxes. There was also some dithering and poor leadership.

But in a way – this is how all smaller ICT firms will meet their Heat Death at the end of the tech Universe. We are moving into an era of not just Mega, but Giga Vendors. Soon, there will be five companies that matter: IBM, HP, Oracle-SAP (one will buy the other at some point), MSFT, some new cloud service vendor that may look like Accenture and Cisco.

That’ll be it, with the majority of ICT produced and consumed in the cloud.

Dinosaurs will end up ruling the Earth – and Novell was always just too tiny a mammal.

A pause for brief lament is in order. Then let’s all move on.

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