The Waltham, Massachusetts-based Linux and identity management software vendor plans to repurchase up to $200m of Novell common stock over the next 12 months, with purchases made at the discretion of management based on its evaluation of market conditions.

The company’s chairman and CEO, Jack Messman, maintained that the repurchase plan demonstrates the board is happy with Novell’s current financial position and strategy, despite stinging criticism from Blum, which owns or controls 5% of Novell’s outstanding shares, and the critical research note from CSFB analyst Jason Maynard.

Our stock buyback is just one of the elements of a plan aimed at enhancing shareholder value and securing Novell’s future as an important provider of solutions to the IT market, said Messman. The buyback demonstrates the board and management’s confidence in our financial strength and strategic plan.

That comment appears to be at odds with Messman’s initial rejection of Blum’s suggestion that it implement a $500m share repurchase program, which was revealed in a filing with the Securities and Exchange Commission earlier last week.

The filing included correspondence between Blum and Messman, within which the investment firm quoted a June 16 letter from Messman to Blum, in which he stated: To date, our analysis has indicated that the current time is not appropriate for a stock buy back.

Novell’s share price has actually increased since then, from $6.27 at the close on June 16, to $7.00 at the close on September 22, and Blum’s letter also indicated that Messman saw more value in Novell’s cash pile in giving customer’s confidence in Novell’s stability.

Blum’s letter quoted Messman as highlighting the need for cash as a demonstration to customers of our market staying power and viability, and noting that a strong balance sheet is an undisputed way to give customers that comfort.

Novell had $985.8m in cash and cash equivalents at the end of its third quarter, ended July 31, and generated $15m in cash flow from operations in the quarter. The company’s cash position was boosted by November 2004 antitrust settlement with Microsoft, which netted the company $448m after tax, and other one-time items in its first quarter of 2005.

The company also raised $600m via the sale of convertible senior debentures in July 2004, using $125m to repurchase 15.2 million shares of common stock, and keeping $475m for general purposes, including potential future acquisitions. Since then it acquired IT asset management software vendor Tally Systems Corp for an undisclosed fee in March 2005.

Acquisitions were also part of the strategic changes suggested by Blum, which recommend that Novell increase its investment in Linux and open source software through partnerships and acquisitions to move further up the stack.

The investment firm also proposed that Novell costs by targeting its two corporate jets, its overstaffed R&D department, legacy products, and its 400 or so NetWare engineers, as well as selling non-core businesses to enable funds to be redeployed.

CSFB’s Maynard had earlier suggested that the company should focus on software services rather than consulting, increase its emphasis on open source software, repurchase company stock, and bring in new management.

Novell has admitted that it is in the middle of a transition impacting its product lines, sales force, reseller channel, and ISV partnerships, following its acquisition of Linux firms Ximian Inc and SUSE Linux AG last year. The company has said it will announce a restructuring round during its current fourth quarter, which ends on October 31.