Tom Petrocelli's take on technology. Tom is the author of the book "Data Protection and Information Lifecycle Management" and a natural technology curmudgeon. This blog represents only my own views and not those of my employer, Enterprise Strategy Group. Frankly, mine are more amusing.

Monday, November 22, 2010

Novell Rides Off Into The Sunset

The curtain comes down for yet another 80’s era pioneer. Novell is finally throwing in the hat (not a Red Hat mind you) and selling itself off to Attachmate for the ungodly sum of US$2.2B. There are a couple of interesting questions about this acquisition but first a moment of silence for an historic old ship that has run up on the shoals of competition. At one point they were as hot as Google. But like Sun and other companies of my youth they didn’t keep up and will soon be no more.

Why sell now? Because Novell is obviously not going anywhere. At one time they had the number two PC server operating system, have the number two server Linux and generally were number two in a many things. You can’t be number two without eventually ending up on someone’s shoe. So, if someone offers you enough money to float a missile cruiser, you take it. That’s being responsible. Or maybe the rent’s too damn high. (Caution: Sound is too damn high in this web site).

Why US$2.2B? Got me. I mean that’s not that much of a premium over Novell’s market cap but it’s a lot of money for a company that is a shade of its former self. Part of why that number is so high is because Microsoft (through CPTN Holdings LLC) dropped US$450M into the pot. They have a lot of cash. For them, this is like buying a pack of gum. Still, I have a hard time seeing this pay off for Attachmate. Unless it’s not about paying off for Attachmate per se. (I love foreshadowing…)

Who? Attachmate? I know what you mean. Who the heck are these guys that they can go out and buy Novell. That’s like Meritline (a purveyor of cheap Chinese electronics) buying Best Buy. Seems backwards. Attachmate has a product portfolio that looks like a hodgepodge of data center management products. The deal makes sense from a product point of view in that Novell has their own hodgepodge of data center tools and technology. So, depending on what stays with Attachmate and what goes to Microsoft, you will have a company with a huge collection of somewhat related technology. Combine them into certain combinations and you have a bunch of companies. The funny thing is that Attachmate is nearly as old as Novell but you don’t think of them like Novell. I’m not sure if that’s good or bad.

Attachmate is owned by a group of private equity groups. That, plus it’s product portfolio mélange, makes it look like a rollup. Rollups keep going by rolling up more companies and selling them off in combinations. It’s like cooking – a little of this, and a little of that, a pinch of something else and Voila! you have a dish you can sell to investors. That might be where the pay off is.

Why should we care? Really we shouldn’t but we do. Whenever a company with a history like Novell’s gets absorbed and turns into little more than a brand it’s sad. We really should if something bad happens next like SUSE Linux goes away, reducing competition in the Linux market. But really, I doubt that will happen and if it does there’s still OpenSuse, right? If you’re a Novell customer of course you care. You don’t know what these guys at Attachmate (or Microsoft) might do and that has to mess with your head. Otherwise, it’s not a game changing acquisition.

So, what does happen next? My guess is that they package up SUSE Linux with some other stuff and spin it off to investors or another company.  If I’m the folks in Redmond I want the identity management IP. That would go along way to creating online services and backend software for trusted Internet environments. Attachmate absorbs the rest and moves on its merry way. Depending what it gets for the other pieces of Novell (like SUSE Linux and ZenWorks) and what it can combine with its own products and sell off, it might make money on this. This is not about product engineering. It’s about financial engineering. And in this type of financial engineering one plus one can equal three.

I wave my hat to Novell as it rides off into the sunset. We’ll miss you amigo.

No comments: