At Long Last, NetWare Drops Dead

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

It looks like Novell (Nasdaq: NOVL  ) has settled on an exit strategy. According to sources spilling a bit of beans to New York Post, the enterprise software specialist will split in two parts, with the Linux-centric segment going to one unnamed buyer and the old-line NetWare and GroupWise portions headed for another destination.

I hate to say I told you so, but this is close to what I've been asking Novell to do for the past four years. Way back in 2006, I told NetWare to drop dead or else move over to an organization that is set up to support a money-making legacy system with no growth juice left in its tank: "Spin off the Netware support or sell it to a consulting expert like IBM (NYSE: IBM  ) , and go up against Red Hat (NYSE: RHT  ) in a two-horse race on equal terms. That might transform Novell from an aging star, desperately clinging to past glories, into a lean and hungry specialist in a much hotter market."

Much water has passed under the bridges since then, but one thing hasn't changed: Novell needs to cut NetWare and its ilk loose in order to refocus its resources on the modern growth opportunity of SUSE Linux. But now IBM looks more likely to bid on the Linux operations than on the legacy part, which probably will end up in the hands of private equity investors and cut down to a tight support package with zero R&D budget until the end of that software's usable life.

Big Blue could fold SUSE into its AIX version of Unix or simply nurture it as a standalone product to ship with its many varieties of server hardware. It's a value-added purchase for IBM, and the company is already comfortable supporting software with an open-source pedigree.

Other prospective buyers include:

  • Virtualization expert VMware (NYSE: VMW  ) , where SUSE would become a preferred host and guest of the company's eponymous virtual servers.
  • Oracle (Nasdaq: ORCL  ) and Hewlett-Packard (NYSE: HPQ  ) are buying anything with a pulse these days and can never be counted out of acquisition discussions, no matter how terrible the outcome would be for the SUSE product.
  • Cisco Systems (Nasdaq: CSCO  ) is almost as hungry as Oracle, but Novell's Linux operations would be a much better match for Cisco's newfound love of server hardware. Oracle has Sun's Solaris software after all, not to mention its Unbreakable Linux, while Cisco has nothing remotely like it. Even if I don't like what Cisco is doing in the server space, this deal would make a twisted kind of sense.

The chop-shop affair is likely to extract a higher value out of Novell's eventual sale than shipping off the whole package to a single buyer. A deal should be signed in the next three or four weeks, and then we'll see who that masked buyer really is. My guess is IBM, but where do you see Novell ending up? Cast your vote in the Fool Poll right here, then start a discussion in the comments below.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Vmware is a Motley Fool Rule Breakers selection. The Fool has written calls (Bull Call Spread) on Cisco Systems. The Fool owns shares of International Business Machines and Oracle. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. You can check out Anders' holdings and a concise bio. The Foolish disclosure policy told you so, dude.

Read/Post Comments (1) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 16, 2010, at 11:49 PM, hldboo wrote:

    With competition creeping up on VMW, I think a little diversification would be healthy and SUSE looks like a pretty good fit.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1303692, ~/Articles/ArticleHandler.aspx, 10/25/2016 9:09:06 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,169.27 -53.76 -0.30%
S&P 500 2,143.16 -8.17 -0.38%
NASD 5,283.40 -26.43 -0.50%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/25/2016 4:00 PM
CSCO $30.34 Down -0.12 -0.39%
Cisco Systems CAPS Rating: ****
HPQ $13.90 Down -0.07 -0.50%
HP CAPS Rating: ***
IBM $150.88 Up +0.31 +0.21%
IBM CAPS Rating: ****
NOVL.DL $6.10 Down +0.00 +0.00%
Novell, Inc. CAPS Rating: **
ORCL $38.36 Up +0.09 +0.24%
Oracle CAPS Rating: ****
RHT $77.35 Down -0.86 -1.10%
Red Hat CAPS Rating: ***
VMW $73.20 Down -0.77 -1.04%
VMware CAPS Rating: ***