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Who Wants Novell?

Anders Bylund
March 3, 2010

There's a storm brewing over Novell (Nasdaq: NOVL  ) . The Linux specialist got an unsolicited buyout bid from a private equity firm -- but investors seem to expect a bidding war.

The turnaround experts at Elliott Associates want to buy all of Novell for $5.75 per share. That's a 49% premium to Novell's enterprise value as of yesterday, a 21% premium over yesterday’s close, and a generous bid any way you slice it. Elliott sees value in Novell's assets, but disagrees with the company's strategy, which means the management team would probably be eviscerated in short order.

"We believe the Company's stock has meaningfully underperformed all relevant indices and peers" because of failed acquisitions and strategy changes, Elliott wrote in its open letter to Novell's board of directors.

That indictment does ring true when you look at Novell's stock charts. I compared Novell to direct rivals such as Red Hat (