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Novell Spent $250m to Get $40m

Novell Spent $250m to Get $40m

The smart money at Prudential has noticed that Novell spent $250 million to buy SUSE and Ximian and acquire roughly $40 million in Linux revenues, or less than 5% of Novell's total revenue stream, to help it rejuvenate a billion-dollar revenue base that's been stagnate for the last five years. Pru says, "Integration and execution issues likely present formidable challenges." Still, the brokerage, which just initiated coverage of Novell, thinks Novell might significantly improve its financial prospects over the next two years from these two small but strategic moves.

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Most Recent Comments
Rob Peglar 02/21/04 08:32:15 AM EST

Acquisition price is one thing, but total ROI is quite another. With worldwide server shipments (that run Linux) on a steep rise, Novell's strategy is clearly correct - invest now to achieve (proportionally) big revenue later, keeping that billion-dollar revenue base instead of letting it wander off. Interesting how the 'smart money' guys (Pru) don't understand the difference between investing and spending. Clearly, their opinion is that Novell spent excessively. Just as clearly, they (Pru) are incorrect. I have no doubt at all that Novell will execute very well indeed in fulfillment of their strategy.