Eric Schmidt, Novell?s chief executive officer, is continuing his strategy of removing anything peripheral to the networking supplier?s business by selling off its shareholdings in ailing firms, the Santa Cruz Operation (SCO) and Corel.
Both companies have been suffering financially for some time, with SCO hit by Windows NT as it encroaches into the firm?s core, low end Unix-on-Intel marketplace and Corel still trying to battle it out with Microsoft in the desktop applications space. As a result, the companies share prices are languishing at about $4 and $2 respectively, which would appear not to make it a good time to sell.
However, Novell itself has not been in the best of financial health in recent years as it too tries to fight off the threat of Microsoft. While it did move back into profit last quarter, revenues dropped 33 per cent to $262 million as a result of sales of the company?s flagship NetWare 3 and 4 product lines falling by $18 million or seven per cent compared with the year ago quarter.
In 1997, Novell lost $78.3 million, while turnover fell almost 40 per cent to $1 billion.
But, according to a recent 10-Q filing with the Securities and Exchange Commission (SEC), the company is now intent on shedding its non-strategic investments over the course of the next year and plans to focus on its core network business.
Novell acquired 6.1 million shares in SCO in 1995 when it swapped Unix for a stake in the firm, and 9.95 million shares in Corel when it sold WordPerfect to the applications supplier in 1996. This made it a "gross unrealised loss" of about $56 million as of 30 April this year.
While Novell refused to comment on the situation, a spokeswoman at Corel said: "Novell has been very forthright in its discussions with us and we can see the decision from its point of view. It does not indicate a lack of confidence in Corel, but is a business decision made for business reasons. Novell is a large shareholder, but is not interested in holding shares in companies it doesn?t have a strategic partnership with."
John Luhtala, SCO?s chief financial officer, continued: "This is not a surprise issue and we?ll work with Novell to minimise the adverse impact on our stock. We could do this in several ways - introduce a buyback programme or talk to a number of people who would be interested in taking a larger position in the company. It?s a matter of whether we can put them together with Novell and whether they can agree a price."
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