Novell, which has been at the centre of acquisition speculation for over a year, has prepared a poison pill defence, apparently to protect shareholders in the event of a hostile takeover bid.
The company has drawn up a plan to maximise shareholder value through a shareholder rights plan, giving them better negotiating powers should a potential buyer acquire 15 per cent of Novell?s outstanding shares.
Just this month Wall Street rang with renewed rumours that Netscape would be making a bid for Novell. However, Novell said that the shareholder rights plan, which the company submitted to the Securities and Exchange Commission last week, was not designed to prevent a takeover but was there to "deter tactics designed to deprive the company and shareholders of an opportunity to control the company?s destin".
Rick Sherlund, an analyst at Goldman Sachs, said that poison-pill policies were commonplace for many companies and that there were a variety of reasons why Novell might have taken the action.
Commenting on Novell?s recently announced fourth quarter results Sherlund said: ?Novell has done a terrific job in cutting costs and rationalising its business, getting out of areas that don?t make sense. The business is improving sequentially and it is making progress."
But he added: ?I stop short of saying that they are going to flourish in the future while their traditional business continues to be encroached on by NT.?
Novell reported flat fourth quarter earnings, but said there had been a five per cent improvement in sales from the third quarter. Net income for the quarter ended 26 October was $59 million, or 17 cents a share, compared with last year?s net income of $59 million, or 16 cents a share on a larger number of shares outstanding.
The company has discontinued or sold several major product lines in the past year and has made some positive if belated moves into the Intranet market on the back of its Intranetware product. James Marengi, Novell?s president, said sales of its Netware server software line increased 15 per cent in the fourth quarter, compared to Q3, to $247 million. He also noted that sales of the company?s Groupwise groupware product increased 18 per cent over the same period.
Sherlund said: ?Netware is not the most scalable platform for building Intranets on so they are going to have to fight hard in this space.? But he added: ?The company is making an effort to leverage the business by selling Netware Directory Services on top of Unix and NT, outside of the traditional Netware market.?
The company has experienced a string of weak quarters. For the full fiscal year, Novell?s net income declined 63 per cent to $126 million, or 35 cents a share, from $338.3 million, or 90 cents a share, in the prior year. Sales declined 33 per cent to $1.37 billion from $2.04 billion.
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