A hedge fund has offered to acquire Novell, developer of SUSE Linux, for $1.8 billion. Moments ago, Novell confirmed that it plans to review the unsolicited buyout offer. Now, Wall Street pundits wonder if folks like Microsoft, Hewlett-Packard, IBM, Oracle or SAP will step in and offer a higher bid for Novell. Here's the chatter so far along with another software company that might make the perfect parent for Novell...

According to The Wall Street Journal:
Elliott Associates LP, a hedge fund that holds an 8.5% stake in Novell Inc., offered to buy the rest of the software company for about $1.8 billion.
Moments ago, Novell confirmed that:
"it has received an unsolicited, conditional proposal from Elliott Associates, L.P. to acquire the Company for $5.75 per share in cash. Novell anticipates that its Board of Directors will review Elliott's proposal in consultation with its financial and legal advisors. J.P. Morgan is serving as financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal counsel to Novell."
Just last week, Novell announced mixed financial results, but the company did mention that SUSE Linux business has reached the break-even point. The VAR Guy wonders: Was that break-even statement about SUSE Linux an open letter from Novell to other potential suitors? Hmmm... Either way, investors are betting Novell will soon get acquired: Novell shares surged about 26 percent after the buyout offer started making news.

Really Sold This Time?

Novell has been the subject of buyout rumors multiple times since the early 1990s. Once a Wall Street darling, Novell struggled to transition from the old NetWare business to more recent initiatives like SUSE Linux, identity and security management, and various data center efforts.

No doubt, the SUSE Linux business is strong... but some critics wonder if Novell's various software businesses really fit together under one corporate roof? Apparently, Elliott Associates, L.P., plans to take Novell private if the hedge fund successfully acquires the software company.

Other Potential Buyers?

But Wall Street analysts openly wonder if a white knight will step in to buy Novell at a higher price. Among the names mentioned:
  • IBM: Big Blue has close working relationships with both Red Hat and Novell, and IBM has also been working a bit more frequently with Canonical (Ubuntu Linux) in recent months. Could IBM abandon those relationships and buy Novell? Hmmm... The VAR Guy thinks it's unlikely. Linux is less than 20 percent of Novell's business (The VAR Guy believes). Does IBM really want the other 80 percent?
  • Hewlett-Packard: Um, Hewlett-Packard has never really been a player in the software industry. And HP also has an extremely close working relationship with Microsoft. So, would HP want to compete with both Cisco Systems (in servers and networking) and Microsoft (in operating systems) at the same time? The VAR Guy doubts it.
  • Microsoft: A decade ago, The VAR Guy believed Microsoft would never, ever enter the Linux market. Fast forward to the present and the timing could be right. The existing Microsoft-Novell relationship has convinced many CIOs to consolidate their data centers around Windows Server and SUSE Linux. By acquiring SUSE Linux, Microsoft could ultimately decide to port Exchange Server, SharePoint and other server apps over to Linux. Has The VAR Guy lost his mind? Perhaps. But Microsoft bidding for Novell doesn't seem so far fetched these days.
  • Oracle: Sure, Larry Ellison's software giant is busy digesting Sun Microsystems. But Novell is an intriguing potential play for Oracle. Remember: Oracle faces growing competition from Red Hat Enterprise Linux running JBoss middleware and a range of third-party open source applications. Owning Novell would be one way for Oracle to potentially combat Red Hat and Microsoft at the same time.
  • SAP: Sure, SAP has a close working relationship with Novell SUSE Linux. But at this week's SAP Partner Conference in Las Vegas, Red Hat stepped forward to sponsor a major welcome reception. SAP has enough challenges competing with Oracle and SaaS companies. Does SAP really want to own a Linux operating system? The VAR Guy doubts it.
  • Dark Horse - Computer Associates: Ironically, nobody has pointed to CA Inc. as a possible suitor for Novell yet. But CA might be a good fit, The VAR Guy believes, since both Novell and CA have extensive systems management, identity management and security products. Also, moving into the Linux market would give CA an instant "wow" factor going forward.
Either way, two things are clear: Novell received an unsolicited takeover offer. And now that the takeover offer is public news, all eyes are on the future of SUSE Linux.