Sun-Novell Merger Unwise

Sun may have the capital to acquire Novell, but does its love of Linux alone make a good marriage?

August 13, 2004

1 Min Read
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OK, Jonathan, time to wake up now. Sun may have the money to buy Novell, and both companies have an affinity for Linux. But these vendors carry too much baggage--and too much red ink--to make for a good marriage.

Even though it lost more than $160 million in 2003, Novell still has a market cap of $2.64 billion--a hefty price tag even for the cash-rich. More than three-quarters of Novell's revenue comes from software maintenance fees, mostly from the Novell NOS, and not from Linux licenses. Buying Novell for its Linux revenue would be like buying a Caesar salad for the croutons. And because there is little overlap between Novell's NOS-dominated business and Sun's hardware focus, there's little opportunity for consolidating expenses--not a good thing for two companies that lost a combined $500 million in their last full fiscal year.

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