Sun-Novell Merger Unwise

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.