Why the Sun-buying-Novell rumor is ridiculous, Part 2

Last issue, I took apart the rumor that Sun might be about to acquire Novell by looking at what Sun would have to pay compared to the value of the products that it might get – and be able to use. Today, we’ll look at some of the intangibles that might also be part of the deal.

Novell has a worldwide consulting organization, Cambridge Technology Partners, as well as the recently acquired Salmon, which has much Linux experience. But Sun already has a well-entrenched consultancy group within the enterprise and would hardly need to add more. That would mean divesting these groups – or simply firing them all – which would add to the cost of the acquisition.

Firings, layoffs, terminations and announcements of people leaving “to pursue other interests” could be expected in the short term, if Sun were to buy Novell. Novell itself – with its Boston-based management and Utah-based workforce – is a study in culture clash. Add in the always abrasive Scott McNealy and his minions, and the clash could become an all-out war! I don’t see Chris Stone fitting in very well with the Sun folks, although he has worked at the company before. Jack Messman would, most likely, be offered the opportunity to retire, which quite frankly, he’s not yet ready for.

What this all amounts to is an indication that Novell’s “intangibles” – its people – would not be an asset that Sun would acquire along with the company. Instead, there would be large expenses involved in removing employees as well as large gaps in expertise from those leaving voluntarily. Putting a value on those things could well push the acquisition cost to more than $4 billion – that much for as we calculated in the past issue, $300 million worth of stuff. I wish I could find a buyer willing to pay more than 13-times the value of the product!

That’s not to say, though, that an acquisition couldn’t happen soon. Novell could be bought, by the right company and for the right price. But Sun isn’t that company and then price Sun would end up paying would be way too high. Still, things could change.

One network wag (that would be me) predicted back in December 2000 that Novell’s sales would continue to stagnate, and by December 2001, Eric Schmidt would be back at Sun – in charge of the NetWare division (see editorial link below). I wasn’t right then, and those predicting Sun’s acquisition of Novell today would be just as wrong, but as sure as there’ll be another U.S. presidential election in 2008, there’ll also be another prediction about Sun acquiring Novell. And you can take that to the bank.