Jefferies has an interesting note on Novell (NASDAQ:NOVL) saying that as the company attempts to breathe life into its software business, they believe a re-positioning of the company as a Windows complement is probable. Recent SLES coupon activations are a beginning, and m&a could play a significant role.
Firm's checks indicate a tightening relationship between Novell and Microsoft, both technologically and strategically.
Firm expects Novell to receive the final part of a $300mm payment from Microsoft this week, boosting the company's net cash/share to ~$3.30 >16,000 activated subscriptions through late December puts Microsoft SLES coupon distributions at a pace that is well-ahead of the 70,000 annual average, and they think there is little chance in FY07 that Novell will record much 'dead' coupon revenue.
They believe investors could see an acquisition and some of the cost-cutting that was anticipated but did not happen late last year. Given that Novell is breakeven on an operating basis right now, they expect that almost any acquisition that delivers more than a 4% T-bill like return will be accretive.
Reits Buy with target going to $8 from $7.
Notablecalls: Expect to see some buy interest in NOVL today.