The technology industry rumor mill is working overtime on gossip that Novell Inc. is about to be snapped up by Big Blue.
Rumors that IBM is eyeing Novell gained momentum last Friday when PC Week magazine published a front-page story saying the Provo networking company is "ripe for picking."The story said unnamed sources at both Novell and International Business Machines confirmed IBM is interested.
The rumors are credited with sparking furious trading in Novell stock. On Tuesday, 31.7 million shares were traded, and the stock hit a high of 101/2 per share. Average daily trading volume is 3.8 million shares.
A Reuters news story Tuesday quoted a senior software executive at IBM as saying he was unaware of any efforts by his company to acquire Novell.
Novell officials are gathered in New York this week at the Java Internet Business Expo. Novell chairman and CEO Eric Schmidt delivered the keynote address at the conference Wednesday.
Novell spokesman Jonathan Cohen said, "It's always our policy not to comment on rumors and speculation."
Reuters on Wednesday quoted Schmidt as saying that Novell is not for sale, but he wouldn't comment on possible mergers.
Several analysts told the Deseret News they don't believe Schmidt joined Novell in April with a mandate to sell off the company.
"I never got the sense (Schmidt) came in to sell. I got the sense he came in to turn the company around," said Chris Shipley, editor of the newsletter Demo. "An acquisition is one way to do that, but an acquisition of that magnitude, to come together that quickly would surprise me."
Jon Olstik, an analyst with Forrester Research, said he believes selling the company may have been a "possibility that was in consideration when Eric took over."
"Regardless of what was going to happen with Novell, he had to cut costs. That was a two-phase blessing. You cut costs and in cutting costs you've made it more attractive to a suitor," Olstik said.
Schmidt cut costs in the past four months by laying off 1,000 employees, streamlining management and shrinking product inventory. The company also plans to consolidate offices in Utah (see accompanying story).
But both Shipley and Olstik said there are strong financial and technological reasons an IBM/Novell marriage makes sense.
Novell's stock is low, it has $1 billion in the bank, it has a customer base of 60 million users and its new line of products may finally help it gain status as a key Internet/intranet player.
Novell "fits in nicely" with IBM's strategy for network-centric computing, Olstik said. IBM would likely kill off GroupWise in favor of its own product Lotus Notes, integrate BorderManager and other new Novell products with its Tivoli program and use Novell's NDS as its leading directory application.
Novell would benefit from IBM's strong sales force and industry status.
"Novell is going in a very new direction lately which would benefit from IBM's sales force to make it happen," Olstik said.
Novell has had other rumored suitors as well in recent years, including Sun Microsystems and Cisco. About two years ago IBM was rumored to be poised to buy Novell, too. What, if anything, makes the rumors different this time?
"IBM's stock is really high, and Novell's is really low," Olstik said. "IBM could do this deal fairly easily."