The end should be near for the current chapter in the Novell (NOVL) story.
Since March, the company has been considering strategic alternatives; the Street expects a resolution of the situation soon. The Wall Street Journal a few weeks ago reported that the company was talking to VMware (VMW), among others, about buying the company’s SuSE Linux business; but Reuters subsequently reported that private equity buyers were balking over the price the company was asking for the rest of its assets.
Piper Jaffray analyst Mark Murphy this morning took a look at the situation, and contends that a “binary event” is on the way. The stock is going to move – the only question is in what direction.
- He thinks there is a 70% chance the stock will rally 25%-75% from yesterday close at $5.97…
- …but he sees a 30% change that the stock drops 25%.
The upside scenario assumes the company is sold in whole or parts, of course, while the downside story would be that the company ends the process and continues independently.
Murphy says recent transaction prices suggest that the shares could appreciate substantially if a deal gets done, “due to the potential scarcity value of SuSE linux and the residual value of Novell’s maintenance revenue stream and other software assets.”
Alas, Murphy resists the urge to guess who might buy which parts of the company.
He keeps his Neutral rating on the stock, but lifts his target price to $6.50, from $5.75.
NOVL this morning is up 3 cents, at $6.
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