Novell to Sell Its Unix Business In a Deal Worth $59.5 Million

By Bloomberg Business News
The New York Times

September 21, 1995

Novell Inc. said yesterday that it had reached an agreement to sell its Unix business to Santa Cruz Operation Inc. for about $59.5 million in Santa Cruz stock, based on yesterday's closing price. The move will allow Novell to concentrate on its more successful Netware business.

In the deal, Novell, the second-biggest personal computer software company after the Microsoft Corporation, would acquire 6.1 million Santa Cruz Operation shares, equal to a 17 percent stake in the company, and part of Unix revenue through 2002, estimated at $84 million.

"The divestiture of Unix makes a lot of sense because it allows Novell to focus on what they know best, which is local area networks," Paul Merenbloom, a software analyst at Piper Jaffray, said.

Shares of Novell, which is based in Provo, Utah, fell 18.75 cents yesterday, to $19.625, in Nasdaq trading.

Santa Cruz Operation shares dropped $2.125, to $9.75, in Nasdaq trading. Analysts said the decline -- which lowered the value of the deal by roughly $13 million -- occurred because investors who expected Novell to buy Santa Cruz Operation were disappointed.

The move ends Novell's efforts to develop the Unix operating system for controlling corporate computer networks. Santa Cruz Operation will now collaborate with the Hewlett-Packard Company to improve the Unix operating system. Santa Cruz Operation, which is based in Santa Cruz, Calif., will also acquire Unixware, Novell's version of Unix.

The agreement will let Santa Cruz license Novell's Netware Directory Services and other products for inclusion in future versions of Unix, the companies said.

Novell bought the rights to the programming code of Unix from the AT&T Corporation, which invented the program, in 1992 for $360 million. Since then, as Novell struggled with its core products, Microsoft's Windows NT operating system gained share.

Novell has been licensing Unix to companies such as Sun Microsystems Inc. and Hewlett-Packard, which have written their own versions to run on their computers. Last year, Sun Microsystems bought a lifetime license for Unix from Novell.

Robert J. Frankenberg, chief executive of Novell, said Hewlett-Packard would now take the lead in Unix technology development and that Novell would concentrate on Netware, which last year accounted for about 45 percent of Novell's $2 billion in revenue.