Tag: attachmate

What lies ahead for independent ESIM vendors?

Contact: Thejeswi Venkatesh, Ben Kolada

Hewlett-Packard recently announced the availability of ArcSight Express 3.0, an upgraded version of the product it acquired last year. In light of this release, we note that independent ESIM vendors aren’t resting on their laurels, either. They continue to develop, innovate and position themselves as potential IPO/acquisition candidates. Competition is already fierce among ESIM players, with each trying to expand their addressable markets, but with HP, Attachmate and Sophos adding ESIM offerings to their portfolios, rivals might look to add to their own to compete effectively.

In a recent report, my colleague Andrew Hay notes that there are several potential acquirers and targets. The list of takeout candidates continues to include Q1 Labs, although there have been M&A rumors around the company for a decade. Q1 Labs is also primping itself for an IPO, but we wouldn’t be surprised if it became the latest target in the growing line of dual-track acquisitions announced so far this year. Given its enviable revenue growth (Q1 Labs reported that its revenue grew 75% in 2010), we expect that Q1 Labs would catch a valuation similar to ArcSight. HP picked up that Cupertino, California-based security provider in September 2010 in a deal valued at nearly 8 times trailing sales. Beyond Q1 Labs, we could point to NitroSecurity, which was allegedly in talks with McAfee earlier this year. We’d also note that McAfee lost out on the ArcSight assets, and could look to NitroSecurity as an alternative.

Not pretty, but it’s done at Novell

Brenon Daly

Contact: Brenon Daly

After holding out for more than eight months, Novell finally accepted on Monday a $2.2bn buyout offer from private equity-backed Attachmate. From the outside, it looks like a case where the buyer – or maybe more accurately, the hedge fund that put the company in play – simply wore down Novell. Under terms, Attachmate will hand over $6.10 in cash per share, or roughly $2.2bn, for Novell.

Yet if we step back and look at the offer, we can’t help but notice that the company is now embracing a bid that only values it slightly more than the original offer that put it in play. For the record, Novell’s board said three weeks after receiving the unsolicited bid from gadfly investor Elliott Associates that the offer of $5.75 for each share ‘undervalues’ the company and its prospects.

Apparently, Elliott’s opening bid wasn’t all that lowball because the company is selling for just 6% more than the offer that ‘undervalued’ it. We would also mention that Novell traded above the $6.10 bid several times over the summer, albeit on pure speculation. (JP Morgan Securities advised Novell, while Credit Suisse Securities and RBC Capital Markets worked for Attachmate.) The deal is expected to close in the first quarter of 2011, pending shareholder approval.

To be fair, the fact that Novell’s board got shareholders even a slight bump above the original offer should be viewed as a sell-side accomplishment. After all, Novell is a hoary, mixed-bag of businesses, with each unit attracting specific suitors. All of that made for an undoubtedly complicated process, with multiple permutations on bidders and bidding teams, as we understand it. (Companies we heard that may have taken a serious look at some point at Novell – or at least some of its businesses – include VMware and Oracle, among others.) Indeed, as part of the transaction, Microsoft will be acquiring a sprawling portfolio of 882 patents from Novell for $450m.

And beyond all of the complications around matchmaking is the fundamental fact that Novell just isn’t that attractive, regardless of whatever business we look at inside the company. Each component of its revenue (license, maintenance/subscription, services) has dropped so far this year, which is part of the reason why Novell has come up short of Wall Street expectations every quarter this year. Overall, sales have dropped 6% in 2010, and current projections call for Novell’s revenue to decline next year, too. So as we look at it, the board probably did a fair job to get Novell valued at $1.2bn (net of cash), which works out to basically 1.5 times sales. Novell shareholders will now have their say on the outcome of the more than eight-month process.