A growth company is usually categorized by the sector of business that it is in. NOVL has failed in growth. They haved failed in many things corporate, that does not disqualify them from being a coporation. They will need cash to undue this failure. ADOBE is at the top of its markets (competitively), they can afford to pay dividends. If the going gets as tough for them as it does for NOVL, they had best stop paying dividends and start righting the corporation. I, for one would yank every penny I have out of NOVL (ex-dividend, of course) if they declared a dividend after nearly ten years of negative cash flows. Such an action would declare the mgmt. to be incompetant as they would be attemtping to artificially placate shareholders with a token gift in lieu of truly increasing shareholder value in the face of potentially lethal competition, which is thier fiduciary charge.
<I still say that if they pay dividends the stock price would be higher, while we wait for the growth to materialize. As an example, Adobe pays dividends.>
What makes you think growth will materialize with less assets than it had before, under its THIRD CEO in as many years? What NOVL needs is an aggressive MGMT infusion (not just a CEO). That is what the street has discounted in their stock price, and that is what they will add a premium for if it occurs. Look at ADOBE's mgmt. They are so adept at selecting capital expentidures that they are actually spinning off shares of thier internal venture funds to share holders due to its triple digit performance, not to mention the fact that they get access to all of the brightest talent and the newest technolgoy through thier investments. Now contrast this to the UNIX purchase and the Wordperfect giveaway to COREL. If you notice, the price of NOVL went down by the exact amount of the premium padi for wordperfect minus the decrease in cash flows right after the sale to COREL. The client version of ADOBE's PDF software is to be had and seen everywhere for free. That is the way of the Internet age. NOVL has not made the marketshare dent via free knock knacks ala ADOBE, NSCP, MSFT, Progressive Networks, the list goes on....
One more thing, growth industires tend to be very dynamic and volatile (i.e. software), and if NOVL dpletes thier cash reseves without healthy cash flows, it spells DOOM. NOVL needs to move into a more predictable and cyclical business if it wants to become an income orientated investment. |
