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Technology Stocks : Novell (NOVL) dirt cheap, good buy?
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To: Barry Nance who wrote (4365)10/30/1996 12:25:00 AM
From: E_K_S   of 42771
 
Hi Barry: I calcualte the book value for Novell based on liquid assets and property assets at $6.25 per share. Novell's free flow cash flow is still positive and their equity assets continue to appreciate. In fact over the last year, equity assets have increased over 100%.

Now depending on how the company carries their assets on their books at cost or market value, I know they are understated based on the last 10K report. I believe real estate is carried at cost not market value. Equity investments, I believe are booked to market each year but I am not sure.

So the way I figure it, the software franchise is now valued at $3 5/8 and that franchise will earn $0.15 - $0.18 this quarter. The PE calculates to 5 times next year's earnings (assuming no growth!).

Therefore, I still see the downside no lower than $6.25 AND that assumes that the rest of the software franchise is valued at $0.00. This is worst case.

What we really need is a management that can take the software franchise and build earnings. Also new management must maximize current resourses and look at expanding other revenue streams to include SERVICE REVENUE for the future. However, with no leadership and vision, I suspect NOVELL will fail on this attempt.

I look forward to the boards annoucement for the new CEO. New management must show the street the 'other' revenue streams to achieve new growth and the business plan to obtain market share in this growing industry.

I believe you would agree that this is quite a challenge for our new management. Novell IMO can meet this opportunity but requires a CEO with visionary insight and a track record based on results.

EKS
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