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Technology Stocks : Novell (NOVL) dirt cheap, good buy?
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To: Salah Mohamed who wrote (6043)12/20/1996 10:26:00 AM
From: E_K_S   of 42771
 
Thanks Salah for the excellent overview. I posted the Morgan Stanely report as they are in my book very good overall in their company reviews. I too liked their narrative but could not understand their basis for the low estimates. In fact, according to your posted numbers for the Zacks estimates Morgan Stanley's 1997 $0.60/share is not even at their low end.

I agree that there may be quite a bit of institutional money waiting on the sidelines taking "the wait and see" approach.

I wonder if the commitment of $400 million for the new Novell building will impact earnings going forward. If 1/2 of this money is used in 1997 for financing the early building expenses, do you think this may impact the company's 1997-1998 earnings projections? Or can management allocate current cash flows and reserves to cover the financing?

The new building costs would probably off set the gains achieved from their equity investments (which are about $0.005/share for 1996). Of course this will depend how Novell plans to eventually finance the building costs (with debt or by a combination of currect cash flow and cash). The overall impact to assets is positive as they are adding value to their real estate portfolio.

With regards to overall asset management, Novell seems to be following a conservative approach in adding value here (ie. real estate and equity investments). These investment should only increase in value going forward through 1998.

EKS
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