<I think John Young is STILL running this company.>
Why else would anyone be short this stock? Confidence in Dr. Schmidt, PhD? Nah. I know folks think he's great, but, afterall, he was Novell's third known choice. Only John Young and God know who else refused the job.
A Marionette Playing CEO for the First Time
And I don't think Schmidt's contributions at Sun were much more than getting in front of a parade. People who have followed the history of Java give the credit to Gosling, Joy and McNealy. Long after it was popular, the CTO, Schmidt steps in to take some credit. He did not do sh*t for Sun, other than to walk around being McNealy's Yes Man.
A Desperate BOD
So Novell was desperate since their good candidates, particularly Ray Lane, said no. They couldn't wait any longer for Marengi to cook the books more than he had, and they had to make a decision.
Bring in a puppet. And they chose Dr. Schmidt, PhD. A technologist to turn Novell into an Internet player.
But Wall Street saw the move for what it was. Ray Lane could do something about the revenue streams--he is the real savior of Oracle, after their well publicized cooking-the-books debacle. He is Mr. Service Revenue. And he could turn Oracle around because Oracle has a different channel strategy than Novell.
Channel Issues
You see, Novell sells through VARs almost exclusively. The moment Novell tries to increase its service revenue through this channel, the VARs will desert in droves, worsening Novells revenue structure. The VARs depend on the service revenue that would turn Novell around.
So, look at the serious position that Novell is in. It can't increase revenue through service, due to its channel structure. The products that it currently has in development do little more than to keep current customers from bolting. There is nothing compelling that Wall Street sees that will bring in new revenue.
Just looking at the channel factor, excluding the internecine battles within the company, and Wall Streets sees a company that will maintain the status quo. And there is no shortage of companies who excel at doing just that so why would a fund manager, whose a$$ is on the line, be willing to invest?
Young hasn't articulated what is in the best interests of the shareholders. He doesn't care about you long folks. Not a damn! And he has shown this time and time and time again. So, why would Wall Street jump on this bandwagon? Is there not enough abuse in New York that they have to go to Orem, Utah, to get more?
Share Repurchase and Takeout Rumors
And there is no share repurchase program. Lots of cash and no repurchase program. People have asked them why they haven't undertaken a share repurchase program? Are they really looking for a buyer? I don't think so. Every time there is a jump or a rumor, Dr. Schmidt, PhD, is right there to deny that they are even thinking about selling the company. Even Wall Street has lost this hope.
The interesting thing is that the stock is dropping so low that it will soon become meaningless to write option contracts on it. Imagine now, the stock will have to jump 50% from 5 to 7.5. Where's the profit for trading options? The CBOE won't like that <g>.
Novell Will Never Die
The final matter is that Novell is not dead. And it won't die. But, worse yet for the Longs, is that the company will become irrelevant. The living dead. The Unisys of the 21st century. That is what is worth thinking about.
There is not a creative strategy in place other than to lay off people, sell off products and cut costs. Wow, Dogbert is running this company, and Schmidt is his puppet. Life as a puppet. But you have to admit, Schmidt is pretty comfortable with that role by now, isn't he?
And you Longs believe in the Schmidt of smoke and mirrors. All he did was jump in front of a parade. Didn't even make a float or present an entry. Was he the one to call McNealy and say Gosling was the best software developer on the planet? No, that was Bill Joy. So why did Dr. Schmidt, PhD, manage to get so much credit.
Summary
Check these words in April of 1998 and you will see. The paper tiger will be toast and people will be saying exactly the same words about him that they are about Amelio. Wrong man for the job. Needed someone who could develop revenue. The board made a mistake, but they'll get it right next time.
Dr. Schmidt, PhD, is worthless and the longer it takes for the Longs to figure that out, the more money there is in there for the Shorts. And this BOD is the greatest thing that has ever happened to the Shorts in this, the greatest of bull markets.
My 2.5 cents.
AV |
