Novell (NOVL) finally dropped the other shoe, but whether the long-expected corner-office shuffle will reverse the fortunes of the troubled Linux software provider remains to be seen.
Wall Street's initial reaction was -- not surprisingly -- positive. After the news broke that Ronald W. Hovsepian, the company's president, would replace Jack Messman in the CEO spot, the stock jumped, and in recent trading shares were up 79 cents, or 13%, to $6.79.
The news hit the wires before the market opened Thursday and was greeted by a flurry of generally positive sell-side notes. Jason Maynard of Credit Suisse said: "This change is an important first step and frankly something that should have happened much sooner, nevertheless, we think there is some time left on the clock for Hovsepian to make his mark." His company is seeking investment-banking business with Novell.
Also leaving is CFO Joseph S. Tibbets Jr. The company tapped controller Dana C. Russell as interim chief financial officer while a search begins for a replacement. Novell also named director Thomas G. Plaskett as nonexecutive chairman.
Novell, which gained prominence as a developer of a now-dated networking operating system called NetWare, has struggled to compete against
in the fast-growing Linux market. It purchased SUSE, which gave its name to a version of Linux, in 2004, and is now the second largest distributor of the open-source operating system.
Novell's most recent earnings report,
particularly its guidance was not inspiring, and operating margins for the last fiscal year were only 5%. This prompted Citigroup analyst Brent Thill to say: "Significant operational challenges remain, and Hovsepian may need to make interim disruptive changes." Nonetheless, Thill was positive about the move and said that Hovespian has impressed the financial community during his stint as president and COO. Thill's company has an investment-banking relationship with Novell.
A number of institutional investors, notably the San Francisco-based Blum Capital Partners, have pushed the company to sell off some of its non-core assets, and to shrink the workforce -- which it has done. It was rumored that there was also pressure to replace Messman. A spokesman for Blum Capital declined to comment on the management change.