Elliott Said to Consider Sale of Unit If Bid Succeeds (Update1)

March 11 (Bloomberg) -- Elliott Associates LP, the fund manager that made an unsolicited $2 billion offer for Novell Inc., may consider selling the NetWare networking-software unit if its bid succeeds, a person familiar with the matter said.

Elliott, which owns about 8.5 percent of Novell stock, would also try to run the company more efficiently and bring about $400 million in cash that Novell holds off shore to the U.S., said the person, who asked not to be identified because Novell hasn’t agreed to the bid. Elliott may also try to find a buyer for Novell’s business that specializes in an open-source operating system, the person said.

“Our intent is to own Novell,” New York-based Elliott said in an e-mailed statement. “We have absolutely no plans to sell any business units.”

Novell stock has surged 22 percent since March 2, when Elliott disclosed the $5.75-a-share offer. Under Chief Executive Officer Ron Hovsepian, Novell is trying to reverse six straight quarters of sales declines. The Waltham, Massachusetts-based company has said it will consider Elliott’s offer.

“The very fact that a financial party is willing to step up shows that there are ways this business could be run better,” said Eric Gebaide, a managing director at New York- based investment bank Innovation Advisors, which isn’t part of the proposed deal.

Board Meeting

Novell’s board is scheduled to meet early next week to consider Elliott’s offer, said the person familiar with the offer.

Ian Bruce, a Novell spokesman, declined to comment until the company releases a further public statement on the bid.

In its letter made public March 2, Elliott said Novell’s shares have “underperformed all relevant indices and peers.” The company is overspending on employees, said the person familiar with the bid. If the takeover attempt is successful, Elliott would take steps to improve sales per employee, the person said.

Novell’s 3,600 employees generated about $239,496 each in revenue for the fiscal year ended Oct. 31, according to regulatory filings. Sales per employee was little changed from the previous year. Novell’s per-employee sales are on par with those of competitor Red Hat Inc. and below the $628,355 per employee for Microsoft Corp. and the about $353,000 for Symantec Corp.

Novell fell 1 cent to $5.80 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares, up 40 percent this year, are trading above Elliott’s bid price.

To contact the reporters on this story: Aaron Ricadela at aricadela@bloomberg.net