Novell plans new acquisitions with $600m fund
Published: 07 Jul 2004 09:05 BST
Novell, the second-ranked seller of the Linux operating system, raised $600m in a bond offering that closed on Friday.
Novell will use about $475m of the funds for "general corporate purposes, including potential future acquisitions," the company said in a statement. The move comes about six months after rival Linux seller Red Hat raised $600m of its own.
Acquisitions have been essential to Novell's transformation into a company with Linux at its core. It bought Ximian in 2003 and SuSE Linux in 2004.
About $125m of the money Novell raised will be used to buy back stock that outside investors -- who also buy the bonds -- are expected to sell short, the software maker said. Investors sell stock short when they borrow shares and sell them, then replace those shares with ones bought once the price has fallen. They make a profit on the price difference. Novell expects more short positions, company spokesman Hal Thayer said.
"Recognising that there were going to be shorts, we used $125m to soften the effects of the shorts," Thayer said. "We sized our buyback pretty close to what we thought would be shorted, so the effect of the shorts would be mitigated."
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