Interview: Novell---Hovsepian, Ron---Chief Operating Officer
>> companies have near-record amounts of cash on their books. one that fits the bill is novell, sitting on about $1.5 billion in cash. earlier, bloomberg’s brian sullivan spoke with ron hovsepian, president and chief operating officer of novell. brian asked ron what novell intends to do with all this cash.
>> we’re going to focus the money in maintaining a strong balance sheet for our customers and shareholders. additionally, we’ve already announced a stock buyback, which we remain very committed to. on top of that, the markets that we’re serving are growth markets . the linux and open-source market is growing in the mid 20’s and as we’ve announced in the past, we will look for the proper acquisitions to help continue to grow our business inside those markets .
>> will those acquisitions be small or big deals?
>> as we look at the range of the small deals that help fill in a particular part of the portfolio and you look at larger ones that can give rapid growth for the company.
>> you’ve bought some linux companies the last couple of years but have not been able to eat that much in some of the other linux players’ market share. are you disappointed? what is your strategy to turn that around? different deals or restructuring the way you sell the product?
>> we’ve taken a different approach. the linux vendors in the market now have focused on the edge server and we’ve really focused in on the enterprise. we’ve had great penetration in the chinese market , we’re the market share leader there with 25% of the market and in our enterprise strategy, we’re not only offering the server, we’re actually also offering the desktop, point of service, things like point-of-sale devices so we have a broader strategy for our customers to better leverage the value of linux in the organization.
>> one analyst noted about the distribution of your products, saying you need to go after the bigger companies and change the way you work through bigger distribution companies. how do you respond?
>> we have a great relationship with our partners right now, partners like i.b.m., h.p. are two key partners as well as dell and we plan on leveraging those channel partnerships much stronger. the relationships continue to build. we just made an announcement for a linux product that’s a dell addition only and those are the kinds of things we’ll do to drive more value for our shareholders.
>> you see more aggressive behavior on novell’s part to get into bigger accounts?
>> absolutely. case in point, a large customer, bear stearns on wall street, we’ve already converted that customer from a linux vendor today to novell and there are many more like that in the marketplace where we’re having good wins at the enterprise level.
>> you delayed your buyback, can you give us a status update?
>> we remain committed to that buyback, however, we’re in a self-imposed blackout so at this point i can’t chat other than to say we’ll give you an update as soon as we can.
>> what about a dividend? currently you don’t pay one. any plans to do so?
>> the company and the board are constantly looking at the best use of proper capital alivation for the shareholders and we look at the whole variety of things on the hors horizon and will - continue to look at those. right now, we’re focused on the growth of these markets and the customers we’re able to attract to the company.
>> let’s talk about novell itself. you’re a former i.b.m. executive, it’s one of your partners. some analysts saying maybe novell would be a good acquisition target by i.b.m. have you been approached by big blue?
>> we couldn’t comment on things like that. right now, the key is to stay focused on the customers and where we can get the best growth from the customers and we’ve seen good penetration in the market .
>> ron hovsepian is president and chief operating officer at novell. a cooling housing market in the u.s. didn’t stop an upgrade for toll brothers shares today, pushing the stock higher. shares of toll brothers were up as much as 4% in trading after wachovia securities raised its rating on the homebuilder to outperform. analyst carl ricard gives these reasons for the upgrade, combling valuation, easing order comparisons and uniquely strong competitive position relative to small and high-end customer builder. toll brothers stock has a ways to go before it returns to its highs. shares are down 41% from their peak of $58 a share last july. when you look at the other homebuilders, their stocks are also down from the peaks in july. the s&p 500 homebuilding index is down 22%. centex down 17.5% and lennar is down 10.3%. hovnanian off 37%. from that time. as for toll brothers, last month, the company’s fiscal first-quarter earnings rose 49%, that’s the smallest gain in seven quarters. wachovia analyst says the stock trades for 7.2 times 2006 earnings estimates, which is in line with the nine-year average. he cites that the last eight analyst rating changes on the stock have been negative. we’ll get the latest on confessed september 11 conspirator zacharias moussaoui in world and national news next. and we’ll look ahead to the end of the first quarter and where the markets go from here. stay with us as “after the bell” continues.
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offered united auto workers union members a payment of $50,000 each in exchange for a 35% pay cut. this is according to a copy of the contract proposal obtained by bloomberg news. the offer is contingent upon general motors helping to pay the wages of the delphi workers am the offer was delivered three days before delphi’s c.e.o., steve miller’s deadline for an agreement. miller has threatened to ask a u.s. bankruptcy court judge to cancel contracts on march 31 if there is no new contract but the united auto workers have threatened to strike if the court allows the contract to be thrown out. a few months ago, g.m. unveiled a plan to get rid of rebates and low-interest loans in an effort to drive sales. how’s it going? g.m. says it is gaining sales. june grasso has more on the story.
>> general motors has cut prices on most of its models this year to simplify pricing and reduce spending on incentives and g.m. says the new strategy has been a success, particularly with its critical rollout of new s.u.v.’s. g.m. said its sales of the redesigned chevy tahoe have been better than expected. this month, the 2007 chevy tahoe sold an annual rate of about 120,000 vehicles a year, up from a rate of less than 100,000 annually in february. g.m. sales chief said in an exclusive interview with bloomberg that six of g.m.’s eight brands reported sales increases.
>> our launch products, the buick lucerne, the cadillac dts, the chevy hhr, the new impala and hummer h3 are all doing very well. we’ve lost a little ground with some of the other products in the portfolio but all of the new launch products we brought out in the last year and a half to two years are all doing well above our expectations, are world-class products in every way and we just need to continue to add more to the lineup.
>> g.m.’s u.s. sales which fell 4.3% last year rose 1.5% through february. while g.m.’s market share continues to drop, laneve said today that the market share is stabilizing. g.m. will announce u.s. march auto sales a week from today. the company cut its reliance on incentives in january after racking up $10.6 billion in losses last year. today’s news is just the first of a flurry of headlines expected from g.m. this week. before the end of the month on friday, g.m. must file its annual report. it missed its deadline after discovering errors in a mortgage unit. tomorrow, g.m. is expected to begin firing hundreds of salaried workers. that’s according to people at g.m. familiar with those plans. this week will also mark a critical point in chief executive rick wagoner’s attempts to reduce healthcare costs, sell a portion of the gmac finance unit. standard & poor’s is concentrating on the progress wagoner is making on gmac. it said it would cut g.m. debt rating if it fails to show progress by friday in its attempt to sell a 51% share of the finance unit. back to you, lori.
>> thank you. ben bernanke presided over his first meeting of the federal open market committee today. investors predict the central bank will raise the benchmark lending rate by a quarter percentage point to 4.75% tomorrow. economists seem to think they have a pretty good idea of what to expect from him. bloomberg’s lindsey arent as more from washington.
>> the fed’s leadership may have changed, but economists expect its approach to monetary policy will stay the same. a bloomberg survey of bond dealers forecasts the fed will raise the benchmark interest rate by 25 basis points to 4.75%. the 15th rise in a row since june 2004. experts predict another one after that, as well.
>> this expectation is built into the market for some time. the fed has not tried in any way to dissuade market participants from this view.
>> fed watchers are looking for smooth transition between bernanke and his predecessor, alan greenspan.
>> the two people are very, very similar. they’re both devoted to price stability. they are devoted to the institution.
>> already, though, subtle stylistic changes are apparent. in a recent speech, bernanke extolled the benefits of increased fed transparency.
>> in retrospect, the clear communication of policy provided notable benefits by increasing the effectiveness of monetary policy while minimizing unnecessary volatility.
>> economists will expect more detailed statements than before and there’s talk of a numerical inflation goal.
>> obviously, at some point or another, the chairman will want to encourage his fellow members on the fomc to begin moving towards explicit inflation targeting.
>> bloomberg’s lindsey arent. many economists surveyed by bloomberg say they think the fed will increase interest rates again to 5% in may. we will have live coverage of the decision at 2:00 p.m. new york time tomorrow. the closing numbers for this monday -- not only did the market have a little movement, we also saw below-average volume. here’s a report from deborah kostroun at the big board.
>> markets little changed on the day, in fact, the dow jones industrial average, at one point, was down 50 points, so really kind of performing quite well today. one of the things the market was waiting on, the interest rate decision coming out tomorrow. we also saw treasuries dropping, the yields inching higher. what that caused at least for the stock market , a lot of the interest-rate-sensitive stocks dropping on the day. of the 24 industry groups in the s&p 500, the laggards, a lot of interest-rate-sensitive stocks like the real estate and utility stocks. real estate stocks, three weeks ago, hitting 52-week highs so quite a bit lower in today’s session. also, utility stocks falling on concern that the fed will be pushing the interest rates up and as those bond yields rose today, it makes utility dividend payouts less attractive. bank stocks, a mixed market , but many of the banks that are tied to mortgage lending were lower today. especially washington mutual, countrywide financial and golden west, all with significant mortgage lending units. crude oil was slightly lower in today’s session. however, integrated oil stocks performing quite well, along with some of the oil services. but other commodities, actually, were the big winners on the day. the philadelphia gold and silver index, one of the best performing indexes on the day. also, gold stocks, metal stocks, all performing well as the prices for silver, copper, zinc and gold all jumping on the day. dow gainers today―alcoa at the top of the list. citigroup said alcoa would be earning more than expected. general motors, one of the biggest gainers today. after announcing strategies on how they will ramp up sales. broker/dealers, goldman sachs performing quite well, agreeing to buy properties from a german firm and may bid for britain’s biggest port operator after raising more than $12 billion in investment funds. i’m deborah kostroun at the new york stock exchange for bloomberg news.
>> telecom stocks led the nasdaq higher. robert gray has details from the nasdaq marketsite. we’ll check back with robert. shares of encysive pharmaceuticals, meantime, fell as much as 45% today. the drop came as u.s. regulators delayed approving the company’s thenin drawing for pulmonary disorder. checking the stock at the close, it was down by 50%. closing at $4.60 per share. the government’s last witness in the fraud and conspiracy trial of former enron executives kenneth lay and jeffrey skilling is raising eyebrows. benjamin glisan, former enron treasurer who testified last week, was targeted today by lay’s defense attorneys as they worked to undercut his credibility as a witness for the prosecution. glisan’s testimony, he testified he warned skilling and lay in september and october of 2001, the company was running out of cash and that the value of some of enron’s assets needed to be written down. today, lay’s attorney presented notes that showed glisan did not present as alarming a financial cisco of the company’s finances during a board meeting on october 22, 2001. and boeing said today it will build a stretched version of its 787 jetliner that seats about 300 passengers. the move comes after demand from customers, including emirates airlines. the stretch 787 would be called the 787-10 and enter service in 2012. boeing is working with embrits now to see if the plane meets the requirements. the company says a fair amount of engineering work has already been done. boeing is counting on the fuel-efficient 787 dreamliner to win back dominance of the $60 billion-a-year jetliner market from rival airbus s.a.s. companies are sitting on near record amounts of cash. what are they doing with all that money? we’ll pose that question to some cash-rich companies. today, we spoke with the president of novell. we’ll hear what he has planned. that’s next as “after the bell” continues.
