Novell to buy Cambridge Tech

SAN FRANCISCO: Business software maker Novell Inc., which is transforming

itself into a provider of Internet solutions for corporations, said on Monday

that it will buy computer consultancy Cambridge Technology Partners Inc. in a

stock swap worth around $255 million.

The boards of directors of both companies have already approved the

acquisition. Cambridge, Mass.-based Cambridge Technology Partners, whose

revenues have slipped and whose share price has fallen 94 per cent from its peak

in July, 1998, will become a wholly owned subsidiary of the Provo, Utah-based

Novell.

"This move is strategically consistent with where we are taking

Novell," Novell chairman and chief executive Eric Schmidt said in a

statement. "The combined talent of Novell and Cambridge will bring us

closer than ever to capturing the value of Novell's Net services strategy."

Novell will exchange .668 shares of its common stock for every outstanding

share of Cambridge Technology. The deal, expected to be completed by Novell's

third fiscal quarter 2001, was initially valued at $266 million based on

Novell's closing stock price of $6.06 last Friday.

The value had slipped to $255 million, based on Monday's closing Nasdaq price

for Novell of $5-13/16. After the release, Novell held steady at $5-13/16 in

after-hours trading on Instinet, while Cambridge, which fell 7 per cent to

$3-3/32 in regular trade, rose to $3-21/32 in after-hours trade.

Best-known as the maker of the NetWare operating system for corporate

networks, Novell is in the midst of a protracted transformation into what

Schmidt calls a "Net services business". Novell's stock price is down

84 per cent off its 52-week high of $34-9/16, and is near its year-low of

$4-12/16.

Before news of the acquisition, Novell had lowered its earnings and revenue

outlook for fiscal 2001 around 16 per cent from previous guidance, citing

slowing corporate spending on information technology. Its last forecast put 2001

revenue for Novell at slightly more than $1 billion and earnings per share for

the year of between 17 cents and 18 cents. Founded in 1991, Cambridge has 3,400

employees with offices in 19 countries.

The systems consultancy was long considered a potential takeover target,

after the company ran aground several years ago as it transitioned to Internet

consulting from network consulting. The company's share price peaked at $58-1/8

in July 7, 1998, but has fallen 94 per cent since then.

Last week, Cambridge Technology warned that its first quarter revenues would

be lower than expected due to the slowing US economy. Cambridge Technology said

it expects revenues for the quarter ending March 31 to be about $120 million,

down from a previous estimate of $125.1 million.

The company said it expects to post a full-year operating profit for 2001 and

sees revenues for the year slipping to about $525 million from $586.6 million in

2000.

(C) Reuters Limited 2001.