Novell Willing to Resume Merger Talks With Lotus

Novell Inc. said Monday that it would be open to renewing merger talks with Lotus Development but added that no such negotiations are being contemplated or sought.

The collapse last weekend of the nearly $1.5-billion deal to create the largest software industry merger ever leaves intact the balance of power in the business, dominated by Microsoft Corp. of Redmond, Wash. And although a combined Lotus-Novell would have created a formidable competitor, size isn’t always an advantage in the industry, analysts said.

The merger collapse “certainly is good theater, but I don’t know that it changes anything,” said Jeffrey Tarter, publisher of Soft Letter, a Watertown, Mass., newsletter.

Following a week of intense negotiations during which Lotus Chief Executive Jim P. Manzi and his board granted several concessions, the proposed deal disintegrated after Novell’s board late Friday demanded equal representation on the board of the combined company.

The two companies earlier had agreed to grant four of seven board seats to Lotus representatives, and the 11th-hour demand surprised Manzi and the Lotus board, which had already approved a definitive merger agreement the day before. Cambridge, Mass.-based Lotus terminated merger talks on Saturday.

Novell, based in Provo, Utah, appeared to be taking a conciliatory tack on Monday by issuing a statement saying it had “hope that negotiations may be reopened in the future.” But Novell Chairman Raymond J. Noorda said later in the day that he isn’t looking for merger partners.

“We’re not eagerly or actively looking to reopen the negotiations to merge,” Noorda said. “If it happens, it happens.”

Noorda said he personally was pulling for the combination, but his board ultimately refused to back him when it became apparent that key shareholders would not stand for the deal that Noorda had negotiated.

Noorda said he hoped the two companies could continue to work together on some joint marketing and sales projects.

Noorda said he does not believe that the unexpected failure of the proposed merger damaged the reputations of Novell and Lotus, but analysts weren’t so sure.

“It’s embarrassing for Lotus, but I think it’s really bad news for Novell,” Tarter said. “They said they had a management succession problem and needed to sell the company, but then they proved themselves to be totally untrustworthy as a negotiating partner.”