Novell Falls on News of Acquisition Plan

Novell (Nasdaq: NOVL) fell 63 U.S. cents to $5.19 in morning trading Tuesday, after the software maker said it would buy information consulting firm Cambridge Technology Partners (Nasdaq: CATP) for about $266 million in stock.

Cambridge Technology was up 28 cents at $3.38 in morning trading.

Cambridge's president and chief executive officer, Jack Messman, will become CEO of Novell following the merger. Novell CEO Eric Schmidt will remain chairman and serve as chief strategist for the combined company.

Provo, Utah-based Novell said the acquisition "significantly expands" its ability to provide consulting support services.

Novell said it will exchange 0.668 of each of its shares for each outstanding Cambridge share.

Schmidt said that the deal will help evolve new relationships with Novell's customers and partners. After the acquisition, consulting services will make up more than one-third of Novell's business.

Last month, Novell reported a loss for the quarter ended January 31st of $7.77 million, or 2 cents per share, compared with net income of $44.84 million, or 13 cents, in the year-earlier quarter. Revenue slipped to $245 million from $316 million.

Novell said that it is aiming to become an Internet services business, instead of relying solely on software licensing revenue. During the quarter, deliveries of Novell's traditional packaged software dropped 62 percent year-to-year, while the company's large network site-license business grew by $9 million year-to-year to $184 million.

Net management services, directory services and consulting all saw revenue declines in the quarter, the company said.