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Novell Acquires WordPerfect in $1.4 Billion Stock Deal

March 22, 1994

SALT LAKE CITY (AP) _ Novell Inc. said Monday it would acquire WordPerfect Corp., maker of the leading word processing program, in a $1.4 billion deal that would create one of the world’s largest software companies.

Under terms of the agreement, all stock in privately held WordPerfect will be exchanged for approximately 59 million shares in Novell, which makes software for linking computers together in networks.

The deal must be approved by federal regulators.

Trading in Novell stock was halted shortly before the merger announcement. Novell ended at at $23.75, down 25 cents, on the Nasdaq Stock Market.

John Edwards, executive vice president of Novell, said the value of the transaction could ″be arrived at through multiplication. The calculation is pretty straightforward.″

At Monday’s closing stock price, the deal is worth more than $1.4 billion.

In addition, Novell announced it would purchase Borland International Inc.′ s ″Quattro Pro″ spreadsheet business for about $145 million.

WordPerfect will become a wholly owned subsidiary of Novell, which is based in Provo, Utah. It will be headed by Ad Rietveld, who recently was named president and chief executive officer of WordPerfect.

In the past 15 years, privately held WordPerfect grew from a tiny word processing software maker based in Orem, Utah, to a major force in the industry with annual sales of more than $750 million.

But the company has undergone management shakeups and, despite record sales in 1993, laid off more than 1,000 workers. Last year, co-founder Alan Ashton announced he was retiring.

″The merger will further strengthen Novell financially,″ said Raymond J. Noorda, president and chief executive officer of Novell. ″WordPerfect will increase Novell’s revenue, add to Novell’s already strong balance sheet and expand Novell’s earnings potential.″

Novell is a leading computer networking company, making products that link groups of computers together. In the fiscal year ending October 1993 it posted revenue of $1.12 billion and operating earnings of $395 million.

Analyst Bruce Lupatkin of Hambrecht & Quist in San Francisco believes the merger stems from Novell not wanting to be the ″odd man out″ as competitors Microsoft and Lotus continue to expand.

The joined companies are likely to become the software industry’s third biggest, behind Microsoft and Oracle, Lupatkin said.

WordPerfect began laying off 1,025 employees - nearly 17 percent of its workforce - in January. John Lewis, executive vice president, said at the time the layoffs were dictated by ″the intensely competitive nature of our industry and rapidly declining software sales.″

Lewis emphasized the difficulty of reading the volatile computer-sales industry.

One trend WordPerfect failed to see quickly was the popularity of Microsoft Corp.’s Windows software, an easy-to-use operating system that helped those new to computers execute commands simply.

Windows employs graphic-type ″desktops″ in which users point at symbols and push buttons, rather than being forced to remember arcane typewritten commands, common to Windows’ predecessor, known as DOS.

WordPerfect should have been quicker to develop a word processing program that would work in conjunction with Windows, Lewis said.

″If we could go back in time, I wish we’d jumped on the Windows platform sooner,″ he said. ″The DOS market declined much faster than we expected. Now, the DOS market is coming back up.″

WordPerfect didn’t come out with its first version of software compatible with Microsoft’s popular Windows until 1991, several years after its introduction.

With computing increasingly being done in networks, which allow users to share software, rather than on stand-alone personal computers, the merged company will be poised to take the lead in developing the next generation of personal and business software, Edwards said.

Novell, which has never been involved in software ″applications″ - such as spreadsheets, databases and word processors - will develop a new generation of software aimed at the new market, executives said.

″Novell is coming from systems point of view and WordPerfect the end users,″ said David Moon, chief technology officer for WordPerfect. ″Bringing them together is very powerful. This will place us exactly where we want to be in the future.″

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