The deal emphasizes Novell's push into the young field of Web services, a way of creating and using software that allows different computing systems to interact and conduct transactions online.
Novell, a one-time software heavyweight, has been working hard to make a name for itself in the new field against competitors such as Sun Microsystems, Microsoft and IBM. Last month, it released athat ties directory services software closer to emerging Web services tools.
"We're coming at this market from a different place. Instead of the monolithic approach based on proprietary products that others have adopted, Novell is focused on offering a cost-effective, flexible alternative that allows the products of all vendors to work together," said Chris Stone, vice chairman of Novell's office of the CEO.
SilverStream's eXtend product line will be re-branded under the Novell name.
The deal calls for Provo, Utah-based Novell to pay $9 for each of the approximately 23.6 million outstanding shares of SilverStream. SilverStream should have about $100 million in cash on hand at the end of the deal, Novell said.
The deal put a significant premium on SilverStream shares, which closed at $5.14 on Friday. Novell CEO Jack Messman said the premium was worth it, since developing SilverStream's technology would have been expensive and would have taken more time.
"Novell can now add features to the platform rather than build the platform from scratch," said Messman. "We can get to a faster breakeven and create value for shareholders rather than try to develop it on our own."
"SilverStream is one of the pure-pay Web Services platform companies with significant cash left," said Nicolaus & Company analyst Gregg Speicher in a research note. "We believe Novell was willing to pay a premium for what is playing out to be the next 'hot' area of Internet-based computing."
SilverStream CEO David Litwack and other insiders who together control about 20.33 percent of the outstanding shares have already pledged to vote for the deal. Litwack will become a senior vice president of Novell and will join Novell's worldwide management committee. SilverStream's offices will remain in Billerica, Mass., and the deal is expected to close in July.
The acquisition should begin adding to the bottom line in 2004, Novell said. The company said it did not expect the deal to have a material impact on revenue and ongoing expenses in the third fiscal quarter, but it should add about 1 percent to total Novell revenue in 2002. In fiscal year 2003, SilverStream is projected to be slightly dilutive to Novell earnings.