Novell Faces Nasdaq Delisting

Novell has confirmed the receipt of a notice from the Nasdaq stock market warning that its shares will be delisted from the exchange after the software company delayed filing its most recent quarterly report to the U.S. Securities and Exchange Commission (SEC).

The vendor said Wednesday that it will appeal the decision and request a hearing before a Nasdaq listing qualifications panel. That move will automatically stay the delisting of Novell’s stock while the panel reviews the appeal. In order to ensure continued listing on Nasdaq, the exchange requires companies to file their financial reports with the SEC on a timely basis.

Novell was supposed to file its Form 10-Q report for its third quarter of fiscal 2006 to the SEC earlier this month.

Last week, Novell announced a delay in the filing as it waited for the results of a voluntary internal review around the granting of stock options to employees. The company intends to file its 10-Q as soon as the review is complete, but has yet to commit to when that process will end. Novell has warned that the review may require it to restate earnings.

As a result of the delay in filing its 10-Q, Novell and Wells Fargo Bank NA are bumping heads over the terms of an indenture, the agreement under which bonds and debentures are issued. The bank is the trustee of Novell’s US$600 million 0.50 percent convertible senior debentures, which are due in 2024.

Wells Fargo said that Novell is in default under the terms of the indenture, which require the company to file its 10-Q reports to the SEC within five calendar days of the due date. Novell said Wednesday the indenture requires it to provide the bank with copies of all its SEC filings within 15 days of the filings being made.

“Novell does not believe that it has failed to perform its obligations under the indenture,” the company said in a release. “Therefore, Novell believes that the above-mentioned notice of default is invalid and without merit.”

Novell isn’t the only IT vendor in hot water with Nasdaq.

Dell said Thursday that it plans to request a hearing before a Nasdaq listing qualifications panel after the exchange informed the vendor in a letter dated Sept. 15 that it was not in compliance with filing requirements.

Dell has delayed the filing of its latest 10-Q report for the quarter ended Aug. 4, 2006. The vendor said it was unable to file its 10-Q due to questions raised by an informal investigation by the SEC into unspecified accounting and reporting matters at the company. Along with the SEC investigation and an internal review by Dell’s audit committee, the U.S. Attorney for the Southern District of New York has subpoenaed documents relating to Dell’s financial reporting from 2002 to the present.

While the Nasdaq panel deliberates on Dell’s fate, the vendor’s shares will remain listed on the exchange.

-China Martens, IDG News Service (Boston Bureau)

Related Link:

• Dell to Delay Filing Q2 Financials

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