Elliott Associates LP, a hedge fund that holds an 8.5% stake in Novell Inc., offered to buy the rest of the software company for about $1.8 billion.

Novell shares, which were off 1% in 4 p.m. trading, surged 30% in late trading to $6.15, above the $5.75 offer price Elliott disclosed in a letter to Novell's board.

Elliott said in its letter it believes Novell's stock has "meaningfully underperformed all relevant indices and peers" as it attempted to diversify away from its original business with a string of acquisitions and changes in focus "that have largely been unsuccessful."

The hedge fund noted that Novell currently has a cash balance of nearly $1 billion, representing nearly 60% of its market capitalization.

A spokesman for Novell said the company would issue a statement later Tuesday.

Waltham, Mass.-based Novell fought a long and losing battle against Microsoft Corp. over the market for operating systems and other software. Last week, Novell reported its fiscal first-quarter profit jumped 89% on higher margins and fewer charges, though its revenue declined 5.8%.

Like many of its peers, Novell—which works with open source and proprietary software—is trying to control costs as revenue falls. The company has been trying to boost the presence of its Linux-based operating system, Moblin, in low-end netbooks, which have become popular.

 source:wsj