Premarket Movers: Novell Down After Deal

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Microsoft Corp.'s support agreement with Novell Inc. dominated the early session, with investors trying to sort out the winners and losers of the industry-shaking deal.

Shareholders initially punished Novell, sending its stock down ahead of the bell even after Microsoft, in essence, gave its stamp of approval to Novell's version of the open-source operating software Linux over competitor Red Hat Inc.'s.

"Microsoft is signaling a preference to prop up the market laggard in the Linux market to the detriment of Red Hat," said Sun Trust analyst Terry Tillman.

But the analyst doesn't expect Novell to benefit necessarily. "Importantly, we believe this partnership does nothing to stem Novell's NetWare declines nor Microsoft's focus on impairing Novell's growth prospects," Tillman wrote.

Novell shares lost as much as 23 cents, or 3.4 percent to $6.56 in premarket electronic trading before shares recovered, matching their Thursday close at $6.79 on the Nasdaq. In the past year, the stock has ranged from $5.73 to $9.83.

Microsoft shares rose 6 cents to $28.83. The company will be able to offer support for both its proprietary Windows operating system and Novell's Linux system as part of the deal, which could expand its corporate customer base. The software company's shares closed Thursday at $28.77 on the Nasdaq.

Meanwhile, Red Hat, which provides a different version of Linux than Novell, saw its shares drop on the news. Baird analyst Steven Ashley downgraded the stock to "Neutral," from "Outperform," saying there is "simply too much near-term noise and uncertainty" in the open-source market.

Red Hat lost as much as 50 cents, or 3 percent, before regaining some ground. Shares were lately down 21 cents, to $15.89 in off-hours trading. The stock closed Thursday at $16.10 on the Nasdaq, where it has ranged from $13.70 to $32.48 in the past year.

Leaving software for pharmaceuticals, Inspire Pharma Inc. shot up ahead of the bell after reporting that its drug to treat cystic fibrosis was "well tolerated" in a Phase II clinical trial.

"There were no serious adverse events or patient withdrawals during the trial," the company said in a statement. The next step is to enroll patients in a Phase III trial to test effectiveness.

Cystic fibrosis is a hereditary lung and digestive system disease that affects about 30,000 children in the United States, according to the Cystic Fibrosis Foundation.

Inspire shares added 42 cents, or 7.9 percent, to $5.71 in the early session after closing Thursday at $5.29 on the Nasdaq. In the past year, Inspire has ranged from $3.92 to $7.88.

Shares in Encysive Pharmaceuticals Inc. rose before the bell after the drug maker said it responded to regulators who requested more information about the company's Thelin hypertension drug.

The Food and Drug Administration said it needed the information before it could make a decision on whether to approve Thelin.

Investors, who had punished Encysive in July when the FDA requested the information, cheered the move, sending the stock up 77 cents, or 15 percent, to $5.90 in electronic premarket trading. The shares closed Thursday at $5.13 on the Nasdaq, where they have ranged from $3.29 to $11.64 in the past year.

Associated Press