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August 20, 2008

Microsoft adds some more cash to Novell deal

Posted by David Hunter at 1:55 PM ET.

Movell logo Microsoft and Novell want us to know that everything is going swell with the interoperability collaboration deal they announced two years ago. So swell, in fact, that Microsoft is kicking in an additional US $100 million:

Microsoft Corp. and Novell Inc. are announcing an incremental investment in their relationship to meet accelerating customer demand for their business model solution, which is designed to build a bridge between open source and proprietary software to deliver interoperability and intellectual property (IP) peace of mind for organizations operating mixed-source IT environments.

The investment focuses on enhanced programs from Novell to provide tools, support, training and resources for customers seeking an enterprise-class Linux* platform and specifically, the optimal interoperability solution between Microsoft Windows Server and SUSE® Linux Enterprise Server from Novell®. It also includes Microsoft’s commitment to purchase up to $100 million in certificates that those customers can redeem for expanded support from Novell that includes SUSE Linux Enterprise Server support and support for moving toward an enterprise-class Linux platform. The investments will take effect Nov. 1, 2008, and between now and then Microsoft and Novell will solicit customer input and identify aspects of the support programs that will be most useful to organizations running mixed-source environments.

Customer response to the Microsoft-Novell model has been significant since it began in November 2006. As part of the initial five-year partnership agreement, Microsoft purchased $240 million of Novell certificates to sell to customers. Within 18 months, Novell invoiced more than $157 million in certificate revenues, or 65 percent of the original allotment. Customers who have already taken advantage of this opportunity to seamlessly run both Windows Server and SUSE Linux Enterprise Server include Wal-Mart Stores Inc., HSBC Holdings, Renault, Southwest Airlines Co., BMW and many other leading companies around the world.

Joe Wilcox delivers an astringent assessment and observes:

For a company with net revenues of $232 million during its fiscal 2008 second quarter and profit from operations of $2 million, Microsoft’s 100 million bucks should be useful.

I’ll say!

The deal allows Novell to exist in the shadow of Windows Server, sustaining on its table scraps. Microsoft can offer customers that simply must have some Linux servers a sanctioned source for good tools ensuring interoperability with Windows Server.

Of course, the real objection to the original deal by Open Source fans was the "patent cooperation" part of the agreement which Microsoft felt bolstered their assertion that Linux infringed on their intellectual property despite Novell’s statements to the contrary. It looks like the lovebirds have gotten over that honeymoon spat now and I’m sure we can look forward to more subsidies for Novell in the future.

Filed under Alliances, Coopetition, Linux, Microsoft, Novell, Open Source, Patent Lawsuits, Patents

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