[conspire] Novell and Microsoft Agree to Sell Each Others Products: Bad News for Novell?

[Mark Weisler]

Interesting article...

Below is an article  "Novell: We Surrender"
by Daniel Lyons, of Forbes, 11.03.06, 11:45 AM ET
I wonder how enterprise folk like SpikeSource are regarding this development.
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Three years ago this week, ailing software maker Novell paid $210 million to 
acquire Suse, a German version of the free operating system called Linux. 
Novell hoped that by embracing Linux, an alternative to the decidedly unfree 
Windows operating system from Microsoft, it could revive its dying software 
business.

On Thursday, Novell (nasdaq: NOVL - news - people ) effectively conceded that 
this effort has failed.

On stage with Microsoft (nasdaq: MSFT - news - people ) in San Francisco, 
Novell announced that the two companies would cooperate to make the Windows 
operating system and Linux work well together. More significantly, Microsoft 
will resell Novell's version of Linux, and Novell will start paying royalties 
to Microsoft in exchange for Microsoft's pledge not to enforce patent claims 
against Novell and its customers.

Novell tried to put a brave face on things, even claiming that its chief 
executive, Ron Hovsepian, had initiated the talks with Microsoft. In fact, 
Microsoft's lawyers have been quietly pressuring open-source companies like 
Novell for more than a year and warning their customers that they could be 
vulnerable to patent infringement claims because they're using Linux.

By partnering with Microsoft, Novell protects itself and its customers from 
such claims. Novell also gets a powerful new distribution partner: Microsoft 
says it will sell Novell's Suse Linux to its own customers and aims to 
distribute 70,000 copies a year.

Novell also gains a way to differentiate itself from Red Hat (nasdaq: RHAT - 
news - people ), the leading Linux distributor, by offering better patent 
protection.

But Novell also is admitting it cannot compete on its own against Red Hat. 
After two years of struggling, Novell holds only 20% market share of 
commercial Linux shipments; Red Hat commands virtually all of the rest. 
Although Linux itself is free, companies like Red Hat and Novell can make 
money by distributing and supporting it.

At yesterday's hastily called press conference in San Francisco, Microsoft 
Chief Executive Steve Ballmer conceded that his customers want to use 
Linux--a Windows rival that Microsoft has spent the past decade trying to 
squash.

Developed collaboratively by programmers from around the world, Linux has 
become wildly popular in corporate data centers, powering companies like 
Google (nasdaq: GOOG - news - people ), Amazon (nasdaq: AMZN - news - 
people ) and many large Wall Street firms. It is a variant of Unix, an 
operating system developed in the 1970s by AT&T (nyse: T - news - people ) 
and considered more stable, though less user-friendly, than Windows.

Ballmer said Microsoft's customers are demanding that his company make its 
programs work more smoothly with Linux.

But while the talk on stage was all about peace, love and interoperability, 
Microsoft's maneuver also lets it divide the Linux market by driving a wedge 
between the two biggest players. In fact, the Linux market is already 
splintering into many different versions, a trend that helps Microsoft.

In addition to Red Hat and Novell, other popular Linux distributions include 
Ubuntu, Xandros and Linspire. Just yesterday, as Microsoft and Novell were 
announcing their pact, the radical Free Software Foundation was releasing yet 
another version of Linux, called gNewSense. The foundation is also working on 
a new license for Linux, which threatens to create even more fragmentation.

Microsoft's pact with Novell also cranks up the pressure on Red Hat. Last 
week, that company came under a separate attack when database giant Oracle 
(nasdaq: ORCL - news - people ) said it would start distributing its own 
version of Linux--a free clone of Red Hat's software. Oracle also intends to 
offer support to Red Hat customers for less than half of what Red Hat 
charges.

Now, Red Hat must compete not only with Oracle but also with Microsoft, which 
will be promoting Suse Linux and steering customers away from Red Hat.

Nevertheless, Red Hat's publicity department cheerily proclaimed that the 
Oracle and Microsoft announcements represent a terrific turn of events. "It's 
fantastic news. Two of the main tech companies decided to get behind Linux 
within six days. If that's not validation, what is?"

Note to Red Hat: When companies start talking about Microsoft "validating" 
their market, they're usually about to be validated out of existence.

Same goes for ailing software makers that announce some triumphant pact with 
Microsoft. These deals are like the Roach Motel. Companies go in and never 
come out.

Think about this: Novell now has signed as its biggest reseller a company that 
wants nothing more than to kill its product.

Microsoft has done this many times before, so often that Redmond has a name 
for the technique: embrace, extend and exterminate. And yet people keep doing 
these deals. Usually, it's weak, struggling, desperate companies with 
declining market share and little hope of turning things around. In other 
words, just like Novell.

On Thursday night, I asked Jeff Jaffe, Novell's chief technology officer, if 
he could think of a company that had partnered with Microsoft and done really 
well as a result. Which Microsoft alliance, I asked him, would he cite as the 
model that he'd like to emulate?

His response: "I think this partnership is breaking new ground."

Um, right. Unfortunately, the new ground they're breaking is probably Novell's 
gravesite.
-- 
Mark Weisler
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