Novell's Acquisition by Attachmate Has A Microsoft Twist, But Red Hat is the Big Winner
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Novell's Acquisition by Attachmate Has A Microsoft Twist, But Red Hat is the Big Winner
by Sam Dean - Nov. 22, 2010Comments (0)
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As everyone digests the news of Novell's acquisition by Attachmate, valued at approximately $2.2 billion, there are many who will note that all the signs were there that Novell wouldn't be sustainable as an independent company. We wrote about the war drums surrounding Novell multiple times, and we noted that, since Sun Microsystems was acquired by Oracle this year, a Novell acquisition would leave one company in an advantageous situation: Red Hat. Among other things, the acquisition of Novell leaves Red Hat as the only public, U.S.-based company primarily focused on open source. There are also interesting Microsoft connections to the Novell acquisition, and more.Mary Jo Foley spotted the key language in the announcement of the Novell acquisition, noting the Microsoft connection:"Seattle-based Attachmate Corp. is buying Novell for $2.2 billion, the companies announced on November 22. At the same time, Novell announced the 'concurrent sale of certain intellectual property assets to CPTN Holdings LLC, a consortium of technology companies organized by Microsoft Corporation, for $450 million in cash.”Microsoft has issued a statement, as well:"We are pleased to be a part of the acquisition of certain intellectual property assets of Novell. Microsoft looks forward to continuing our collaboration with Novell into the future, to bring mixed source IT solutions to customers,” said the company via a statement from Horacio Gutierrez, Microsoft’s Corporate Vice President and Deputy General Counsel of Intellectual Property and Licensing."As GigaOM notes, it isn't clear yet which exact assets of Novell's Microsoft is acquiring, but the long-standing deal between Novell and Microsoft surrounding Novell's Linux business would imply that Microsoft, along with Attachmate, will steer all or part of that Linux business. Microsoft may also gain increased control over key patents that Novell owns. Microsoft entered into a deal with Novell in 2006 to distribute certificates for SuSE Linux to its customers and Novell, as Mary Jo Foley notes, "basically conceded that its implementation of Linux violated Microsoft patents and agreed its customers needed patent-enforcement protection."For its part, Attachmate has said that it will operate Novell as two business units, one focused on non-Linux projects, and one focused on SuSE Linux. But despite the fact that Novell's Linux business, which has been doing poorly, will march on, the real winner in this deal is Red Hat. As the only remaining public, U.S. company focused on open source, and with a thriving business surrounding Linux, the deep knowledge of how the Linux business works at Red Hat will become even more of an advantage as Novell loses its independence. Microsoft and Attachmate will likely offer relatively diluted focus on the Linux business, just as in recent years, Novell's Linux business has largely depended on deals that Microsoft helped it strike, with Microsoft often showing diluted focus on that task. You can get a feel for how dependent Novell has been on Microsoft from this quote from one of the company's earnings reports this year:"As we have stated before, our Linux business is dependent on large deals, which may result in some fluctuations of our quarterly invoicing. This quarter, we did not sign any large deals, many of which have been historically fulfilled by Microsoft certificates." Novell CEO Ron Hovsepian stressed that he pursued this acquisition on behalf of shareholders, and that sounds true, but the Microsoft connection is one to watch, and Red Hat--with its flourishing Linux business--will almost certainly be the big winner. 
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