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Why Microsoft Can't Afford To Let Novell Die

geek4 sends in an analysis indicating that Microsoft may have the most to lose if hedge-fund operator Elliot buys Novell. (The eWeekEurope piece is based on a longer and geekier writeup by Andy Updegrove on how the mechanics of unsolicited tender offers can play out in the tech world.) To avoid meltdown or asset-stripping, Novell can try and find a preferred bidder — a company with some interest in running Novell as a business, and preferrably a tech company. Or another company may make a move independently. But who might that be? A couple of analysts have suggested IBM, Oracle, or SAP. These all have problems... Microsoft is in a similar category, with one added problem. ... Microsoft has staked any open source credibility that it has on Novell's SUSE distribution. If Novell falls to bits, then Microsoft's efforts to gain open source cred pretty much disappear with it. It's something that would have been impossible to imagine a few years back, but if we're looking for someone to prop Novell up, Microsoft would now be a prime candidate."

28 of 215 comments (clear)

  1. Microsoft the tar-baby by Bruce+Perens · · Score: 4, Insightful

    Once you start with MS your paths close up until the only remaining one is: they own you. Maybe if Novell had stayed away from Microsoft they'd be doing better now. Red Hat is doing really very well.

    1. Re:Microsoft the tar-baby by fuzzyfuzzyfungus · · Score: 4, Insightful

      Do you think that they did badly because they touched Microsoft, or that they touched Microsoft because, for some other set of reasons, they weren't doing well enough against Red Hat and thought that it would provide them with competitive distinction?

    2. Re:Microsoft the tar-baby by Bruce+Perens · · Score: 5, Interesting

      I think SuSE understood what they had to do to make a business out of a Linux distribution. And Ubuntu/Canonical has, and they started later. I don't believe that Novell ever has. Like Caldera before them, they ended up alienating the very communities that would have pushed their own product in the enterprise, because they didn't understand that those communities were grass-roots engineering staff within their corporations - and were already connected to Open Source developers if they weren't themselves the developers - rather than the IT management that Novell focused upon.

      So, Novell was doing poorly, and saw MS as a fast and easy source of some third of a Billion dollars if they'd just do what Microsoft wanted, which would also endear themselves to those same IT managers that Novell was after, while further alienating the engineers.

      It was a short-term strategy.

      Want to bet that Novell becomes a litigation factory eventually? We're starting to see the symptoms.

      Bruce

    3. Re:Microsoft the tar-baby by cptdondo · · Score: 4, Interesting

      Novell has a long, long history of making short-sighted decisions that eventually turn out badly.

      It failed to see the shift from dedicated, limited network OS to distributed peer-to-peer networking.

      It didn't react in time to dump IPX/SPX and got left out of the whole internet thing.

      It bought Wordperfect about the time it tanked, then couldn't make a go of it.

      Then it bought Suse, and screwed that up too.

      Now it's got wads of cash. How much do you want to bet it will make a short-term decision that ends badly?

    4. Re:Microsoft the tar-baby by linumax · · Score: 3, Insightful

      +5 Insightful? Really?! Microsoft has hundreds of partners of different sizes, many have been with them for decades, some competing at the same time and are still alive and well and some have been bought out.

      In Novell's case however, it's not like they were taking over the world before "closing paths" with MS, they were already in dire straits and had nothing like the growth rate of Redhat. It's all guesswork but their partnership extending Novell's life seems like a much more likely outcome than your assessment of what happened.

    5. Re:Microsoft the tar-baby by Jah-Wren+Ryel · · Score: 4, Insightful

      Once you start with MS your paths close up until the only remaining one is: they own you.

      Apple did pretty well with that 'investment' by MS a decade or so ago.

      --
      When information is power, privacy is freedom.
    6. Re:Microsoft the tar-baby by GNUALMAFUERTE · · Score: 3, Informative

      Yes there is such a thing as bordering the illegal.

      When something is per se illegal, but a team of lawyers with questionable ethics find a way to phrase it that somehow circumvents the law, that situation is certainly in the border of the illegal.

      When something goes against the spirit of the law, but steps carefully over regulations, and is "technically" legal, that is bordering the illegal too.

      --
      WTF am I doing replying to an AC at 5 A.M on a Friday night?
    7. Re:Microsoft the tar-baby by Jah-Wren+Ryel · · Score: 3, Informative

      They did. But then Microsoft owns them at least partially.

      I'm too lazy to google it up, but I'm pretty sure they unwound that a couple of years ago.

      --
      When information is power, privacy is freedom.
    8. Re:Microsoft the tar-baby by Degrees · · Score: 3, Insightful

      I agree. It is all gain for Microsoft when Novell burns.

      No more competition in the user directory space: Active Directory for the ultimate win. (Local data center) Email is down to Exchange versus Domino. MS SMS no longer has to compete with ZENworks. (Note that Novell has ZENworks for Linux now, too). The Google Wave server that Novell is working on will go down in the flames too.

      Most of the migrations will be from SuSE to Red Hat - but some will be from SuSE to Windows. And all those Red Hat users will have to authenticate to Active Directory. It won't be any surprise when the Windows clients get right in to Windows servers, but the Red Hat boxen have inexplicable delays, random timeouts, and "what we have here... is a failure to... authenticate".

      It's all win for Microsoft when their potential (hold-out) customers lose an alternative.

      --
      "The most sensible request of government we make is not, "Do something!" But "Quit it!"
    9. Re:Microsoft the tar-baby by Anonymous Coward · · Score: 5, Insightful

      You have bad memory.

      I think SuSE understood what they had to do to make a business out of a Linux distribution.
      Back in the days, SuSE was in the red for $50 000 000 and survived because IBM injected them cash. They already were not very much in control any more. Later, IBM gave another $50M to Novell wich then bought SuSE. Is that the way to make a business out of a Linux distribution? To get in the red to get bought?
      http://209.85.229.132/search?q=cache:jaPNE148pE0J:techupdate.zdnet.com/techupdate/stories/main/novell_suse.html+ibm+novell+deal+suse&cd=3&hl=fr&ct=clnk
      I don't believe that Novell ever has. ... they ended up alienating the very communities that would have pushed their own product in the enterprise, because they didn't understand that those communities were grass-roots engineering staff within their corporations - and were already connected to Open Source developers if they weren't themselves the developers - rather than the IT management that Novell focused upon.
      Basically, SuSE was doing business around IBM big iron, they had (and have) a good relationship with IBM (frankfurt iirc) and work well.
      Apart from that, they alienated every (popular) community gathering around them long before the novell buy out by not freeing YaST, their management tool. The thing is, they tried to get some money from the people using their distro before you could download it. Which didnt work either, which leds to the $50M loss. (Others tried to not get money from their users, and it did work).
      Apart from that, as for the grass-roots engineering target, it is an entranched place where you find people either deeply tied to debian or to red hat. They don't give a damn about anything else, even if it's a nice piece of engineering as SuSE has always been. So is it really unwise to have aimed at another target? Maybe an already untouched area, like compagnies already doing microsoft that want to go linux too? I don't think so.

      those same IT managers that Novell was after
      AS FOR NOVELL, once it bought SuSE, they freed everything that wasnt already free in SuSE and then they freed some NOVELL software too. They hired people, they had for example 3 engineers on the ATI drivers, they have developed new distribution tools like the build system and the SuSE studio which are excellent and innovative.
      So would they have done this if they werent really trying to do a very good distro (and it is) and build a business AND a community around it?
      Also there is a text online from one of SuSE founder that says that after the buyout, the 5000 NOVELL people listened to the 500 SuSE people and got along with the program.

      The only meat in what you say is of course the MS deal which infuriated many persons (and me too). But this problem arise from the existence of patents and of a broken patent system. That is the real problem that needs to be fixed. You need a new Jefferson.

    10. Re:Microsoft the tar-baby by Kennon · · Score: 4, Insightful

      I pretty much agree with every point you make here except this "Then it bought Suse, and screwed that up too." I don't understand why so many people repeat this. If I recall correctly SuSE was failing as a commercial Linux company when Novell acquired them. They were on their way to Mandrake-ville. Where I work we have hundreds of SLES servers in production today and they are rock solid. Fast, reliable, super easy to manage. I would put my SLES datacenters up against a Red Hat shop any day of the week. And Novell licensing is so much cheaper than Red Hat we basically have a site license for the cost it would take to license half our servers for support to Red Hat. Not to mention the fact that Red Hat basically abandoned the Desktop a while ago and SLED is a great windows replacement for a significant portion of our end users who don't require the few remaining windows client-servers apps we have left.

      The stupid MS agreement and not ending support for these crap legacy apps is what is killing them. If you look at the numbers, the Linux division of Novell is profitable. The problem is the boat-anchor of closed source legacy BS they are still supporting is dragging down the whole company. Instead Novell has too many old timer bean counters at the helm who don't understand that the word Free does not mean free.

      --
      "All those moments, will be lost in time...like tears in rain..."
    11. Re:Microsoft the tar-baby by segedunum · · Score: 4, Informative

      Back in the days, SuSE was in the red for $50 000 000 and survived because IBM injected them cash.

      Not particularly accurate. It's not unusual for such companies to take some time to break even, and the same was true of Red Hat. The $50 million injection was purely as part of the Novell deal and no they weren't in the red to that figure. There wasn't a second payment that I'm aware of. Novell have also only just about, with some creative accounting, managed to make their Suse Linux business break-even. Would Suse have done better by themselves? It's a matter of some debate.

      Apart from that, they alienated every (popular) community gathering around them long before the novell buy out by not freeing YaST, their management tool. The thing is, they tried to get some money from the people using their distro before you could download it. Which didnt work either, which leds to the $50M loss. (Others tried to not get money from their users, and it did work).

      You're going to have to qualify that statement and set of assumptions with some facts I'm afraid. Trying not to make money from something to get money is a contradiction in itself. Many open source companies around Linux have tried it and they've burned their VC money and went to the wall. It's a stretch to assume that because Suse didn't open YaST it was in trouble, but it would have probably had to have happened eventually. They didn't open it purely because they had some competitive advantage at the time. It was hardly a reason for people not giving Suse money for the distro, which is ultimately what counts.

      Additionally, Novell has done the very thing you accuse Suse of doing - and it has cost them. They haven't opened Groupwise or any of their other archaic pieces of software and as such no one was using them. That was the real problem at the time Novell bought Suse. That's sometimes even worse than people not paying for your software! They've also retro-fitted Novell on to effectively a proprietary Suse Linux in OES which has not only alienated Linux users but has also completely alienated and failed to attract existing Netware users - who've usually gone to Windows Server. They've handled that so badly it's unreal.

      Apart from that, as for the grass-roots engineering target, it is an entranched place where you find people either deeply tied to debian or to red hat. They don't give a damn about anything else, even if it's a nice piece of engineering as SuSE has always been.

      I'm not entirely sure what that means, but that sounds like a problem with Novell's management and leadership.

      AS FOR NOVELL, once it bought SuSE, they freed everything that wasnt already free in SuSE and then they freed some NOVELL software too.

      They freed some Suse and Novell software they didn't care about, and much of the Novell software they did free like Hula fell by the wayside very quickly. The important software that they should have open sourced and found a business model around like Red Hat's to get people really using it again they didn't, and it's all been left to rot and stagnate. Novell's revenue has steadily declined since just as it did before the Suse takeover.

      They hired people, they had for example 3 engineers on the ATI drivers, they have developed new distribution tools like the build system and the SuSE studio which are excellent and innovative.

      What money have they made off that? Their much touted 'Enterprise Linux Desktop' is absolutely nowhere to be seen. Suse Studio is possibly the most different thing they've done, but again, they need to turn that into revenue. They just haven't made the money from Suse that they should have done.

      Also there is a text online from one of SuSE founder that says that after the buyout, the 5000 NOVELL people listened to the 500 SuSE people and got along with the pro

    12. Re:Microsoft the tar-baby by Bruce+Perens · · Score: 3, Insightful

      Yes. But they built market share really well. At the expense of at least one Free Software project that I know.

      It is possible that they made a wrong turn with the new management. Matt Asay was not the most clued-in person in the Open Source world, judging by his columns and the frequent hostility he experssed in them toward the Free Software community. If they are smart they will keep him working exclusively on operations.

  2. Re:Microsoft Has Already Moved On To Ubuntu by postbigbang · · Score: 4, Interesting

    Except that it's not a patent minefield.

    It's a blowhard's way of stanching competition with bogus citations. Ubuntu doesn't have the enterprise penetration of any of the community versions of SUSE or Red Hat. Novell's stupid, and hampered by the FOSS community's perception that they're a Microsoft sell-out because of their license agreement with Microsoft.

    Still, the openSUSE community thrives. It's Novell's legacy problems (hello Eric Schmidt!) and their incapability of appealing to enterprise systems designers that they're in the undervalued column. Microsoft won't buy them. They'll get broken into pieces, and sold off that way. My guess: to Oracle, whose Linux version languishes. At least Oracle knows how to excite developers.

    --
    ---- Teach Peace. It's Cheaper Than War.
  3. Re:Microsoft Has Already Moved On To Ubuntu by 93+Escort+Wagon · · Score: 4, Insightful

    Microsoft is perfectly happy to leave Novell's rotting corpse on the trash heap of computing. It served its purpose of getting the message out to the commercial world that Linux is a Patent Minefield.

    Everyone's going to have a different take on this of course, depending on their personal views regarding Microsoft and Linux. Me, I think the main point is it's no longer the 1990's. Microsoft has very short coattails, and anyone planning to ride them to success nowadays is in for a rude awakening.

    But I really don't get your "patent minefield" comment at all. That's what Microsoft was HOPING to accomplish, but frankly it seems obvious they failed miserably - that's why for the past couple years they've made significant moves towards coexistence and interoperability with Linux. It's not like they managed to even slow down Red Hat, let alone turn the corporate world against them.

    --
    #DeleteChrome
  4. MS doesn't need Novell, not now, not ever. by ipquickly · · Score: 4, Insightful

    Why would MS even care?
    In fact if Novell fails, along with what recently happened with MySQL and Open Solaris, MS can brag about how proprietary software is the way to go.

    Call my cynical, but any inroads into open source software by MS have been either because they had to, or because they had a direct benefit from the public image attained by playing nice with open source software.

    At the end of the day, the fact remains. MS would like everyone to use their proprietary software. MS would like everyone to forget about open source.

    The only way this will ever change is if open source becomes more profitable to them than proprietary software.
    Then MS would transform into the #1 proponent of open source.

    Think of the shareholders!

  5. Rubbish article by Gorobei · · Score: 4, Insightful

    Trying to pretend this is some giant strategic cat-fight is a waste of time. I can only assume the author of the article is trying to gin up his importance and earn a few thou in consulting fees.

    The big companies have already figured out that Linux works just fine in datacenters. Most managers don't know or care if they are running Redhat, Ubuntu, Suse, or a home-roll. They do know that Linux isn't going to vanish just cos some random firm gets bought out.

  6. IBM should buy them. by Ungrounded+Lightning · · Score: 5, Interesting

    Novell still has the copyrights to Unix.

    If Microsoft were to buy them we could see a re-run of IBM vs. SCO, with Microsoft playing SCO but, having learned from SCO where the land mines are and having the REAL copyright ownership, going after any places where they might win and winning. They might be able to collect a "Microsoft Tax" on any remaining Unix vendors that are still running under ongoing licenses. They might find places where other vendors weren't covered by previous licenses. They might find some code leakage from Unix to open source projects and go after them, beating them into submission or bankruptcy, maybe winning on the merits, maybe winning by just having big pockets while open-sourcerers live on a shoestring. This could be a disaster for IBM, open source, any remaining proprietary Unix vendors, etc.

    If IBM buys Novell they are protected from this sort of attack on their current business model from now on. They have the option of releasing the Unix code base under open-source licenses. I could go on.

    IBM has the bux, the incentive, and the smarts. So I'm not just hoping, but betting, on them.

    --
    Bantam Dominique roosters crow a four-note song. Once you've heard it as "Happy BIRTHday" you can't NOT hear it that way
    1. Re:IBM should buy them. by Bruce+Perens · · Score: 4, Interesting

      Forget about Unix copyrights. No litigation value remaining because of the time they were in the public domain, and the time they were released under the BSD license. Look how far it got SCO.

    2. Re:IBM should buy them. by Ungrounded+Lightning · · Score: 3, Insightful

      Why would you want IBM, the largest patent troll in history, to buy them?

      Because IBM has built a large business supporting open source solutions in large corporate customers. They're smart enough to feed the goose that lays their golden eggs - and have a track record of doing so.

      IBM was ONCE a problem. But they've been through a mid-life crisis since then, and came out as one of the best "corporate citizens" the Open Source community could have for a neighbor. Past behavior is the best predictor of future behavior, but recent past behavior is a better predictor than distant past behavior.

      --
      Bantam Dominique roosters crow a four-note song. Once you've heard it as "Happy BIRTHday" you can't NOT hear it that way
    3. Re:IBM should buy them. by Bruce+Perens · · Score: 4, Informative

      The BSD I am talking about is a Caldera release of the Unix source code under the BSD license. It's well-documented. Regarding USL v. BSD, the key part is known, which is that Unix was released to Berkeley and the BSD users without a proper copyright statement, and before the Bern Copyright Convention was ratified by the US. At that time material without a proper copyright statement was in the public domain.

  7. Re:Microsoft Has Already Moved On To Ubuntu by Bruce+Perens · · Score: 5, Insightful

    All software is a patent minefield. You can't write any significant software without infringing upon a granted patent. If existing patents were enforced at all well, there would be no software industry.

    MS continues to make gains in licensing its "Linux patents", and there's nothing that says they won't decide it's time to enforce them against you and me tomorrow.

    The worst part is that we have no credibility in fighting this at the government level any longer. When Open Source was people doing good for other people, we had the credibility to kill a proposal for uniform enforcement of software patents across the EU. Today, Open Source is big business, and there is no such credibility if it's Microsoft vs. Red Hat rather than Microsoft vs. do-gooders and non-profits. So, this means that our commercial success is likely to kill us through software patents eventually.

  8. That's what I always wondered. by khasim · · Score: 3, Interesting

    Instead of buying a distribution, how about hiring some of the coders and providing them with specs to get your money-making products ported to ALL Linux distributions?

    Then pay bounties for improvements you need/want in other areas of Linux.

    Your company and products end up distribution-agnostic and you have lots of good will from paying the coders who are furthering Linux. And you can do it for a LOT less than the price of buying a whole distribution.

  9. Who will own Unix? by Billly+Gates · · Score: 3, Interesting

    SCO lost because Novel owns Unix, the utilities, posix, and how it operates.

    I am afraid of someone like Microsoft buying Unix only to cease and desist any Unix like product that looks similar. What better way to get back at Oracle and kill Linux then to own the unix standard?

  10. Novell killed itself with its choices by deanston · · Score: 3, Interesting

    Nothing Novell does is special or cost effective any more. Groupwise? Still sucks on the web and on mobile and feels like desktop email from 2000. Netware? Plenty of competition there. Suse? The lizard's cute but can't beat RedHat/CentOS in farms or Ubuntu and others at home. Mono? Regardless of your opinion about dotNET, the sure thing is Mono will always lag behind latest MSFT version and never gain significant production and commercialization. The closer they get with Microsoft, the easier it is for shops that used to run both Novell and MSFT to drop the extra Novell piece and just go with all MSFT. Same old story.

  11. Open source cred? Important to whom? by jasmusic · · Score: 3, Insightful

    People really think Microsoft gives a flying fuck about its open source cred when their entire product line is bolted away?

  12. RedHat should step in by jroysdon · · Score: 3, Interesting

    I hate to see Novell die (I was a CNA way back in the day, and learned NetWare 3.x in high school), but I think it'd be for the best interest of FOSS due to their taintedness with Microsoft.

    Here's what I think should occur:
    RedHat should set up a third-party company that they own. That company should buy Novell. That company should sell all non-tainted assets to RedHat.

    Then what is left are the tainted bits the third-party is holding. Let it just die or shut down or whatever it is that you can do with a corporation to put it out of its misery.

  13. Re:Microsoft "investment" by warrigal · · Score: 3, Insightful

    That "investment" of $150Mill worth of non-voting shares was cashed in at a good profit a few years later.
    Apple had a cash heap of over $15Billion at the time and no debt. The $150Mill was simply a confidence move.
    If anybody did well out of it it was Microsoft. They got to keep using the Quicktime code they were illegally using in Windows and Apple's promise to keep putting IE for Mac as the preferred browser. In return Microsoft promised to keep pumping out MS Office for the Mac for several more years. That latter agreement has long ago expired but MS Office is going as strong as ever.