cnbiz850
November 9th, 2006, 03:20 AM
Novell: We Surrender
Daniel Lyons, 11.03.06, 11:45 AM ET
Dan Lyons
pic
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.
Daniel Lyons, 11.03.06, 11:45 AM ET
Dan Lyons
pic
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.