Novell reveals financial details of pact with Microsoft

15 Nov 2006

PARIS: Network software company Novell will get the lion’s share of financial benefit from the recent and wholly unexpected news that it will work with arch nemesis Microsoft to enable its SUSE Linux platform to work seamlessly with Microsoft’s Windows environment, it emerged yesterday.

At a Novell European press briefing in Paris, where a number of senior management figures were laid low by a bout of food poisoning, Roger Levy, vice-president of open platform solutions, recalled to journalists the searing rivalry that exists between the companies and their differing platforms.

While Microsoft is championing its own proprietary Windows environment for enterprise systems, Novell has nailed its colours firmly to the Linux mast.

Indeed, two weeks ago the unthinkable did happen when Microsoft and Novell signed a collaboration agreement that is set to run until 2012. The agreement includes both technology and business elements, with the companies intending to build, market and support “a series of new solutions” to make their existing products more compatible.

“People were surprised when [Steve] Ballmer [Microsoft CEO] stood on stage and said that Linux is relevant and can’t be ignored,” Levy said. “This was a little bit different from the man who called open source a cancer not so long ago.”

In Paris yesterday Levy said that the deal struck with Microsoft will have a number of knock-on financial benefits for Novell. “Microsoft has agreed to distribute a minimum of 70,000 certificates a year to allow their customers to use SUSE Linux. This is worth upwards of US$240m to Novell over five years.

“There is an estimated US$108m dollars coming towards us from Microsoft and an estimated US$40m going towards Microsoft from us. We get the lion’s share in order to look at who has what strength, revenues and patents out of the agreement.”

Levy pointed out that the deal struck with Microsoft should not be seen primarily as a deal between companies but more a resolution whereby customers with heterogeneous IT environments would not be sued for building a Novell enterprise network on top of a Windows operating environment or vice versa.

Levy said Microsoft recognised the reality of the IT world today, where mixed IT environments are the norm as opposed to a single IT platform dominating the world.

The deal, he said, corrected a fallacy in the IT business. “Customers were afraid they’d get sued if they crossed platforms and this meant that they were hesitating on buying decisions.”

The solution to this conundrum, which could have ultimately hurt both companies’ revenues, was to create a covenant not to sue customers for mixing platforms.

“As part of the deal Microsoft will agree not to sue our customers and we agreed not to sue their customers. This is not an agreement between companies — we can still sue each other for any number of reasons — but ultimately our respective customers needed peace of mind to make decisions,” Levy said.

In an interview with following the press briefing, Levy said: “Heterogeneous is that state that things are in across the IT world. The reality is customers have cross platforms. We have recognised that and now Microsoft is acknowledging it. This is all in the customer’s favour.

“From an immediate financial point of view it is good for Novell. But it is also good for Microsoft because there are customers they will retain that might otherwise have decided to migrate away. The agreement is good for both companies, customers and great for the overall Linux community to strengthen its position in the market,” Levy said.

By John Kennedy