Microsoft loses with prominent role in Novell deal

Microsoft's central role in Novell's acquisition is likely to hurt the trust it had begun to build with open source

Press and blogger coverage of Novell's acquisition by Attachmate has identified EMC VMware, previously a rumored Novell suitor, and possibly even Linux and open source in general as being hurt by the acquisition. That coverage has presented the acquisition as having a positive or -- at worst -- neutral impact on Microsoft's competitive position with both VMware and Linux. However, the truth is that Microsoft has lost more than it has won in its decision to pull together a consortium to buy some Novell patents to help raise funds for Attachmate's acquisition of Novell.

Microsoft's high-profile role in Novell's acquisition
Microsoft was prominently highlighted in Novell's press release as having organized the CPTN Holdings consortium that will acquire some 800 Novell patents. The proceeds of this sale will in turn lower Attachmate's eventual cost of acquiring Novell by $450 million. (It's initially paying $2.2 billion.)

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That Microsoft worked to create a buyer consortium to assist Attachmate in the eventual acquisition is not surprising. Microsoft would have been unlikely to receive the necessary government approvals to acquire a Linux operating system provider with Suse's market share in the server Linux market, so Microsoft could not have bought Novell itself. Thus, keeping Novell's Suse Linux out of VMware's product portfolio could definitely be seen as strategic to Microsoft as VMware tries to grow beyond the hypervisor market into a vertically integrated platform provider.

Some have argued that VMware, or any interested vendor, could still acquire the Suse business unit from Attachmate. That's true -- as Attachmate is not a public company, it has much more flexibility to address any parties interested in acquiring the Suse business unit in the future.

It's also not entirely surprising that Microsoft would assist a third-party consortium in securing some of Novell's patents. Although the specific patents haven't been named, rumors have suggested the patents could be related to Unix or Linux. (Novell later said Attachmate would keep the Unix copyrights.) Whether Microsoft wanted to help a third party acquire these patents is irrelevant. It appears that the $450 million, or 20 percent of the acquisition price, was necessary to best the the purchase price offered earlier by Elliot Associates in its bid for Novell.

Microsoft's open source efforts in question again
What is surprising, and frankly astonishing, is that Microsoft would agree to be named as having played such a prominent role in the acquisition press release.

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