When Novell turned down an offer to be acquired by hedge fund Elliot Associates earlier this year, it seemed like the Linux vendor was looking for a better deal. The company announced today that it has accepted an offer to be acquired for $2.2 billion by software company Attachmate. Parallel to the acquisition, Novell has sold over 800 patents for $450 million to a consortium of technology companies organized by Microsoft.
Novell entered the Linux market in 2003 by acquiring Ximian and SuSE, commercial Linux vendors that were rising to prominence at the time. Novell used the technology obtained through those acquisitions to build enterprise Linux desktop and server platforms that the company brought to market under a unified SUSE brand. Novell opened the source code of some core SUSE features, such as the YaST configuration system, and attempted to foster an independent open source development community around its software.
Although Novell made a considerable investment to build a strong Linux product portfolio, the company faced serious difficulties. It couldn't catch up with Red Hat's substantial lead in the enterprise server market and was never able to build a credible business around its desktop products. Novell's desktop strategy was plagued by a general lack of direction and suffered from the friction between the GNOME-centric Ximian and KDE-centric SUSE developers.
Novell eventually managed to make its Linux business profitable by signing a controversial interoperability agreement with Microsoft in 2006. The goal of the deal was to boost SUSE's compatibility with proprietary Windows protocols in order to make the Linux distribution more appealing to companies that use a combination of Linux and Windows software. The agreement was extremely unpopular among Linux enthusiasts because it included a patent covenant that protected SUSE customers exclusively, failing to grant protection to downstream code recipients—a characteristic that is deeply hostile to open source licensing.
The deal with Microsoft proved to be profitable in the short term, but wasn't enough to make Novell a truly competitive force in the enterprise software market. Novell has gradually shifted its focus towards development tools, cloud computing, and the mobile space.
The company is a significant participant in the MeeGo project and is doing an increasingly large portion of the engineering for MeeGo's netbook stack. The Mono project—Novell's open source implementation of Microsoft's .NET framework—is enjoying some commercial success as a tool for cross-platform mobile and embedded development. The company has also made inroads in the virtualization market with its extremely impressive virtual appliance tool, called SUSE Studio (this led to some speculation of a potential acquisition offer by VMware that never materialized).
In addition to the wide range of modern open source technologies in Novell's product portfolio, the company also has some extremely valuable legacy IP, including some of the original copyrights on the UNIX platform and patents that cover fundamental aspects of networking technology and operating systems. The UNIX intellectual property was at the center of the litigation brought by dying UNIX vendor SCO against the Linux platform. SCO's claims that Linux misappropriated UNIX technologies were never evaluated in court because it was determined that Novell was actually the rightful owner of the intellectual property that was allegedly infringed.
There are some concerns that the case against Linux could be resurrected if a hostile third party such as Microsoft were to obtain the UNIX intellectual property. Novell's sale today of over 800 patents to a Microsoft-led coalition for $450 million alongside the Attachmate deal raises questions about whether we could see SCO-like litigation resurrected in the immediate future. It's worth noting that no evidence of actual infringement was ever found during SCO's misdirected crusade against Linux. In fact, internal memos from SCO that were uncovered during the court proceedings reveal that the company's own source code audits found no infringement.
The lack of copyright infringement doesn't mean that Linux is immune to litigation over UNIX-related patents, however. It's not yet clear exactly what patents Microsoft and friends bought for $450 million or how they intend to put those patents to use. Although there are still many unanswered questions, it seems clear that Attachmate intends to perpetuate Novell's Linux business. In a statement issued today, Attachmate CEO Jeff Hawn highlighted the value of SUSE and said that his company will continue to strengthen the SUSE products.
"This acquisition will add significant assets to our current portfolio holdings and the Novell and SUSE brands will allow us to deliver even more value to customers," Hawn said in a statement. "We have great respect for Novell's business, its employees and its commitment to customers. Moreover, we look forward to maintaining and further strengthening Novell and SUSE solutions to meet market demands."
Novell has made a number of significant contributions to Linux over the past six years and played an important role in helping the platform to mature as a desktop and server operating system. The company's failure to achieve success on its own is disappointing, though not particularly surprising. It's possible that new leadership will put SUSE on a more profitable path, but it's not clear whether the company will continue to be a major open source software contributor after the acquisition is complete.
Source: ars technica