Microsoft loses with prominent role in Novell deal

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.)

[ Keep up with the latest open source trends and news in InfoWorld’s Technology: Open Source newsletter. ]

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.

Microsoft’s positive work with open source projects and communities is again in jeopardy of being discounted as customers consider the risk of patent litigation by the consortium. Having publicly accepted the central role in creating the consortium, customers will surely see any aggression by the consortium as aggression on Microsoft’s behalf.

Microsoft’s veiled threats against Linux vendors have had no material impact in the growth of Linux market share, or that of Red Hat, the Linux market share leader. (Microsoft likely weighed the reputational risk of suing Red Hat directly.) You could hardly argue that the reputational risk to Microsoft is in any way changed if the consortium that Microsoft assembled decides to sue Red Hat or other vendors directly.

Additionally, unlike the case for would-be Unix owner SCO, Microsoft’s wide-reaching business severely limits the potential of Microsoft suing customers — unless Microsoft wants to encourage those customers to migrate away from Microsoft technologies.

As an outsider, it’s difficult to see what benefit Microsoft thought it would receive by being named as a central figure to the Novell acquisition. Travelling in Europe this week and speaking to customers who are generally more positive toward Linux and open source than their North American peers, I heard this sentiment repeated over and over.

Microsoft deserves the respect it has earned as an astute vendor and aggressive competitor. However, in this case, you have to wonder if Microsoft truly considered all the facts before agreeing to be named in Novell’s press release.

What do you think? Does Microsoft’s role in the acquisition affect your perception of the company?

Follow me on Twitter at SavioRodrigues. I should state: “The postings on this site are my own and don’t necessarily represent IBM’s positions, strategies, or opinions.”

This article, “Microsoft loses with prominent role in Novell deal,” was originally published at InfoWorld.com. Read more of Rodrigues et al.’s Open Sources blog and follow the latest developments in open source at InfoWorld.com.