Novell buys SuSE –as IBM looks on
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Network software company Novell is acquiring SuSE Linux in a $210 million cash deal. At the same time, IBM has bought $50 million of Novell's stock.
4 November 2003 Network software company Novell is to acquire SuSE Linux, Europe's biggest distributor of the open-source operating system, for $210 million in cash.
The value of the deal represents a multiple of about five times' SuSE's revenues. The German software company is believed to generate annual turnover of about $35 million-$40 million. Novell's market value is just under $3 billion.
Analysts say that while the $210 million price tag is high, the role of IBM, the leading IT industry backer of Linux, might explain Novell's determination to buy the number-two Linux distributor.
As well as announcing the SuSE deal, Novell also said that it is to receive a $50 million investment from IBM, while the two companies have agreed to strengthen their partnership.
Under the new agreement, IBM will resell Novell's flagship NetWare product. Novell and IBM are also negotiating extensions to IBM's agreements with SuSE for support of its eserver and middleware products.
The timing of both deals, which are expected to be completed in early 2004, has already raised eyebrows within the analyst community. The deals, seemingly unrelated, have nevertheless prompted speculation that IBM is attempting to seize indirect control of the Linux market.
Analysts say that IBM would have been deterred from buying SuSE because of its close ties with Red Hat, the US-based market leader in Linux distributions.
The Novell-SuSE deal, meanwhile, represents a dramatic endorsement of Linux at a troubled time for the operating system. Novell has supported IBM in its bitter legal row with SCO Group, which claims that IBM took bits of code from Unix, an operating system that SCO has rights to, and transferred them to Linux.
SCO has even hinted that it might extend its legal dispute by suing SuSE for distributing the 'tainted' operating system.
By investing so much in Linux, Novell has sent a defiant message to SCO that IBM will eventually win the argument, say analysts.
The SuSE deal is the latest in a series of moves by Novell into the open source sector.
In April 2003, at its annual BrainShare user conference, the company signalled its intention to offer a version of Netware for the Linux platform. Four months later it acquired Ximian, the owner of the Gnome desktop Linux user interface and Mono, an open source technology that makes it possible to run Microsoft .Net applications on Linux.
Further strengthening its open source credentials, Novell also distributes the Apache open source web server and a UDDI (Universal Description, Discovery and Integration) based open source web services directory server.
With the SuSE deal, Novell adds server-side Linux to its expanding portfolio. "The acquisition of SuSE Linux will complete Novell's ability to offer enterprise-class Linux solutions to our customers from the desktop to the server," said Novell CEO Jack Messman.
Gary Barnett of Ovum Research says that the deal is also good news for Linux users. "This announcement is extremely important for Linux and Linux adopters, as it propels SuSE into the big league in terms of its ability to deliver product innovation and customer support," he says. "SuSE now represents a serious and credible threat to Red Hat for market leadership - and as a result, users of both distributions are set to benefit."
