Microsoft ups its anti-Linux crusade by $100 million. Novell and Red Hat profit

"Follow the money" was Deepthroat's suggestion to journalist investigators in the Watergate scandal. Several decades later, that same advice helps to unravel the mystery of why Microsoft keeps upping its investment in Novell's SUSE Linux certificates...while simultaneously denouncing Linux for violating its intellectual property and generally wishing that Linux would cease to exist.

As context, Microsoft and Novell today announced an expansion of their 2006 interoperability agreement, which included a controversial covenant not to sue over patent infringement. "The investment focuses on enhanced programs from Novell to provide tools, support, training and resources for customers seeking an enterprise-class Linux platform and specifically, the optimal interoperability solution between Microsoft Windows Server and SUSE Linux Enterprise Server," writes Fox Business.

But it's not the interoperability provisions that anyone is going to be talking about. It's the $100 million in additional SUSE Linux certificates that Microsoft is buying. I know from friends at Novell that customers are indeed lapping these up, but not for the reasons publicly stated (patent protection (Microsoft) and interoperability (Novell). No, the primary reason is that they are cheap.

With this underwriting of Linux by Microsoft, Novell is able to sell its Linux software at highly advantageous pricing. As Novell's Linux business has grown, it has been able to stand more and more on its own and discount less, but to follow Deepthroat's counsel, you really need to ask why Microsoft would want this.

How do the two companies benefit? As eWeek's Joe Wilcox suggests:

Novell's benefit is obvious, if not self-destructive. The deal allows Novell to exist in the shadow of Windows Server, sustaining on its table scraps. Microsoft can offer customers that simply must have some Linux servers a sanctioned source for good tools ensuring interoperability with Windows Server.

This, however, is probably not polite enough to Novell and is far too polite to Microsoft. Microsoft wants to kill Red Hat. Period. If Novell were the market leader, Microsoft would have done this deal with Red Hat. (That said, inside sources tell me that Microsoft spent nearly a year trying to get Red Hat to agree before it ever approached Novell.)

It's just business for Microsoft, and business is better when Linux is limping. So Microsoft is trying to kill off the Linux market leader by giving Novell a compelling differentiator. The day that Novell becomes a threat to Microsoft's business, however, is the day that the deal is shut down.

It may be too late at that point.

Novell, for its part, is playing a dangerous but currently highly profitable game. Microsoft has helped to rejuvenate its once lagging Linux business. While I don't like the patent provisions included in the deal, I think Novell has done a good job of largely side-stepping these provisions, however much hay Microsoft has tried to make of them.

$100 million is $100 million (added to the $240 million Microsoft paid Novell before), and this investment is clearly paying off for Novell, though it has yet to even remotely slow Red Hat's pace.

In short, while Novell is treading a dangerous line in this deal, the only loser so far in it is Microsoft. Red Hat continues to thrive. So does Novell's Linux business. Microsoft's Windows server business has shown no signs of slowing, either, but $340 million into its efforts to cripple Linux it has yet to demonstrate a dime's worth of return.

I used to rebuke Novell for its complicity in helping Microsoft with this deal, but I'm having second thoughts. Novell has never dampened its enthusiasm for Linux, though it has occasionally let its hunger for greater Linux revenue lead it astray in its marketing messages. People make mistakes. On the whole, however, Novell is playing Microsoft against Microsoft to its own profit, and has thus far done so with aplomb.

Whether Novell can continue to pull it off is a different question, but for now both Novell and Red Hat continue to grow, and Microsoft is helping to feed that growth (at least, on Novell's side). The dummy, it would seem, is Microsoft.

[mike88888]

Although Red Hat is still the clear leader (2:1) in annual Linux distribution and support dollars, IDC reports Novell is beginning to take market share. Do you see this trend continuing in a material way?

[bbneo2]

Do we really have to accept the idea that Microsoft's dominance is inevitable? It's not.

Who cares? Let Microsoft worry about interoperability with the Linux world at large and lets get off this Microsoft planet before it burns up in the sun.

[Seaspray0]

But has linux posed a serious threat all these years? No longer do you hear anything like the 1994 shout of "year of the linux desktop". It's in the server arena where linux is most valued and even there it's been losing share to microsoft over the last few years. So why do a deal like this? Maybe microsoft thought they could nail the coffin shut. I don't see it happening that way they think it will. To me, the best feature of linux is the ability to scale it down to the core to perform only the tasks you need. Unlike windows, you can run a stripped linux kernel on a phone or use it on minimal hardware for specialized uses (i.e. ATM machine, DVD vending machine, etc). I think it's the linux community itself that could cause linux to die. Rather than concentrate on this nitch where linux has an edge, linux development has been more geared towards bloating the OS, adding features, to make it operate more like windows. If microsoft released a stripped core of windows as an OS(they claim they've got one), I think it would do much more damage to linux than any deal with novell. But what do I know? I don't work for microsoft and they're bound to know what they're doing, right?

[The_Decider]

I think this is more of a case of MS wanting to get a piece of the ever growing corporate abandonment of MS pie. Right now it is not a huge pie, but it is steadily growing.

Anything that MS can do to stave off the need for them to actually produce compelling products is the MO at Redmond.

[as901]

Beware of Geeks bearing gifts. Each time a non-Microsoft company tried to partner with Microsoft, Microsoft won.

Many years back, Apple computer invited Bill gates to their plant. They were working on a system similar to the GEM system. They called it the Mac. When Mr. Gates left, he began creating a clone called Windows.

Microsoft does not play well with others.

Mark

[no_arab_president]

Many years back, XEROX computer invited Steve Jobs to their plant. When Steve Jobs left, he began creating a clone called Lisa.

You think Microsoft copied from mac??!

The GUI is the natural evolution of the computer from command line.
Thats like saying that Ford created a round steering wheel, and GM copied them.

It is ridiculous.

go back to your linucks pops, or Eunichs, whatever you command line boomers use.
You can telnet into your box, while I'm running IPSEC PPTP with encrypted RDP.

Our whole company has converted to Vista the day that SP1came out, and we have never had a more stable LAN/WAN.

I can manage 800 PC's and server with Active Directory, Exchange 2007, Office 2007, mac leopard, websense and now http://www.microsoft.com/uc/voipasyouare/default.aspx without EVER USING COMMAND LINE!!

Welcome to the new millenium, pops

[piNzign]

Why would Microsoft sink another 100 million into a strategy that is failing? Its not like they are stupid. I think you don't give them enough credit. Perhaps destroying Linux is not their motive?

[skipthompson81]

>>>(That said, inside sources tell me that Microsoft spent nearly a year trying to get Red Hat to agree before it ever approached Novell.)

matt, love your blog, love utah snow, can't wait to go skiing again in park city.

ron hovsepian has been quoted saying "I called them" an old colleague from IBM. true or not?

[schlandower]

Microsoft scream and kick and shout about patent ifringments, yet they them selves have infringed so many patents over the years and nothing is allowed to be done.
I said when Novell first sold out the Linux community that this is going to be bad for
everyone, I have yet again been proven correct.
Has any looked at the Novell / MS agreement, read the full thing, seen the fine print?

NO!!!!!!!!!!

Why?

Because then you will see that Novell has "licenced" open source software it both own and doesn't own to MS.

The only reason MS has made inroads into the server market is through marketing.

It still remain an insecure, unstable very costly "opperating system".

I only use Linux for everything, NOTHING MS ever.