Novell was recently rumored to be shopping itself around for a buyer. The new rumors? That it's doing some shopping of its own. In this, Novell isn't alone, with Dell also looking to pick up companies that can expand its product lines, as both look to grow despite CIOs' decreasing willingness to spend. Open source may factor into both companies' M&A strategies.
As reported in Daily News & Analysis, Novell CFO Dana Russell has said the company is "interested in making acquisition in the high-growth businesses like identity security and compliance management software, data centre tools and open source software." With over $1 billion in the bank, Novell is in a prime position to buy companies on the cheap.
However, Novell should avoid its SiteScape error, viz., buying into a trendy but not yet profitable market. Identity security and compliance management are probably safe, because they're precisely the sort of "boring" markets that CIOs will pay money for in a recession.
Open source is much the same, but it depends on which open-source products it picks up. A Zenoss, Reductive Labs (Puppet), or some other company in IT management/configuration might be a smart bet.
Novell isn't alone in its interest in acquisitions to spur growth. Dell has been widely reported to have a $10 billion war chest set aside for acquisitions and, according to The 451 Group, Dell may be looking to make some significant acquisitions in the storage market:
With existing partners such as Cisco and Oracle...now priming themselves to become players in the server hardware market, Dell clearly needs to build up its portfolio to do battle with these new entrants along with its traditional rivals Hewlett-Packard and IBM. One clear way to do this would be to expand its storage software and hardware lineups since these offerings are complementary to its core server and PC business.
One way to get into the market would be to buy EMC, a current partner, but as The 451 Group notes, Dell has rarely ventured into big acquisitions--its $1.4 billion acquisition of iSCSI storage systems vendor EqualLogic in November 2007 the exception to the rule. I'd expect Dell to buy midrange players along the lines of 3PAR, Exanet, and so on rather than NetApp or EMC. Buying big would be distracting to Dell and take too long to digest and commoditize, Dell-style.
It's possible that Dell might even delve into the open-source storage market. An Infoworld reports identifies the best of the bunch, with vendors/projects like Zmanda, FreeNAS, and StorageIM in the mix.
It's doubtful, however, that any of the vendors in the open-source storage space are big enough to move the revenue needle for Dell. So, while it's SMB strategy may involve a healthy dose of open source, I wouldn't expect its storage strategy to do so...at least, not yet.
Open source could be a boon for both Novell and Dell, but each would need to be pragmatic about what to expect from open source. Currently, the most revenue either can expect from an open-source buy would be in the $50 million range, with most open-source vendors offering much less than that.
However, the one thing that open source can offer both right now is a ready supply of leads, plus branding and relevance in markets where Novell and Dell may not yet have much of either.
Follow me on Twitter @mjasay.
The bad news is that global server revenue is down 25 percent in the last quarter, according to IDC, with Microsoft Windows server revenue down a whopping 29 percent.
The good news? Novell reported Thursday that its Linux Platform revenue climbed 25 percent year over year in the midst of one of the worst recessions in history. Talk about Linux swimming against the economic current.
Well, it's good news for some. Microsoft, of course, won't take any comfort in Novell's numbers, especially as recent Eclipse survey data suggests that Linux is eating into its Windows server and client businesses, with 43 percent of Eclipse developers citing Linux as their preferred deployment platform (versus Microsoft's 41 percent).
It wasn't the best of quarters for Novell, either. Net revenue was down to $216 million from $236 million a year earlier, though cost cutting resulted in $16 million in net income. Novell's problem is that outside its Linux Platform and Identity Management businesses, which both grew, its other lines of business stumbled -- Workgroup was down 14 percent, while Systems and Resource Management dropped 2 percent.
Novell reported $37 million in Linux Platform Products revenue, up 25 percent compared to the same period last year. While not on par with Red Hat's continued growth -- 18 percent last quarter on a higher revenue base, -- Novell's execution on its Linux Platform business, in particular, is impressive.
Workgroup, of course, continues to deliver the biggest chunk of revenue ($79 million in the current quarter), but is also the biggest drag on Novell's brand. Workgroup is a constant reminder of the old Novell: NetWare, GroupWise, etc. I understand the reasons for keeping that revenue, even declining revenue, on the books, but it comes at a high cost to Novell's credibility.
With $1 billion in cash or short-term assets, Novell could conceivably buy relevance in this market, as it has tried in the past with its Sitescape acquisition, but thus far it has failed and throwing more money at this line of business won't likely help. Novell is an enterprise server company. Its desktop-related business is a distraction.
Novell's Linux performance, however, suggests a way forward for the company. It's called open source, and perhaps Novell's own flavor of open source (hybrid source) could be a winning strategy against Red Hat and Microsoft.
Follow me on Twitter @mjasay.
Novell primarily gets public credit (or recrimination) for its Linux business, but on Thursday Novell reminded the world that it's more than just a Linux vendor, acquiring the assets of technology assets of Fortefi Ltd. and a perpetual source code license to ActivIdentity's single sign-on solution.
Both moves strengthen Novell's position in the Identity Management market.
Linux serves as the beachhead for Novell into enterprises that may have lost interest in the former NetWare giant. CIOs that are interested in Linux will consider SUSE Linux Enterprise Server and then, hopefully, give the Novell sales executive time to also explain how the company can help with identity management, workgroup collaboration, and other areas served by Novell's product line.
Novell isn't just a Linux company, then, and most of the software it sells is proprietary, calling into question whether it's even accurate to call it an open-source company.
Regardless of the nomenclature, the Fortefi and ActivIdentity deals give Novell more value to sell CIOs. It's a strategy that seems to be paying off.
Follow me on Twitter at mjasay.
(Credit:
Microsoft)
Microsoft, long the bastion of proprietary thought, is increasingly adding open-source DNA to the fold. And it's adding to its roster of open-source veterans: Dick Hardt, founder and CEO of Sxip Identity and ActiveState, announced on his blog earlier this week that he will be joining Microsoft:
I will have the title Partner Architect and will be working on consumer, enterprise and government identity problems. My open source, open web and digital community experience will continue to guide my thinking. For me, this is an opportunity to work on the identity problems I have been toiling over for the last six years, but now with massive resources.
Hardt insists that this isn't a sell-out move (He likely doesn't need the money, having sold ActiveState to Sophos a few years back), arguing that he "was recruited to Microsoft because (he is) an independent thinker." He's probably right. Microsoft has been seeking to bring more contrarian outside counsel into the company in the past year or two. The fact that Hardt won't "fit right in" is probably a big selling point to his hiring manager.
As noted above, Hardt won't be alone. Microsoft now employs Bill Hilf, former Linux technical strategist for IBM; Sam Ramji, a former executive at Ofoto which was a heavy user of open source; Bob Duffner, another IBMer who worked with its open-source Gluecode acquisition; Rob Conery, founder of MPL-licensed SubSonic; Tom Hanrahan, former technical lead at the Linux Foundation; Daniel Robbins, former chief architect of Gentoo Linux; and more.
It's a clear trend, though clearly these hires constitute a tiny minority of total Microsoft employees. Even so, "a little leaven leavens the whole lump," to quote Paul's words to the Galatians. Here's hoping that Hardt and the others will continue to make headway within Microsoft on open-source issues.
News on Hardt first found via Mary Jo Foley at ZDNet.
Life may have just become a wee bit harder for Novell. Novell has been an open-source competitor for years in the Linux market, but it's less clear how Novell will react to open-source competitors to its proprietary products.
In the Linux server market, Novell knows how to fight fire with fire, with IDC suggesting that Novell's SUSE has been making market-share gains at Red Hat's expense. Red Hat still dominates the market with more than 60 percent of global market share, but Novell has an increasingly viable response to Red Hat's dominance.
It's less clear, however, how Novell will compete with open-source product in a market where its own product is proprietary. Recently, an open-source identity management solution called Zivios launched to go head-to-head with Novell's proprietary identify management solution.
Identity management is an area of strength for Novell, but Zivios wants to cut into its market, as ZDNet describes:
"It is akin to Novell Zenworks, Novel Zenworks Linux Management, Novell Zenworks Patch Management combined," said Rehan Zafar, COO at Zivios. "However, Novell Zenworks suite of products is designed to work in a Novell eDirectory environment. Zivios uses completely open source industry standard and popular technologies. Zivios fits the same space as Microsoft's Active directory does in the windows arena, with a more ambitious road map."
Novell has dabbled in open sourcing some elements of identity management in the past, but has mainly sought to hold onto its identity management revenue stream. If Zivios has its way, that's about to change. Even so, it has a long way to go. Novell isn't losing sleep about Zivios...yet.
Last week I spent some time talking with Tom Kemp, CEO of Centrify. Centrify is not open source but, depending on how you look at it, either solidifies or dilutes Microsoft's hold on its customers. In Centrify's case, it extends Active Directory to platforms other than Microsoft, meaning that it:
...centrally secures...heterogeneous systems, web applications, databases and storage systems using Microsoft Active Directory. Centrify DirectControl secures...non-Microsoft platforms using the same authentication, authorization and Group Policy services deployed for your Windows environment.
In other words, it lets customers choose to leverage their Microsoft technology without being forced completely into the Microsoft ecosystem. This is a good thing. Choice is good.
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