Microsoft pays US$400m in Novell open source deal

Software giant signs five-year marketing agreement

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By  Published  November 17, 2006

Microsoft will spend over US$400million supporting Linux as part of the deal with Novell that the two companies announced earlier this month.

The five-year partnership involves a series of business, marketing and intellectual property (IP) agreements aimed at promoting interoperability between Windows and Novell’s SuSe Linux platforms.

In a filing to the US Securities and Exchange Commission (SEC) on November 7, Novell revealed Microsoft would make two upfront payments totalling US$348million, as well as additional investment of US$94million over the life of the deal.

“The financial commitments Microsoft is making as part of this agreement are significant,” commented Ron Hovsepian, president and CEO of Novell in a statement.

Microsoft will pay its open source competitor US$240million upfront to allow the software giant to sell subscription for upgrades, updates and technical support from Novell.

Under the patent cooperation agreement — which states that each vendor will not assert patent rights against the other’s customers in relation to products covered under the scope of the deal — Microsoft will also make an upfront payment of US$108million, while Novell will make ongoing payments of at least US$40million to Microsoft over the next five years.

The software giant will dedicate US$60million over the life of the deal to marketing Linux and Windows virtualised solutions and has also committed to spend US$34million over the same period for a dedicated Microsoft sales force to market the firms’ combined offerings.

Novell revealed the deal also stipulates that for three years Microsoft will not enter into an agreement with another Linux distributor to encourage the adoption of Linux-Windows virtualised solutions through a Linux subscription certificate programme.

Both vendors have defended the agreement following accusations that it might be in breach of the General Public License (GPL).

Created by the Free Software Foundation, the GPL grants users the right to copy, modify and redistribute programs and source code from developers that have chosen to license their work under the GPL.

“In the context of negotiating this agreement with Microsoft, we very much had as a motivating factor continuing compliance with the GPL,” stated Joseph LaSala Jr, Novell general counsel, according to Cnet news service.

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