Novell acquires SuSE Linux for cash

Novell has expanded its open source offering through the acquisition of SuSE Linux for US$210million cash. As a result of the deal, Novell is expanding its Middle East services to include training on the SuSE platform. It is looking to appoint a local channel partner.

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By  Patrick Phelvin Published  November 23, 2003

Novell buys open source services company.|~||~||~|Novell has expanded its open source offering through the acquisition of SuSE Linux for US$210million cash. As a result of the deal, Novell is expanding its Middle East services to include training on the SuSE platform. It is looking to appoint a local channel partner.

Although the takeover will not be finalised until the early next year, Novell becomes a SuSE distributor with immediate effect. Judging from demand for the first 60 places on the Dubai-based SuSE training programme, which sold out in ten days, demand for the open source services in the region is high.

The acquisition of SuSE adds to Novell’s increased investment in the open source platform. For instance, in August the company purchased Ximian, best known for its Linux desktop solutions. However, despite this current Linux focus, Novell says it remains dedicated to cross-platform solutions and is now in a position to tailor its product range to fit whatever its clients demand.

“We already had a complete suite of Novell services that delivered integration to any Microsoft desktop. And, by using a Linux back end flavoured by SuSE, users can have the connectivity to the Microsoft products they already have installed and use Linux,” says John Bell, Novell’s Middle East managing director.

“It [the SuSE acquisition] is clearly a commitment to the open source platform, but even further, it is a commitment to all platforms. We are trying to get across the point that this is not about trying to get people to change from where they are to where they want to go, it’s about being able to integrate it and stick it all together,” adds Bell.

In addition to acquiring SuSE, Novell has also strengthened its links with IBM, which has been touting its support of Linux and all things open source for some time. The latest bond comes in the form of US$5 million in convertible preferred Novell stock, which Big Blue has bought.

The companies are also negotiating extensions to the current commercial agreements between IBM and SuSE Linux on IBM’s eServer products. These developments have fuelled speculation that IBM will mount a takeover bid for Novell in the coming weeks.
“IBM is backing both [Red Hat and SuSE] horses and US$50 million is a pretty significant investment. But from a regional Linux point of view, how are users going to get support locally? There is no Red Hat Middle East but there is a Novell Middle East,” Bell adds.

The analyst community believes the SuSE acquisition makes good sense for Novell, adding credibility to its increased Linux offering.
“Overall, the move will certainly strengthen Novell’s hand in the Linux marketplace and will bring more experienced Linux developers and service professionals to the company to supplement the staff it acquired with the Ximian takeover,” says Tony Lock, chief analayst with Bloor Research. “There is little doubt that Novell will now be very well positioned to promote Linux and take an even larger role in the evolution of the software base,” he adds.

The Novell acquisition also represents a further blow for Microsoft, which has declared its intent to mount an attack on the enterprise market space in which Novell operates. But the Redmond giant says the acquisition, coupled with an announcement that Red Hat will start charging for some versions of Linux, is further evidence of the commercialisation of the open source platform. This in turn, will allow Microsoft to compete on a like-for-like basis, rather than on price alone.

“The more Linux becomes commercial, with Red Hat reducing their free versions and Novell acquiring SuSE, the more we will see less of this emotion in the industry,” says Martin Taylor, Microsoft’s general manager of platform strategy.
“People will realise it is a commercial product. It is like Unix, it is like Oracle and it is like IBM WebSphere. Customers will make decisions based on facts and figures like return on investment (ROI),” he adds.
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