Novell and Microsoft Collaborate III

November 8, 2006 1 Comment

Some additional information has been released since my last post on this topic, in the form of an 8-K filing from Novell. From the filing:
On November 2, 2006, Novell, Inc. (“Novell”) and Microsoft Corporation (“Microsoft”) announced that they had entered into a Business Collaboration Agreement, a Technical Collaboration Agreement, and a Patent Cooperation Agreement. This set of broad business and technical collaboration agreements is designed to build, market and support a series of new solutions to make Novell and Microsoft products work better together for customers.
Under the Business Collaboration Agreement, which expires January 1, 2012, Novell and Microsoft will market a combined offering. The combined offering will consist of SUSE Linux Enterprise Server (“SLES”) and a subscription for SLES support along with Microsoft Windows Server, Microsoft Virtual Server and Microsoft Viridian that will be offered to customers desiring to deploy Linux and Windows in a virtualized setting. Microsoft will make an upfront payment to Novell of $240 million for SLES subscription “certificates,” which Microsoft may use, resell or otherwise distribute over the term of the agreement, allowing the certificate holder to redeem single or multi-year subscriptions for SLES support from Novell (entitling the certificate holder to upgrades, updates and technical support). Microsoft will spend $12 million annually for marketing Linux and Windows virtualization scenarios and will also spend $34 million over the term of the agreement for a Microsoft sales force devoted primarily to marketing the combined offering. Microsoft agreed that for three years it will not enter into an agreement with any other Linux distributor to encourage adoption of non-Novell Linux/Windows Server virtualization through a program substantially similar to the SLES subscription “certificate” distribution program.
The Technical Collaboration Agreement, which also runs until January 1, 2012, focuses on three areas:
* Novell and Microsoft will develop technologies to optimize SLES and Windows running as guests on each other's operating systems.
* Novell and Microsoft will work together and with independent software vendors to develop management tools for managing heterogeneous virtualization environments, which will enable each party's management tools to command, control and configure the other party's operating system in a virtual machine environment.
* Novell and Microsoft will work together on ways to make translators available to improve interoperability between Office Open XML and OpenOffice formats.
Under the Patent Cooperation Agreement, Microsoft commits to a covenant not to assert its patents against Novell's end-user customers for their use of Novell products and services for which Novell receives revenue directly or indirectly from such customers, with certain exceptions, while Novell commits to a covenant not to assert its patents against Microsoft's end-user customers for their use of Microsoft products and services for which Microsoft receives revenue directly or indirectly from such customers, with certain exceptions. Both Microsoft and Novell have payment obligations under the Patent Cooperation Agreement. Microsoft will make an up-front net payment to Novell of $108 million, and Novell will make ongoing payments of at least $40 million over five years to Microsoft based on percentages of Novell's Open Platform Solutions and Open Enterprise Server revenues.
As you can see, quite a bit of money is flowing in from Microsoft to Novell. As this article points out, that money may be coming just in the nick of time:
This news comes just one day following rumors, still unconfirmed by Novell, that the Linux company had laid off some employees. In addition, Novell announced on Nov. 6, for the third time, that it was extending its deadline to get the holders of its Convertible Senior Debentures to not demand immediate payment of the total $600-million owed in 2024.
Wells Fargo Bank N.A. demanded the early payment in full when it claimed that Novell had defaulted on its payment agreement by not turning in its July 31 quarterly earnings report to the SEC in a timely fashion.
This, in turn, had been caused because Novell, like many other technology companies, has delayed its financial reports while it audits its past stock option practices.
It should also be noted that this does not appear to be a patent licensing agreement as some articles were calling it, but a revocable covenant not to sue. That's a big difference, but it's still unclear to me whether the agreement violates the GPL. I'd guess we'll hear more on that issue soon. In the end, on the Novell side this may have just been a move to keep the company going. It's harder to tell the motivation on the Microsoft side. It could be a way to incent Novell not to sue (which it looks like could have been a very real possibility on multiple fronts), it could be a play into a few new markets such as virtualization for Microsoft, it could be an attempt to subvert the Linux community or a variety of other things. I don't think it will be clear for a little while what the motivation(s) are, but as you may have guessed I'll be keeping my eye on this one.
–jeremy
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Filed under Linux, Main Page, Microsoft, Novell, Open Source

Red Hat Response to Oracle and Microsoft/Novell Moves

November 5, 2006 Leave a comment

Here's a response from Red Hat on the recent upheaval in the Linux world. My take? Half really good points, half disingenuous and/or ridiculous. First, the good points.
Last time I looked, we were still in ring, and we are still standing. The big mistakes companies and employees make is to be focused on stock price in the short-term.
Think back to the Microsoft/Sun announcement from a couple years ago, and today, you haven't seen any of the promised technical collaboration from that partnership whatsoever.
Novell has fallen into the trap of allowing Microsoft to do exactly what it wants to do, which is to trumpet IP (intellectual property) solutions and promises.

He's completely right. These days, far too many people focus on short term stock price. Vision and long term planning is almost a thing of the past. In the end, I think this will be the undoing of many companies – Open Source or not. Second, the highly touted and much hyped Microsoft/Sun announcement from a couple years ago didn't really create anything substantial that I can think of. Whether the Novell/Microsoft deal will bear more fruit remains to be seen, but they both sure did draw a lot of media attention. The last sentence I think speaks for itself.
On to the bad:
Having said that, does Red Hat think either of them has taken the right approach, now that Microsoft and Novell have made 'Microvell'?
We still believe that we will be the dominant player in the Linux market, because by that time there won't be any other Linux players. We will have succeeded once again.
This is not about IP. This is about the freedom to meet customer needs and to create competition. That problem is, you can be either for freedom and collaboration, or you can take a different approach. These companies are trying to do both. I can at least respect Microsoft, because they don't pretend to be an open source company.
The first sentence is a bit disingenuous. This was a partnership (and a loose one at that), not anything close to a merger that would warrant a 'Microvell' moniker. Stating they will be the “only” Linux player is odd on multiple levels. First, they have always claimed that not being the only vendor was one of the big advantages for Linux. Second, in what world will every other Linux player disappear in the next 365 days? I'm not sure where he was going with this one, but this is the kind of hubris that gets companies in trouble. The last one is a nice backhanded jab, but he should have just come out and said what he meant – in his opinion Novell isn't an Open Source company, even thought they claim to be.
I remain interested in how this will play out, not only for Red Hat and Novell; but for Linux in general. As you may have guessed, I'll keep you updated.
–jeremy
Red Hat, RHAT, Novell, Microsoft, Linux, Open Source
Edit: There is now also a more marketing slanted official response on the Red Hat site.

Filed under Linux, Main Page, Microsoft, Novell, Open Source, Oracle, Red Hat

Novell and Microsoft Collaborate II

November 5, 2006 Leave a comment

The dust still hasn't settled, but this is a story everyone is keeping a close eye on. A few quick updates on my original posting. First, as you may have guessed, the general community reaction has been mostly negative. I'd guess that's a natural instinct response due to Microsoft's involvement in the deal. I'm waiting to get more information and read as much as I can before making my final decision. One thing I do know is that some of the media claiming this is the “death of Linux” are most certainly way off. Linux isn't something you can kill. That being said, it does seem like Microsoft may have some nefarious plans with this one. From this article:
The distributors of other versions of Linux cannot assure their customers that Microsoft won't sue for patent infringement. “If a customer says, 'Look, do we have liability for the use of your patented work?' Essentially, If you're using non-SUSE Linux, then I'd say the answer is yes,” Ballmer said.
“I suspect that [customers] will take that issue up with their distributor,” Ballmer said. Or if customers are considering doing a direct download of a non-SUSE Linux version, “they'll think twice about that,” he said.
However, Ballmer did not say whether Microsoft had any plans to file patent infringement suits against other Linux distributors.
That, to me, seems like a thinly veiled threat of litigation, almost like SCO tried to pull. It could be that Microsoft is using this deal to try to get other major distros aboard, so they can get a small piece of every commercial Linux license sold. It could also be a plan to launch litigation against Red Hat or Oracle. Since they now have an “industry partner”, they'd be much less likely to be blocked by a monopoly proceeding. Along the lines of “no no, we don't dislike Linux or competition – just look at our pals Novell. We just think these other guys are infringing on our IP!”. Of course, it could be simpler than that. Also from the article:
Ballmer said developing greater interoperability between Windows and SUSE Linux will actually increase the intensity of competition because it will make it easier for Microsoft to sell its technology into enterprise data centers with a mix of Linux and Windows server technology.
Microsoft has joined into this Windows-Linux collaboration projects because “customers want it” and because “if we're interoperable we are going to take more business from Linux,” he said.
That seems like a more honest statement. They are not getting the acceptance in the enterprise data center that they hoped for, so they are using this deal to get their foot in the door. From what I've seen so far, this deal probably isn't generally good for Linux. I'm still up in the air as to whether it's bad for Linux. As to whether it's good for Novell – that remains to be seen. Ask the long line of now-crushed previous Microsoft business partners what they think.
–jeremy
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Filed under Linux, Main Page, Microsoft, Novell, Open Source, Red Hat

Responses from around the Linux Community

November 4, 2006 1 Comment

Here are some responses from around the Linux community on the recent Novell deal with Microsoft.
Eben Moglen thinks the deal may actually violate the GPL:
It's possible that Thursday's deal between Microsoft and Novell could conflict with a provision in the General Public License (GPL), according to Eben Moglen, the attorney for the Free Software Foundation that created and oversees the Linux license.
“If you make an agreement which requires you to pay a royalty to anybody for the right to distribute GPL software, you may not distribute it under the GPL,” Moglen told CNET News.com Thursday. Section 7 of the GPL “requires that you have, and pass along to everybody, the right to distribute software freely and without additional permission.”
Whether the partnership precludes Novell from distributing Linux depends on precise terms of the agreement that Moglen hasn't seen, he cautioned. But he found other aspects of the deal troubling, too.
Microsoft's pledge not to sue unpaid programmers is “no comfort at all,” given the quantity of paid open-source programmers.
If the deal will have a material impact on Novell earnings (and I'd guess it does), there will have to be a filing on this in the coming weeks, so Eben and others may get the information they need to make an informed decision on this potential GPL violation. If the deal does indeed violate the GPL, I'm not sure how Novell will proceed.
Bruce Perens seems to have similar concerns:
One of the questions yet to be settled is whether Novell will violate the GPL, the license of the Linux kernel and other important software, by offering patent protection that is exclusive to Novell customers. The press release pretty much stated that. On that topic, the preamble of the GPL says it best:
We wish to avoid the danger that redistributors of a free program will individually obtain patent licenses, in effect making the program proprietary. To prevent this, we have made it clear that any patent must be licensed for everyone's free use or not licensed at all.
Novell has clearly accepted that license. But it appears that they are now out to make patent protection a business differentiator.
also from Perens:
“This is actually really bad news,” said Bruce Perens, a well-known Linux advocate. “It sets up Microsoft to assert its patents against all commercial open-source users. The deal is going to be, ‘You have to buy Microsoft-licensed Linux distribution from Novell or there is an implicit threat that Microsoft will assert their patents against you.”
It should be noted that Microsoft has opened this offer up to other Linux distributors, but to me that's of little solace. I'd not expect to see Red Hat sign a similar deal with Microsoft in the near future. Other community members seem less worried. From Linus:
I prefer to be an optimist, and will happily take the option that not everybody needs to be enemies,” said Linus Torvalds, the creator of the Linux kernel, in an e-mail message. “Let’s see how it all pans out.”
Greg KH, a Novell employee, thinks the media hype is much ado about nothing:
I don't really think this is a big deal at all for the Linux kernel community and code. We are no worse off than we were last week before this announcement, and we actually might be a bit better off now, depending on the actual wording of the agreement (which again, I have not read.)
I've still not formed a final opinion and am reading everything I can get my hands on. I couldn't, however, agree more with John Terpstra:
Instead of judging the book by its cover, we should sit back to weigh the facts, discuss this announcement in rational debate and then formulate a well-thought-out and united response.
That is spot on! The one bit of information that I did miss in my previous post is this bit:
Microsoft will make a one-time upfront payment to Novell for the cross licensing deal. Novell will pay a fee for each SuSE support contract that it sells.
Whoa! A fee for each SuSE support contract that it sells?!? That seems like a really bad precedent and certainly something that could lay the groundwork for future Microsoft litigation. Novell has now inextricably tied itself to Microsoft. I wonder if 5 years from now they'll look back on this deal fondly. Writing a monthly check to Microsoft isn't something I'd want to do if I were a Linux company.
–jeremy
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Filed under Linux, Main Page, Microsoft, Novell, Open Source, Oracle, Red Hat

Novell and Microsoft Collaborate

November 2, 2006 1 Comment

As if the recent Oracle Red Hat talk wasn't interesting enough, Novell today announced that they will be collaborating with Microsoft. While some people seem to think this may have been a reaction to the Oracle announcement, I can't see any way this was thrown together that fast. I'd guess talks on this were ongoing even as the Oracle rumors were starting. The open letter is missing financial details as you may have guessed, but it does include some brief information on the 3 deals that were part of this arrangement. From the FAQ:
Q. What are you announcing?
Novell and Microsoft are announcing an historic bridging of the divide between open source and proprietary software. They have signed three related agreements which, taken together, will greatly enhance interoperability between Linux and Windows and give customers greater flexibility in their IT environments. Under a technical cooperation agreement, Novell and Microsoft will work together in three primary areas to deliver new solutions to customers: virtualization, web services management and document format compatibility. Under a patent cooperation agreement, Microsoft and Novell provide patent coverage for each others customers, giving customers peace of mind regarding patent issues. Finally, under a business cooperation agreement, Novell and Microsoft are committing to dedicate marketing and sales resources to promote joint solutions.
The agreement would seem to be a tacit acknowledgment by Microsoft that Linux is the real deal, has changed the rules of the game and is here to stay. As to what was actually gained by both sides. For Novell they are getting some increased exposure, which they desperately need right now. They are getting a resale deal for SLES (Microsoft will distribute as part of a resale arrangement approximately 70,000 coupons for SUSE Linux Enterprise Server maintenance and support per year) along with the recommendation of SLES by Microsoft if you are interested in running Linux in a Windows environment (For customers who have a significant Windows investment and want to add Linux to their IT infrastructure, Microsoft will recommend SUSE Linux Enterprise for Windows-Linux solutions). Additionally, their customers get patent protection for Samba, Mono and OpenOffice. Microsoft gets increased exposure for .NET through Mono, which should serve to help them compete better with Java in the enterprise space, and broader acceptance of the OpenXML document format, which could help them keep some of the Government contracts they may lose if OpenXML isn't broadly accepted. The companies will be working together on Virtualization, which looks to be a huge market going forward and have also built a “Collaboration Framework” which will allow them to work together more easily moving forward.
Shares of NOVL spiked almost 15% on the news, but are down about 1% in after hours trading. RHAT dropped about 2% on the news, with an additional 3% dip in after hours. The news had almost zero impact on MSFT. It should be interesting to see how both Red Hat and Sun react to this in the coming days. It will also be interesting to see how the Open Source community reacts to the news over the next 48 hours. It's a group that can be fickle at times and certainly one that isn't overly trusting of Microsoft. It's something I'll keep you updated on.
–jeremy
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Filed under Linux, Main Page, Microsoft, Novell, Open Source, Oracle, Red Hat

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