Time is ripe for Microsoft to buy Novell

Sam Varghese
Saturday, 25 April 2009 08:13

Business IT - Technology

This week was a historic one for Microsoft with the firm reporting its biggest drop in both quarterly profits and revenue in its 23-year history as a public entity.
Microsoft's third quarter, which ended on March 31, brought in $US13.65 billion as revenue, a drop of six percent from the corresponding period in 2008. The company's net profits fell to $US2.98 billion, down from $US4.39 billion in the third quarter of 2008.

The year does not appear to be smiling on the Redmond outfit - it also had to sack 5000 employees in January, the first huge layoffs in its history.

Hence it is appropriate for Microsoft to look for other sources of income at a time when the world economy is in deep trouble.

Given the way that Red Hat Linux is bucking the trend and improving profits, one needs to ask: why has the idea of buying Novell not occurred to Microsoft? This seems about the best time to make a bid.

For one thing, Novell would be at a bargain basement price right now, given its last set of results. For its first quarter (which ended on January 31), the company saw sales drop by seven percent to $US214.9 million, with software licensing sales drop by even more - 29.7 percent to $US28.3 million.

And if Microsoft had not increased its SUSE Linux coupon deal by another $US100 million and put in $US25 million for the quarter, Novell would have had no profit to show at all. All that it recorded was a drop of 36.5 percent in profits to $US10.7 million.

One must ask: instead of propping up profits for another company, why not do it for oneself? Why not buy this company and make it more profitable than it is?