Microsoft puts money where mouth is with Novell

Stan Beer
Wednesday, 08 November 2006 08:03

IT Industry - Strategy

Anyone who thought Microsoft wasn't serious about getting into the Linux business with Novell should consider the US$442 million the Redmond software company has committed to the alliance, much of which will go directly into Novell's coffers. What's more, under the agreement Microsoft will be tied exclusively for at least three years to Novell for its Linux requirements.

The agreement between Microsoft and Novell, which runs until 2012, includes a US$240 million upfront payment to Novell for Suse Linux Enterprise subscriptions plus a further US$108 million for the use of Novell patents, totalling US$348 million.

In addition, Microsoft plans to spend a further US$94 million, including $34 million for a dedicated sales force, on a five year sales and market effort devoted to plugging the benefits of interoperability between Windows and Linux.

There will also be some money flowing back to Microsoft from the agreement. Novell will pay Microsoft more than US$40 million over five years from revenues obtained through selling products containing Microsoft patents.

The exclusivity of the deal leaves other major Linux distributions, most notably Red Hat, as well as the increasingly popular Ubuntu Linux, out in the cold.

A US$34 million sales force and US$60 million marketing effort constantly pushing forward the benefits of using Windows and Suse Linux to enterprise users will present a tough battle for Red Hat. Making the battle even tougher, is Oracle's push into the Red Hat support space, which will put pressure on Red Hat's margins.