If VMware buys Novell, what happens to the Microsoft deal?

Sam Varghese
Tuesday, 21 September 2010 11:49

Opinion and Analysis

Over the past few days, there has been speculation that Novell's GNU/Linux business will soon be bought by VMware, the company that is partially owned by EMC Corporation and makes virtualisation products.

These reports also claim that the rest of Novell will bought by a private equity-backed software company, Attachmate Corporation.

The sales may or may not eventuate. Novell is apparently looking for a hike in price above that which was offered in March by Elliott Associates - $US5.75 a share.

Some reports say that Novell is still deciding on how to partition its staff and IP for the possible sales.

How would the sale to VMware, which is a big rival of Microsoft, go down in Redmond, especially given that Novell and Microsoft still have a deal on the table which runs till the end of 2011?

It was only last month that VMware previewed a new cloud-based service called Project Horizon which it said would allow the delivery of applications to any device and lessen the importance of the Microsoft's Windows operating system.

According to  details which were made public in the original deal which they signed in November 2006, Microsoft was to pay Novell about $US348 million over five years, with $US240 million being for SUSE Linux Enterprise Server "certificates" that Microsoft could resell, distribute or use.

Microsoft increased this by $US100 million in 2008, when it was announced that SUSE Linux Enterprise Server had been customised to perform on Microsoft's Hyper-V virtualisation offering.

Under a patent deal, Novell was to get $US108 million from Microsoft for use of Novell's patents. Novell was to pay out about $US40 million annually for five years to Microsoft. In return, Microsoft agreed not to raise patent claims against Novell's end-user Linux customers.