One has to wonder what's going on in the world between Microsoft and Novell. They signed a deal in 2006 worth over $300 million so that Novell could provide licensing certificates and support to Microsoft for its SuSE Linux distribution. Novell, in turn, has to pay Microsoft $40 million over 5 years for indemnification for its customers.
Huh?
Stories like this one stem from the announcement of a couple of days ago when Novell invoiced Microsoft for a $100 million payment based on this agreement.
I still don't get the whole idea behind this deal. It sounds great for Novell who gets a lot of money to fund further development of SuSE and other branded products but what the heck is Microsoft getting out of this? Has Ballmer lost his ability to negotiate? Is Bill Gates ok with this deal? Still?
It makes one wonder if Microsoft is actually buying in to a Linux solution because they see the writing on the wall for their own beleaguered OS, much as Novell did a few years ago with NetWare, or if Novell is simply selling out.
Microsoft could be investing in Novell for a complete buyout at some point in the future after Novell developers create the ultimate OS for them, using Microsoft's money, of course. $300+ million buys you a lot of development.
How much would it take to buy Novell? $2 billion? $3 billion? More? Whatever the asking price, I think almost $350 million is a good down payment on it. What Microsoft would be getting for their money is years of development, a huge customer base of Linux users, and the future of Microsoft. By the time an actual buyout is announced, Novell and Microsoft will be so deep into each other's pockets that a merger of the two will only make good financial sense.
And, if you're wondering what happens to this deal at the end of the 5 years, stay tuned. My prediction is that in 2011, just before the 5 years is up; there will be an announcement. A big announcement. An announcement so big, in fact, that the SEC will have to have time to analyze it.
