Novell to Buy SuSE Linux for $210 Million

From the company that turned away early Linux pioneers Bryan Sparks and Ransom Love, Novell Inc. is completing its reinvention by buying SuSE Linux for $210 million.

The transaction is subject to regulatory approval and the resolution of shareholder agreements. It all goes well; Novell expects the transaction to close by the end of its first fiscal quarter, in January 2004.

Novell's move follows on the heels of its acquisition of open-source developer Ximian Inc. in August. These two acquisitions will make Novell, according to Novell representatives, the first billion dollar Linux software company.

In November 4th 2003 press conference held in Germany, Novell spokesperson Bruce Lowry, said that the deal will be good for both companies and their customers. He declared that SuSE was "the missing piece (for Novell's recent embrace of Linux), the foundation itself, the platform, today we plugged that with SuSE we get one of the top two commercial Linuxes. Together, we can significantly accelerate Linux's enterprise acceptance."

Lowry went on to say that, it was a great strategic fit for Novell since SuSE has the technically best Linux distribution, great people, and were already number two in the marketplace. Together, Lowry declares, "We can soon become the number one Linux ompany." But most important of all, "Linux is the future of computing."

It's not just Linux though. Throughout the press conference, Lowry and Novell Vice Chairman Chris Stone, emphasized Novell's complete support for open source in general and the continued work of SuSE employees on open source projects in specific.

Richard Seibt, CEO of Nuremberg, Germany-based SuSE, declared it was "our goal and vision was to see SuSE running everywhere in the world, to become the de facto standard for Linux. To get to that goal, we've teamed with Novell with its twenty years of experience. Our customers will get great value from Novell's worldwide support and business partners that can support them locally."

Seibt assured SuSE's customers that "Novell's global reach, marketing expertise and reputation for security, reliability and global enterprise-level support are exactly what we've been seeking to take SuSE Linux to the next level."

In contrast to Linux vendor Red Hat's recent decision to focus exclusively on the enterprise space, Novell will deliver both desktop and server distributions of the open-source OS drawing on Ximian and SuSE's product lines.

Novell will also turn its worldwide technical support staff and resellers to supporting Linux. In particular, Stone pointed out that Novell's approximately 25,000 worldwide reseller channel partners will be great for Linux and that Linux will be great for them. He admitted though that while there is much crossover between SuSE and Novell resellers, few Novell resellers are currently trained in Linux. That said, Seibt pointed out that supporting Linux could be as big a moneymaker for resellers as the Year 2000 conversion was for them in 1999.

In addition, Novell is negotiating with IBM Corp. to continue SuSE's eServer commercial agreements. IBM and Novell will apparently continue to follow SuSE's path as a major IBM Linux partner; Novell also announced that IBM intends to make a $50 million investment in Novell convertible preferred stock as soon as Novell officially acquires SuSE.

Other companies are also praising this deal. Sam Greenblatt, SVP and Chief Architect of Computer Associates' Linux Technology Group said, ""CA feels this move is excellent for the industry. The excellent global support that Novell brings to the open source community will help continue market adoption of Linux from the desktop to the server." Stone predicts that with Novell's long history of working with original equipment manufacturers (OEM)s and independent software vendors (ISV)s, many such companies will now embrace Linux.

Analysts tend to think well of the acquisition. Gary Barnett, Research Director with Ovum says, ""This announcement is extremely important for Linux, and Linux adopters as it propels SuSE into the big league in terms of its ability to deliver product innovation and customer support. SuSE now represents a serious and credible threat to Red Hat for market leadership - and as a result users of both distributions are set to benefit"

Others aren't so sure. Bill Claybrook, the Aberdeen Group's Research Director for Linux and Open Source, says, "My feeling is that this is good for Novell and its Linux business." However, "If I were a company deciding between Red Hat and SuSE after Novell buys SuSE, I would be wondering what will happen to SuSE Linux longer term. I think that SuSE Linux will have a very difficult time, even with the acquisition, overcoming the brand recognition of Red Hat."

Dan Kusnetzky, IDC vice president for system software research, though, thinks that a Linux distribution was just what Novell needed. "Novell has a very strong services offerings based on a declining platform. They needed to focus on a growing market and Linux is their chance."

That said, "We (IDC) thinks this is a win for Novell if they can move at Internet speed and manage the corporate culture adjustments. With this move, Novell has put itself on Microsoft's front burner and they need to move quickly to integrate Linux with their offerings." As for SuSE, "SuSE needed capital. They were doing well for a Linux distribution but it still wasn't that much money. Now, SuSE will be another business line with a worldwide software and services company and this really expands SuSE's opportunities."

Jack Messman, chairman and CEO of Provo, Utah-based Novell, said in a statement, "The acquisition of SUSE LINUX will complete Novell's ability to offer enterprise-class Linux solutions to our customers from the desktop to the server. No other enterprise Linux vendor has the operating system experience and the worldwide technical support capabilities that Novell will be able to deliver. Novell is bringing our significant resources to bear to help customers adopt Linux with more confidence, giving them the freedom of choice Linux provides without the anxiety over whether an open-sourc