Novell: Sleeping With the Enemy?

 
 
By Brian P. Watson  |  Posted 2007-05-14
 
 
 

In November 2006, Waltham, MAss.- based Novell announced an agreement with Microsoft to collaborate on making interoperable Novell's open-source SUSE Linux and Microsoft's proprietary Windows platform.

The deal put aside decades of feuding that once landed them in court, with Microsoft paying Novell $536 million to settle antitrust claims related to Novell's NetWare operating system, which competes with Windows.

Open-source enthusiasts gawked: How could Novell purveyors of SUSE, which it acquired in January 2004 jump into bed with Microsoft?

Novell says the partnership happened, simply, because customers asked for it. "Every major enterprise with Linux has Windows in its data center," says Roger Levy, Novell's vice president for open platform solutions. "Those companies saw these two worlds moving further and further apart, not closer together, which is what customers want."

And he says it meshes with Novell's outlook and how the firm sets itself apart from Red Hat, its primary competitor in the open-source space. Besides SUSE with market share of 29%, according to Evans Data Corp. Novell offers enterprise software tools like Identity Manager, which automates user provisioning and password management, and ZENworks, a remote manager for desktops and software. While Red Hat sees itself as an open-source provider, Novell, Levy says, "is an enterprise infrastructure software company."

Novell's focus on the enterprise helped it win British broadcaster ITV as a customer. When a February 2004 merger of two networks created ITV, the new company had to merge more than 50 environments using different flavors of Unix, according to Nick Leake, director of operations and infrastructure.

Leake's Unix administrator thought he could move them to a Linux platform and save on support costs. When he tried it out on two x86 servers, he found that two two-processor Linux servers replaced two four-processor Sun servers—with a 30% performance improvement.

Back then, Leake says, Novell was guaranteeing patches for quirks in its Linux offerings, and its certification and training program was more thorough than Red Hat's. "We felt their ethos and their strategic direction were aligned to our corporate interest," Leake says.

Novell's range of product offerings helped win over Alex Inman, technology director at the Whitfield School, a private junior-high and high school in St. Louis.

In March 2005, Whitfield bought an enterprise management license from Novell that included nine licenses for SUSE Enterprise Server and access to ZENworks, which helps the school perform software updates and upgrades. The school maintains that access today for approximately $1,100 per year, according to Inman.

But the future impact of the Microsoft deal is still uncertain. Will Windows users interested in Linux flock to Novell? Will Red Hat see customer defections? The consensus of customers and industry analysts is that it's too soon to say.

Take, for one, Guru Vasudeva, chief architect with Nationwide, the Columbus, Ohio, insurance conglomerate. Nationwide currently uses SUSE to run its Web site, Nationwide.com, as well as a portal for insurance agencies and some internal applications.

Vasudeva says that while the deal looks "interesting," he's not convinced it will have an impact on Nationwide because the company isn't running much Windows. And as for the deal being a major threat to Red Hat's standing, Vasudeva isn't so sure.

"I doubt that's going to happen," he says. "For a long time, I think they'll be pretty good competitors. And I think that's healthy for the market."

At A Glance

NOVELL
404 WYMAN STREET
WALTHAM, MA 02451
(801) 861-1329
WWW.NOVELL.COM

TICKER: NOVL (NASDAQ)
EMPLOYEES: 5,300
RONALD W. HOVSEPIAN President & CEO
JEFFREY JAFFE CTO
PRODUCTS Novell SUSE Linux Enterprise provides virtualization capabilities along with its AppArmor security tools.

FINANCIALS

2007FYTD* 2006FY 2005FY
Revenue $229.58M $967.28M $1.20B
Net income ($19.91M) $185.80M $376.72M
R&D spending $46.43M $32.07M $200.63M
*Represents first three months ended January 31, 2007. Fiscal year ends October 31.