Insightful analysis and commentary for the US and global equity investor
Contributors: Douglas McIntyre Jon C. Ogg

Previous Posts

Wednesday, November 08, 2006

Mr. Softy’s Big Pocketbook (MSFT)(NOVL)(RHAT)

Microsoft has not paid out this kind of money unless it is settling a patent claim or antitrust judgement. The company is investing $400 million in its partnership with Novell to get Windows and Linux to operate nicely together on PCs.

MSFT will be paying for coupons so that corporate customers can get annual licenses to the Suse Linux operating system. It is, in essence, paying for the distribution of the open source software that it has feared would take market share from Windows.

With Vista, Microsoft's new OS, about to launch, supporting rival Linux would seem a queer thing to do.

Maybe not. If Microsoft become the de facto largest reseller of Linux, it will have some measure of control over how fast the open source initiative can grow. Novell's annual sales are under $1.2 billion, and its rival in the Linux market, Redhat, has sales of well under $300 million.

Microsoft also got a promise from Novell that it would not sue Microsoft over Windows, presumably over any patent issues or monopoly practices.

That, by itself, could be worth $400 million.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

Powered by Blogger