Thursday, November 02, 2006


I know...when you heard word about a 2pm "Industry" announcement by Ballmer, you secretly hoped Steve was stepping down, MSFT was going to finally buy YHOO or SAP, they were splitting into three separate companies with individual tracking stocks, or maybe just going to formally announce Vista ship dates - right? Nope, on all counts.

In case you missed it, MSFT announced a joint relationship with Novell. Honest! Here's some coverage:

Listening to the webcast, I'm not 100% sure that I understand this deal. Apparently, Novell initiated the discussions based on issues they were seeing within their customer base. Meanwhile, MSFT was seeing similar issues, so the timing was fortuitous. Six months later, we get today's announcement. Now, I understand the customer need for better interop between Linux and Windows. And, as a stretch, can understand the need for cross-company patent litigation protection agreements in support of that. But why is MSFT supposedly buying 70,000 coupons from NOVL for a one-year SUSE subscription, which they will then distribute to customers? And was that total, or did I hear the NOVL guy say it was annually? Does that explain why the flow of money is apparently heavily skewed from MSFT to NOVL, or is there something else?

One attendee, clearly also having a hard time following the announcement and sensing a conspiracy instead, asked whether the current WordPerfect litigation issues between NOVL and MSFT just happened <wink> to get resolved as part of this? Answer: no. In the meantime, Infoworld figures they know the reasons:

I love those "neutral" perspectives that give three choices, all of them unpleasant. I'm not sure we could call Linux's current miniscule desktop marketshare a "bleeding of Windows to Linux", and therefore write this off as MSFT's effort to staunch it. But of the three, that's the most plausible. Their "Desktop OEMs pushed it" argument, strikes me as strained, and their "Apple fear" one is just laughable.

Still, why this deal, why now, why Ballmer in person to announce it, and why is MSFT distributing SUSE coupons as part of it and paying NOVL cash? Certainly, it seems to have a lot to do with server consolidation and virtualization, and the impact that's expected to have on the technology landscape (hence MSFT's major efforts over the past year or more to try and catch up to EMC's leading VMware). But whether this is a sign of weakness on MSFT's part vis a vis Linux, strength (that on a level playing field customers will choose to host SUSE under Windows vs the reverse), some Machiavellian response to ORCL's recent decision to offer a relabeled Rhat Linux, or simply the customer-focused necessity that NOVL/MSFT suggest it is, is TBD.

Between the recent ORCL/Rhat news, and now this MSFT/NOVL SUSE news, the technology landscape just got a lot more confused. Meanwhile, Linux supporters are currently having a field day in the media with this development, painting it as capitulation on MSFT's part to the inevitability of an Open Source world. For its part, the market (both in the session and AH) gave this a collective yawn for MSFT, although NOVL was up big time as word somehow leaked out ahead of the announcement...

Update: Microsoft Monitor's Joe Wilcox shares his thoughts on the deal:

Update #2: Forbes wades in with their particularly harsh take:


  • what you and others have not digested yet are the ip implications. novell apparently feels it needs ms patents to shop its oss products. and msft apparently thinks its has patents in novell's oss products... hmmm. sounds like oss products may be infringing on some companies (at least msft's) IP.... Remember osrm's study? kernal may potentially infringe 283 or was it 288 patents of several parties including msft. well msft did not sue like IBM, they enabled solutions and put customers first. what will others do? and how much will that cost oss products and companies?

    By Anonymous Anonymous, at 8:52 PM  

  • What can I say, but what you have already said. I watched this hit the wire today and my jaw dropped. My only thought was that "we are so lost". I mean seriously...I guess this pretty much throws our multi-year strategy for open source in the toilet. I can envision lots of people in building 18 running around trying to spin this in some positive marketing direction. The other strange thing is why Steve made the announcement. If this is a pure platform play, why not Kevin Johnson? There's got to be something more...but we'd never know and where was the internal exec memo with talking points? So much for transparency. There are days when I just hate us...HATE!!!!

    By Anonymous Anonymous, at 11:50 PM  

  • From the article:

    ...and their "Apple fear" one is just laughable.

    I wouldn't dismiss this so readily.With the transition to Intel, the Mac is the most versatile platform on the planet. That has massive appeal in a number of circles.

    I'm no Apple "fanboy" as the youngster's say. I've got history with several platforms dating back to the early '80s.

    By Anonymous Anonymous, at 7:59 AM  

  • Forbes is (for once) correct. This is divide and conquer. Support the #2, encourage proprietary extensions to it as Oracle does the same, fragment the competition, sweep up.

    By Anonymous Anonymous, at 12:58 PM  

  • Say What?

    "painting it as capitulation on MSFT's part"

    I don't know who you're reading but all of the takes I've read paint this as another, albeit better financed, SCO-like attempt to neuter Linux.

    By Anonymous Anonymous, at 2:46 PM  

  • "I don't know who you're reading..."

    A simple web search on the deal, will locate a dozen or more articles that paint the picture I alluded to.

    By Blogger MSFTextrememakeover, at 3:11 PM  

  • Once people digest the deal (and this will happen sooner rather than later because terms will be disclosed b/c of SEC reqts); they will realize that this was a smart move by both companies. Heteregenous environments are a fact of life and both companies are putting their mutual customers first to improve interop and make teir products more appealing. And IP issues in OSS are being dealt with in a responsible manner. Novell can provide IP piece of mind to customers; and MS is for the first time providing an ROI to its investors for its IP in OSS.

    By Anonymous Anonymous, at 11:25 AM  

  • Hmm... I guess you're just biding your time with filler topics since you can't really say "I told you so..."

    Stock's still at 28+ and holding... Your plan to boost the shorts right up to the earnings release didn't work. Tsk. tsk... and you tried sooo hard too...

    Feel free to filter, this was a message for you...

    By Anonymous Anonymous, at 7:29 PM  

  • "Feel free to filter, this was a message for you..."

    A couple of thoughts. First, if you don't like the topics, feel free to suggest others and/or give my site a pass. WRT the rest, you seem to be confused about my motivations. I'm not here to "boost the shorts". While I'm extremely critical of the current leadership and direction - duh - I'm long MSFT. Therefore, I'm happy that the stock didn't take a hit following the Q, as I had feared was possible. That said, many of the concerns that I raised heading into that event (impact from coupons, impact from failed tender, Vista RTM delay, etc) proved to be correct. Luckily, the market seems to have decided to focus on full-year guidance which, while lower as I had predicted, was only marginally so (they took down the top end of the range). It's not every day that you can surprise the analysts community (again), with a $1.5B quarterly revenue shortfall 2 days out, and live to tell the tale. I'd say we dodged a bullet and be thankful - not cocky.

    By Blogger MSFTextrememakeover, at 8:16 AM  

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