UPDATED: SuSE goes to Novell for $210mn

By Matt Whipp

Posted on 4 Nov 2003 at 14:15

Novell has acquired Linux vendor SuSE for $210mn in cash, helped by a $50mn hand from IBM.

The deal, still subject to regulatory approval, will make Novell the only $1bn software company with its own Linux distro and mean it is also the world's largest supplier of 'desktop-to-server' Linux solutions.

In a conference call this afternoon Jack Messman, CEO at Novell, said: 'I can't tell you how pleased we are... The deal makes sense from every angle.' He said that Novell now had 'a full Linux stack,' of products, services and support. 'We can now become the number one Linux company,' he said.

The other good fit is geographically: SuSE stands to gain much ground in the US, where it has traditionally been overshadowed by Red Hat, and Novell will benefit from SuSE's penetration of the European market.

IBM also said it would take $50mn in shares convertible to Novell common stock, which Messman reckoned to be 'probably in the 2 per cent range' and the companies are negotitating an extension to support IBM's eServer product range, which uses the SuSE platform.

Messman said that the acquisition process had taken nine months and that SuSE would add $35mn in revenues. He expected SuSE to at least follow the 30 per cent growth rate of the Linux market. he said the acquisition and IBM's investment would have a neutral effect on the diluted value of Novell shares for fiscal 2004, but be positive in the long term.

SuSE's CEO Richard Seibt described the deal: 'We have decided to team up with Novell,' he said, 'So our customers get the best out of the merger.' He added that: 'We had alternatives, but chose Novell.' However, he did not disclose what other offers were on the table.

While Novell's products are certified for both Red Hat and SuSE, SuSE will now be the 'preferred' distribution. Indeed, when pushed, he said that Red Hat would only remain certified for Novell products 'for a period of time'. Indeed today's announcement that Red Hat is to discontinue some of its products he saw as an opportunity to gain market share.

Mesman also promised that the SuSE brand would be maintained, but with the caveat: 'We have no plans to change things in the near future'.

So Novell's strong presence in the US will give SuSE more than a fighting chance agaisnt Red Hat. Messman said that although the company's direct sales force would be brought to bear with SuSE, he expected the channel to really drive sales. 'The channel has been asking us to do this - to provide the product,' he said.

As for Seibt's position within Novell, Messman said he hoped he would stay and described his role as to 'oversee the integration of SuSE into Novell'.

Open-Source commitments

Messman said that Novell was committed to Linux and Open Source and that both it and SuSE would continue contributing to the community. He added that the response of the Open Source community to the news has been 'impressive'.

As for UnitedLinux - an initiative designed to offer a single enterprise-class Linux from four geographically differentiated vendors, one of which is SuSE - SuSE's commitments to the platform will continue.

Seibt said: 'We remain very good friends with TurboLinux and Connectiva'. It is, however, difficult to see that there is no overlap now for Novell as it already has a global presence. The platform is not made any more attractive with the litigious SCO having been one of the other four pillars of UnitedLinux.

SCO withdrew support for UnitedLinux in June, and although was not mentioned at all in connection with UnitedLinux, Messman took the opportunity to again to 'call on SCO to come forward on its claims.'