SEC filings reveal Microsoft and Novell payments for Linux deal

 

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By Matt Whipp

Posted on 8 Nov 2006 at 17:31

Documents filed with the US Securities and Exchange Commission reveal how Microsoft will buy support licences for Novell's SUSE Linux for subsequent distribution.

The deal, announced last week, sees Microsoft stumping up 'an upfront payment to Novell of $240 million for SLES (SUSE Linux Enterprise Server) subscription "certificates," which Microsoft may use, resell or otherwise distribute over the term of the agreement, allowing the certificate holder to redeem single or multi-year subscriptions for SLES support from Novell', according to the SEC filing - the closest Microsoft has ever come to selling Linux.

Microsoft will also commit to marketing 'Linux and Windows virtualization scenarios' to the tune of $12m and will spend a further $34m putting together a sales team to sell the combined Linux and Microsoft products.

For the patent covenant, by which each party agrees not to assert their respective patents against each other's customers, Microsoft will pay an upfront payment of $108m, while Novell will pay Microsoft no less than $40m over five years based on a cut of Novell's Open Platform and Open Enterprise Server revenues.

'The financial commitments Microsoft is making as part of this agreement are significant,' said Ron Hovsepian, president and CEO of Novell. 'This will help drive Linux more rapidly into the enterprise and government arenas, broadly expanding opportunities for Linux and open source. This is good for Novell, but it's also good for the community because it will make Linux and open source much more prevalent and drive demand for Linux-based solutions.'

The deal precludes Microsoft from entering into similar negotiations with Novell's rival Linux vendors for three years. 'It will not enter into an agreement with any other Linux distributor to encourage adoption of non-Novell Linux/Windows Server virtualization through a program substantially similar to the SLES subscription "certificate" distribution program,' the filing reads.

This is at odds with a recent eWeek report which cites Microsoft's Steve Ballmer as saying that competing Linux vendors are 'welcome' to offer their customers a similar deal.

Red Hat for one immediately stepped up to the mark on last week's news, sliding into place an indemnity assurance of its own for its customers on the patent threat.

However, there do appear to be chinks in the Novell and Microsoft patent agreement which assures end users of freedom from patent assertions but 'with certain exceptions'. These exceptions are not detailed.

Novell is clear that the patent covenant does not infer that its products infringe Microsoft patents. Nor is it a licence deal. Novell will not develop its open-source software using Microsoft patented technology, and its support for projects such as Mono, the open-source implementation of Microsoft's .Net framework, will continue unchanged.

Novell has its hands tied in any case over the patent issue. There is no way it could license Microsoft patents within the software it produces under the GNU General Public Licence without breaking the terms of that licence, which stipulates that distributors must be able to afford downstream users the same terms. Novell's GPL software includes its flagship SUSE Linux operating system.

The products that do arise out of the Technical Collaboration Agreement are described as 'technologies to optimize SLES and Windows running as guests on each other's operating systems', 'management tools' for controlling and administering each other's virtual machines from a single console, and translators to 'improve interoperability between Office Open XML and OpenOffice formats'.