As most readers will know by now, Novell has announced a deal to acquire
SUSE Linux. Many of the details can be found in the associated press release
; others came out
during the press conference and afterward.
SUSE was bought for $210 million in cash. The deal thus values SUSE at
less than one tenth the market capitalization of Red Hat ($2.4 billion
as of this writing, down somewhat after Novell's announcement). Since SUSE
has never been a public company, information on its finances has been hard
to come by; at the press conference, however, SUSE's revenues for this year
were estimated to be between $35 and $40 million. Red Hat's revenue
will be on the order of three times that figure. So SUSE truly is a
smaller company, deserving of a lower valuation. The magnitude of the
difference is striking, however.
The press conference was full of upbeat "forward looking statements" on how
this acquisition positions SUSE as a proper competitor for Red Hat.
Novell's large, global support and training operation was mentioned several
times; indeed, having a business on that scale behind the distribution
might just help nervous CIOs sleep better at night. Novell and SUSE also
have high hopes for Novell's large sales (and reseller) channel. Of
course, Caldera/SCO was also supposed to succeed based on its channel...
Novell also wastes no opportunity to point out that it now has "the whole
stack" of offerings, from the base operating system through its proprietary
SUSE currently has 399 employees. It appears that Novell plans, for now,
to keep the technical staff around; there may be some reductions in the
administrative area, however. Novell has stated that it is committed to
maintaining SUSE's presence in Nuremberg.
Novell's management has learned to say the right things with regard to the
open source community - though they accepted no questions from community
publications at the conference. Novell, says CEO Jack Messman, "expects to
learn a lot" from the SUSE engineers, and plans to continue to be a leader
in the development community.
After the conference, we asked about Novell's plans in a couple of areas.
Unlike Red Hat, Novell/SUSE does not plan to drop its retail distribution;
instead, it will fire up its sales channels and try to create a much larger
presence for all of SUSE's products, especially in the U.S. The situation
with desktops is a little less clear. SUSE has long been a supporter of
the KDE desktop, but Novell owns Ximian, which is rather firmly in the
GNOME camp. Novell, apparently, doesn't yet know how it will resolve that
difference; PR person Kevan Barney told us
"We'll be evaluating how to
proceed on the desktop front in the coming months."
The same press release announced that IBM is investing $50 million
into Novell. The two companies will be negotiating other deals in the
future for the continued support of SUSE Linux on IBM's platforms.
The long-term consequences of this deal could be large. Red Hat is no
longer the biggest Linux distributor; it will now be competing with an
established, large company with a huge installed base of customers. The
upper end of the Linux distribution market looks increasingly like a
duopoly controlled by two giants. Despite the wealth of distributions
available to Linux users, only a very few of those distributions will ever
develop the mass to be successful in the commercial arena.
It's also worth noting that, for the first time, one of the core Linux
distributions is owned by something other than a community-based company.
It is certainly possible for a large company like Novell to handle such a
resource properly and not ruin SUSE's relationship with the development
community that supports it. Novell does seem to be trying to do the right
thing in this regard. This acquisition might just work, and it could turn
out to be a good thing for everybody involved, but the Linux commercial
landscape has a different look than it did last week.
to post comments)