At what point is it cheaper for MS to just buy Novell?

The U.S. Supreme Court has cleared the way for Novell to continue their Wordperfect anti-trust suit against Microsoft. Novell's argument is that anti-competitive operating system issues caused their once mighty Wordperfect suite to come tumbling down. This turn of fortune cost Novell to the tune of $1 billion. The lawsuit Novell has filed against Microsoft is for damages potentially in the order of $3 billion.

Whilst everyone agrees Microsoft is no saint the fact of the matter is Novell and Wordperfect got beaten by aggressive pricing and marketing rather than significant operating system level anti-competitive action. Microsoft gained market share by aggressively dropping the price of Office to the point that it was less than half that of its competitors. Rather than following suit and matching dollar for dollar these moves Novell blindly followed their original pricing structures inherited from when they purchased Wordperfect.

Novell's past business blunders aside, given Microsoft's recent showing in the courts you would have to say its an even money bet that some financial compensation arises from this case. Whether it is in the order of $3 billion is unlikely but even a quarter of that amount is still a hefty sum. Does there come a time when Microsoft executives look at Novell and decide it is cheaper to buy them outright than cough up massive legal fees and reparations?

A few years ago the idea of Microsoft buying Novell would be dismissed on anti-competitive grounds, but these days Microsoft faces stiff competition from the likes of Red Hat, IBM, Sun, Oracle and of course Google. Even in recent years the two companies have hardly been competing against each other. The controversial agreement struck a few years ago between the two has seen them in coopetition rather than competition without so much as a mumble from regulatory bodies.

Given Novell's current financial position if a $3 billion payout were on the cards it is not a huge leap to suggest that Microsoft simply buy them out rather than buy their forgiveness. Whilst it would take more than $3 billion to buy the company it would not take much more (relatively speaking) considering Novell has a current market cap of $2.1 billion. Also from a shareholder's perspective an acquisition is much better than a payout as their investment is preserved and built upon instead of going to lawyers and the opposition.

From a technology perspective Novell have two things to offer Microsoft - SUSE and Identity Management. Microsoft currently resell SUSE and have a comparatively weak Identity Management business so both assets could be put to good use. Netware, Novell's other technology is at end of life but this customer base is currently having to weigh up a tricky migration to SUSE or Windows Server. As a consequence owning both end points of this decision would not be such a bad thing from a sales point of view.

Perhaps the biggest hurdle to get over is the general idea that Microsoft cannot sell Linux because it invented Windows. Given the recent announcements at Mix'08 in cloud computing and advertising it would seem that Microsoft no longer sees itself as simply a Windows company. Arguably another indication of this is their determination to buy the LAMP-centric (Linux/Apache/MySQL/PHP) Yahoo. Instead of migrating all the tried and tested Yahoo services over to a Windows server infrastructure, wouldn't it be simpler to establish Microsoft Linux through the acquisition of Novell? 

Eben Moglen on the threat of patent agreements

Eben Moglen of the Software Freedom Law Centre is a great public speaker and he demonstrates this skill exceptionally well in his ability to answer what the risk to the Free Software community is when deals such as last years Novell - Microsoft agreement take place.

If you like his response to this quesiton then I believe you will find his interview on FLOSS Weekly about Free Software and the GPL not only good to listen to but educational at the same time.

Mount Microsoft makes more patent rumblings

Microsoft's General Counsel Brad Smith placed the number of patent violations by Free & Open Source Software (FOSS) at 235 in an interview with Fortune magazine this week. Considering these suposed violoations cover everything from the kernel through to office applications I am somewhat surprised that the theoretical total is not more considering the huge number of patents Microsoft has recently aquired. Tim Bray of Sun's response in his blog was short but to the point, 'litigate or shut up'.

Unfortunately the chances of Microsoft actually litigating are slim to none considering the damage it would do to their image and the potential problems it would cause from counter-suits from the likes of IBM. Instead the threat of legal action looks like it will continue to remain just that in the vain belief that by simply placing a cloud over Free software's head it will deter existing Microsoft customers from jumping ship. Whether or not such a strategy will be successful only time will tell, but forcing potential customers to buy your product through fear of what would happen if they did not does not seem like the kind of image one would want to portray.

OpenID gains support from Microsoft and AOL

On the 6th February Bill Gates announced that Microsoft was going to support OpenID within its CardSpace set of technologies. Given this massive vote of confidence from the world's leading desktop supplier it would seem there is very little in the way of OpenID becoming a highly influential, Web-based identity system. After this announcement it also comes as no surprise that other large, Web-centric companies like have announced their intention to support OpenID as well.

OpenID became a successful identity solution because it is not centralised around a single, all powerful source and at its heart is relatively straightforward when compared to many of its contempories. Like other influential technologies such as RSS and podcasting it was created by a small team (Brad Fitzpartrick) and was released to the world as an open standard. These factors have made it relatively easy for large companies like Microsoft and AOL to adopt whilst other more complex, 'big business' alternatives have failed to gain momentum.

OpenID's limited scope means it is not going to solve all the world's identity problems but in the near future we should find maintaining our identity on the Web becomes just a little easier. What still remains to be seen is whether Google and Yahoo will support OpenID in their product lines. Given their operating models I do not believe either will support OpenID directly in their services but they both will provide their users with OpenID-enabled accounts. Nick Manley provides a good case for this in his post 'Why Google will support OpenID'. The bottom line is anything that makes people use their Google/Yahoo accounts more frequently is good for business, especially now that will be supported within Windows.

UPDATE: (21/2/2007) Kevin Rose has recently announced that will be supporting OpenID sometime next year.

Jeremy Allison speaks out on Novell

On December 29th Jeremy Allison officially left Novell and was able to speak openly about the Novell-Microsoft deal. He provided answers to questions posed Mary Jo Foley of ZDNet and Boycott Novell although it would appear that his answers to the later source were for the most part copied and pasted from his ZDNet interview. What is interesting from the interviews is that the controversial patent deal was included by Microsoft at the last minute (5 days before the announcement). This would suggest Novell was setup by Microsoft, or even worse intentionally withheld information from people within their own company that understood the most about the issues at hand. Whichever was the cause it does not bode well for Novell as it was a lot of negative publicity they could have seriously done without and even avoided if managed more effectively.

Adobe ready to launch Apollo rocket at Microsoft

For over a year and a half Adobe has been making some interesting moves that could bridge the gap between the Web and traditional desktop applications. Adobe's first move in this strategy was to purchase Macromedia, the company behind Flash and a range of Web development tools. With these technologies in stock they are now actively developing Apollo, a cross-platform desktop framework which draws together HTML, PDF and Flash to create a Web/desktop hybrid environment (refer to this technical article for details).

TechCrunch has an excellent article about Apollo and posted a podcast with Adobe's chief software architect Kevin Lynch on the subject. With Apollo Adobe will be put on a direct collision course with Microsoft in the emerging Rich-Web application arena. Alongside Vista, Microsoft are releasing their new Windows Presentation Foundation (WPF) and XML Paper Specification (XPS) technologies. WPF and XPS are Microsoft's response to the two formats that have successfully defied their monopoly on desktop file standards: HTML and PDF. WPF is part of the .Net 3.0 framework and whilst intended to replace the aging Windows graphical API a large part of it is devoted to facilitating Rich-Web applications through XAML markup (an incompatible derivative of HTML). XPS on the other hand is a direct PDF competitor and is not intended to replace any existing Windows technology rather destroy the incumbent. Usurping these entrenched standards is important to Microsoft because as history has shown controlling a standard is equivalent to holding the high ground on a battlefield; it does not automatically win you the war but it goes a long way.

An Apollo application running on Windows

Getting Vista working with Samba

In their efforts to 'innovate' (a.k.a. make it harder for people to use non-Microsoft products) it would appear that connecting to a Samba file server in Vista is not as easy as in prior versions of Windows. This BuilderAu post describes how to enable LM and NTLM authentication methods supported by Samba but disabled in Vista by default. It sounds like the Samba team are moving fast on getting Samba fully Vista compatible, unfortunately issues like this will effect NAS devices and servers not running the latest versions of Samba for a long time to come.

Microsoft rattling the patent case cage

Microsoft's silent threat of patent lawsuits against Linux users is beginning to solidify in the last couple of days. Since the announcement with Novell, Microsoft have been busy trying to establish similar patent protection deals with other Linux vendors. However their attempts have not been greeted warmly by Red Hat who's deputy general counsel ruled out any need for such an agreement on the grounds that "we do not believe there is a need for or basis for the type of relationship".

Fortunately for Microsoft they are not easily deterred by such confidence with CEO Steve Ballmer (in the words of Boing Boing) painting Linux users as patent crooks during a Q&A session on Friday. Although Ballmer did not say it so bluntly he did openly threaten businesses running Linux by stating that the Novell patent protection is crucial otherwise:

"We (Microsoft) believe every Linux customer basically has an undisclosed balance-sheet liability."

Source LinuxWorld - Linux Users Owe Microsoft

These are definitely fighting words but at some stage they are going to have to do more than just rattle their hypothetical sabres and actually sue. If (when) that day comes it will be a very interesting moment in open source history and be a pivotal moment in the future of Microsoft.

A clever site worth checking out

This site is very clever, it is called Microsoft Firefox and promotes/pulls fun out of Internet Explorer 7. It is all very professionally done with some very clever video, subtle jokes and links to other funny sites. No doubt the site will be taken down by Microsoft legal given its look and feel and abuse of the Microsoft copyright/trademark.

How things are shaping up with the Novell/Microsoft deal

If you are part of the Linux/Novell community last week you would have no doubt heard of the Microsoft - Novell agreement. When it was first announced it looked materially very boring on the surface comprising of a couple of virtualisation developments and a promise by the two companies to work on OfficeXML and directory system interoperability. All this is fairly trivial but what made the deal controversial was the promise from Microsoft not to sue Novell customers for using Linux.

The two 'problem' technologies that fall under this legal cloud is Mono, an implementation of Microsoft's .Net runtime for Linux and Samba, a SMB compatible client/server capable of mimicking the network functionality within Microsoft products. Whether or not there is any real legal grounds for patent infringement is a matter for debate. Neither break copyright laws and the extent of patent infringement by either project has never been described by any party. Nonetheless Microsoft has successfully created and maintained a cloud of uncertainty over these products, a feat helped in no small part by their support of the long running SCO vs IBM/Novell lawsuit (which boils down to the copyright status of some Linux code).