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Microsoft's Novell Investment Tops $340M - InternetNews.
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Microsoft's Novell Investment Tops $340M

The Linux business is looking better than ever for Microsoft (NASDAQ: MSFT). It's been so good that Microsoft has decided to buy up to $100 million more worth of Novell's Linux offerings in order to help satisfy customer demands.

The new incremental investment is on top of the $240 million of Novell Linux that Microsoft committed to in November of 2006.

The latest extension of the deal involves Microsoft reselling Novell Linux subscriptions, from which Microsoft appears to be generating some margin of profit.

"We have purchased the Novell certificates, which enables customers to gain direct support from Novell for Novell SUSE Linux Enterprise and we take those certificates and sell them to customers," Susan Hauser, general manager for strategic partnerships and licensing at Microsoft, told InternetNews.com.

"We keep the pricing confidential since customer size and opportunity pricing varies. We do resell and redistribute the certificates as part of our engagement."

The engagement itself so far has exceeded everyone's expectations.

"The original commitment that we made has been super successful and we have distributed more than 50 percent of it at this point," Hauser added. "The agreement expires in January 2012 so we looked at our track record of success and we felt really conformable that we could make an incremental investment of up to $100 million."

The deal between Microsoft and Novell involves joint sales opportunities for the two vendors. Hauser noted that while Microsoft is able to resell the Novell subscriptions to Microsoft customers and sales opportunities, Novell also can leverage the investment as well. The deal also involves the two partners continuing to work on interoperability initiatives between Linux and Windows.

"There are joint sales opportunities but there are also cases where Novell's sales force goes into an account and is involved in a bake off against Red Hat," Justin Steinman, director of marketing for open platforms at Novell, told InternetNews.com. "A point of differentiation for us is our interoperability with Microsoft."

In addition to the joint work on interoperability, the Microsoft Novell deal also includes a patent covenant. The patent protection extends to Novell's Linux users and covers any potential infringement of Microsoft's intellectual property that allegedly exists in Linux.

Microsoft has alleged that open source software infringes on its intellectual property and that vendors like Red Hat should pay up. To date, Red Hat has not entered into any kind of patent protection deal with Microsoft.

A Red Hat spokesperson told InternetNews.com that Red Hat has no comment on the new extension of the Novell Microsoft deal.

"Customers have told us that they don't want to be experts in the area of intellectual property and they are just pleased that our two companies have built this bridge and taken the issue off the table," Hauser said. "Customers just like to hear it's not an issue and they want to roll up their sleeves around the technical collaboration."

The original Microsoft Novell deal and the issue of patent protection has been a hot button in the tech industry. With the extension of the deal, however, the negativity appears to have waned.

"It is clear that customers want Linux. We're pleased to see Novell's Linux business grow as well as the overall market for Linux expand," said Jim Zemlin, executive director at The Linux Foundation, in an statement e-mailed to InternetNews.com. "We think this industry growth and the demand from Microsoft's customers represents customers' desire to have more Linux in their data centers."

Interoperability is one of the items that data center managers always need to deal with and a challenge still facing Microsoft and Novell. For example, Microsoft's NAP (network access protection) access control technology, which is a key part of Windows Server 2008, did not exist when the original interoperability agreement was signed.

"To this point NAP has not been on the table," Novell's Steinman admitted. But as part of the agreement Novell and Microsoft have regular update meetings to discuss areas that should addressed.

Microsoft's Hauser commented that new project have been added to the interoperability road map since the original deal was signed. Also slated to be added is Moonlight, which is a Linux port of Microsoft's Silverlight framework.

"We've learned a lot over the last 18 months about what it takes for customers to integrate and actually leverage interoperability," Hauser said. "Over the next couple of months we'll be fine tuning our tools, support and workshops that will continue to make it easier for customers. I don't see any road blocks to adoption we're just trying to help customers reduce complexity."