Microsoft is profiting from Linux

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As Microsoft is set to pump up to $100 million more in Novell for Linux, it’s important to note that Microsoft is not paying off Linux – it’s actually making money from it.

Microsoft isn’t just buying Linux subscriptions from Novell to give away…it’s buying them so they can sell them. So that means for the past 18 months, Microsoft has been selling Linux.

How much Microsoft is actually making is difficult to determine.

“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.”

But seeing as this is a blog let’s do some simple math – as pure speculation – to figure out how much Microsoft may yield in direct Linux revenues. 

Let’s start by assuming the total value of the Novell Linux subscription purchases is $340 million (and it may not necessarily be that in the end as it could be less – or more). Microsoft is reselling those subscriptions at a markup that should yield some kind of operating profit. To date in 2008, Microsoft has net profit margin of just over 29 percent.

So doing the simple calculation ($340 million by 29%= X), Microsoft over the lifetime of the Novell coupon deal could profit by $99 million (or more) dollars. At that figure Microsoft would likely be one of the top Linux resellers on Earth.

Yes there are a lot of assumptions in there and we don’t know what the actual markup/margin is – but we do know that Microsoft is selling Linux and they are making money doing it.  It just goes to show you that people will buy Linux – even from Microsoft.