Microsoft Adds $100M to Novell’s Linux Payout

Microsoft plans to pay software maker Novell (NASDAQ: NOVL) up to $100 million in additional subscription fees due to strong demand for Novell’s open source Linux software that partners with Microsoft’s proprietary Windows software.

The payment to be made by Nov. 1, announced by the companies on Tuesday, is in addition to a $240 million payment to Novell from Microsoft (NASDAQ: MSFT) in 2006 as part of a broad set of business and technological agreements to make their products work together for corporate customers using both Linux and Windows servers.

Microsoft, the world’s largest software maker, buys certificates from Novell and then sells subscriptions to Windows clients who want support in making their computer systems work well alongside Linux machines.

The agreement between the companies expires Jan. 1, 2012.

Linux is the most popular variant of open source software. Unlike proprietary software, open source software lets developers share code and add functions, and users only pay for custom features, maintenance and technical support.

Novell said it will also spend an undisclosed sum of money to provide new tools, support, training and resources for subscribers.

The company said it has already invoiced $156 million in revenue from the Microsoft certificates in the first 18 months since the November 2006 start of the five-year agreement.

The pact between Microsoft and Novell stirred up quite a controversy in the open source community because it included among other things a clause saying that neither company would sue customers of the other for patent violations.

This clause was seen as an endorsement of Microsoft’s claim that it holds patents to intellectual property behind some open source software, a contention rebutted by Novell and others in the open source community.

Critics said the deal undermined the patent position of Linux software and gave Microsoft an edge in persuading businesses to use Microsoft products over Linux and other types of open source software.

A software group that own rights to much of the code behind Linux software threatened to punish Novell over the deal before opting not to take punitive action against the company.

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