November 7th, 2006
Details still fuzzy on Microsoft-Novell pact
Novell went public on November 7 with more specifics, including the financial terms, of the partnership it announced last week with Microsoft. In spite of the additional details, there are still a few things still remain mysterious.
According to an 8K Novell filed with the SEC, Microsoft has agreed that for three years, “it will not enter into an agreement with another Linux distributor to encourage adoption of Linux/Windows virtualization solutions through a Linux subscription certificate program.”
Last week, Microsoft officials made it sound as if it would be interested in signing Novell-like deals with any and all interested Linux vendors.
Another nugget: Microsoft is going to pay Novell $240 million to cover the 350,000 coupons (70,000 per year) that Microsoft is doling out to customers interested in support and maintenance for Novell’s SuSE Linux Enterprise Server.
Microsoft is spending another $94 million to market and sell SuSE products. And Microsoft also has agreed to pay Novell $108 million to release Novell from patent claims. Novell, for its part, has agreed to pay Microsoft at least $40 million over the course of the five-year agreement “to ensure Microsoft won't sue Suse customers for patent infringement,” according to News.com’s story.
The actual amount will be based on percentages of Novell's Open Platform Solutions and Open Enterprise Server revenues, according to Novell. In a new Q&A on the deal, Novell says explicitly that the Microsoft agreement is not an admission that Novell infringed on Microsoft patents.
“Patent concerns did not drive our entry into this agreement. Novell makes no admission that its Linux and open source offerings infringe on any other parties' patents. Our position has not changed as a result of this agreement,” the Q&A says.
Another Q (and A) from today’s new documents: “November 2 press release states that, ‘Novell will also make running royalty payments based on a percentage of its revenues from open source products.’ Are these payments for a patent license to Novell?”
A: “No. Novell has no license or covenant not to sue from Microsoft under this agreement. The payments are for Microsoft's covenant directly to Novell's customers. By the same token, Microsoft's customers receive the same covenant from Novell in return for payment from Microsoft to Novell.”
Clearer now? Yeah, about as clear as mud.
What, exactly, is covered by Microsoft’s $108 million and Novell’s $40 million patent payments to each other? What did each company know/see/fear that spurred these payoffs? Inquiring minds want to know more.
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