Well, our interview with Jeremy Allison made front pages on Digg and Slashdot, and I think we made it through the storm without a problem. Over on slashdot, some very interesting things were pointed out by symbolset during the discussion, and I wanted to bring them up here as well.
Previously, I wondered "what is circumventing the spirit of the GPL worth?", pointing to information of a Novell 8-K filing outlining a $350,000 bonus to Novell VP and General Counsel Joseph LaSala for his exceptional contributions. Now, we know what Ron Hovsepian stood to gain from the deal personally.
Hovsepian’s Personal Payoff
He received 778,470 shares of stock awarded 12/20/06.
From this page you can see he’s historically not a big holder.
778,470 @ $6.20 is $4,826,514. No doubt he was hoping for more presents under his tree. Perhaps there will be more for him after the dust settles. Certainly would have been nice for him if the Street had liked the deal and he got a good bump. Too bad.
It’s interesting that seven of ten managers listed here are new to the company in 2006, and almost all are new in the last 18 months.
If I were a stockholder looking at that, and the recent change of course in the company, I might be concerned. The theme is familiar, but I can’t remember where I saw it before… Maybe someone else will reply with that answer.
Here, we learn a bit more about the dire financial straits that Novell was in before making this deal, further evidence that they were not in the "position of advantage", as they and others have suggested.
Also, the company is having some trouble filing reports with the SEC, presumably because of options grants.
Just days before this deal was announced they had an interesting 8K report filed.
They owed a ton of cash that was due in 2024, but callable in the event they failed timely filing of reports with the SEC. Apparently that Microsoft money saved their bacon on that one, since immediately after the deal was done it was reported the money had already been paid out to debtors. Their SEC reports should make interesting reading for some time to come.
Being paranoid, though, I wonder if their accountants or the debtor or both aren’t beholden to Microsoft’s business interests in some way. That would be really scary.
And, Novell (like just about every other tech company) has questions regarding Options grants in the past, which could lead to their delisting.
Sonsini Got Questionable Options
I don’t know why we don’t hear more about things like this:
The fact that Novell had guidelines for option grants — and that directors strayed from them — is particularly disturbing, said lawyers and academics.
“It should be an issue of shareholder concern whenever a board changes its own compensation,” said Kirk Hanson, the director of the Markkula Center for Applied Ethics at Santa Clara University and a former Stanford University business professor.
While directors are generally permitted to award themselves whatever they want as long as it is publicly disclosed, Hanson said basic principles of corporate governance hold that they should avoid giving themselves pieces of the company just because they can.
And then there’s the spectre of delisting.
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Shane and I contacted Jeremy Allison, who has answered many of the questions which we thought our readers would like to see answered. I would like to thank Jeremy for taking the time to provide his input.
BN: We would like to hear about your experience with the deal: what and when you were told about it, your initial reaction, what you tried to do to fix it from within, and when/why you finally decided it was a case of irreconcilable differences.
Allison: When I first heard that Microsoft was going to take Linux seriously by doing an agreement with Novell I was delighted. But the more I looked at the details the more unhappy I got with the patent part. I tried to raise the alarm internally but was too timid with my criticisms until it was too late and the deal was signed (I heard about it about 5 days before it was signed). A nagging doubt is that if I had just spoken out louder against the deal I might have been able to change something, but I was too quiet until too late. It’s hard to be the one saying the emperor has no clothes, especially whilst listening to others praising the finery of the silk stitching .
I don’t know exactly why Novell signed it. I don’t think Ron Hovsepian is clueless or malevolent. I’ve met him and think he is a really nice guy. My guess is that the negotiations for the useful parts of the agreement (the virtualization part and the federated directory interoperability part) had, as Ron says, been going on for months and just before Novell wanted to seal the deal Microsoft turned up with “there’s just this one more thing we want you to sign…” and in desperation to get the other parts of the deal done they rushed it through.
It was carefully prepared by Microsoft legal to try and bypass the GPLv2, and I think to their shame Novell helped them do this. I’ve spoken with Novell executives since I came out internally against the deal and their position on it has been “if it doesn’t violate the GPLv2 what is your problem?” The problem is I do think it violates the intent of the GPLv2 if not the letter, as we explained in the Samba Team statement on this.
The intent matters. As I tried to explain in my resignation letter, if you’re screwing over some of your major suppliers by following what your lawyers see as the letter of a license, not the good faith intent of the license, then you can’t expect those suppliers to say “well done, you really tricked us on that one…..”.
The GPLv3 will fix any possible hole in the letter of the license (and Samba will hopefully move to it once the copyright contributors are happy with it). But in the meantime I don’t want to give my efforts to a company that is willing to try and trick their way out of their license obligations on my software. When I talked to the Novell Executives we just had to agree to disagree. In part, I see this deal as a personal failure on my part.
We would like to know more about the reaction to the deal amongst the developers within Novell – are you the only person who is offended, are there other developers that have left or are considering leaving, whether ‘less prominent’ or not? How is morale in general amongst the rank-and-file Linux people since the deal?
Allison: I’m not going to speak for other developers within Novell. Like any large company there are a range of views. Some people agreed with the deal, some did not. Obviously you won’t hear anything from the people who disagree whilst the whole company PR is set on presenting the deal as “a good thing”. There is a healthy discussion on Novell mailing lists about this – I don’t think I’m giving away any company secrets by saying that. Novell is not a monolith controlling its employees thoughts or actions, people are free to disagree with things the company does – it’s one of the things that made it such a great place to work for me.
My contract with Novell prohibits me from soliciting or hiring people away from Novell for 1 year and I take this very seriously, so I won’t comment on other people who may or may not leave, that’s entirely up to them. I found this deal troubling enough to leave and I’m the only person I’m willing and able to speak for.
I’m sad because I don’t think we needed to do this. We were gaining a lot of traction with SuSE Linux desktop, and from my perspective (admittedly not high up in the company hierarchy with views on revenue) we were winning. We had a good product, I was always extremely busy with new customer requirements, and was personally involved in winning new customers for SLED and SLES. It just feels to me like snatching defeat from the jaws of victory.
Do you think that Novell will ‘fix’ the covenant with Microsoft and indeed be GPLv3 compliant, as Stafford Masie has promised?
Allison: I think Novell has very little power to alter the terms of the deal. If they had, I think they would already have done so. Remember the patent part of the deal wasn’t Novell’s idea, essentially it was forced upon them at the last minute. Novell is a victim, but they were a willing victim and that I can’t forgive.
I’m guessing the effect of the GPLv3 is designed to make Microsoft want to cancel this deal, as that’s where the real decisions lie.
What do you think about Nat Friedman and Bruce Perens’ publicly calling on you to leave Novell as well?
[editor’s note (shane): This question is worded awfully, and is my fault.]
Allison: Nat supports the deal for Novell, and has never called on me to leave. I didn’t know Bruce had asked me to leave, but Bruce and I see eye-to-eye on many things, so it doesn’t suprise me. I like and respect them both, although I’m obviously a little dissapointed in the Open Source/Free Software people within Novell who are publicly supporting the deal. I see them as damaging the Free Software/Open Source community, but then again they see my public reaction against the deal as damaging to the Free Software/Open Source community, so we just have to disagree on this.
I guess that any questions regarding ‘how life at Google is’ are premature since you haven’t started there just yet, but I would like to know what you feels Google’s interest in Samba is, and the direction of the project going forward.
Allison: Yep, very premature :-). I’m not going to comment much on why Google is interested in Samba, I’m hoping that will become apparent over time. Samba is becoming a more complete solution for integrating Windows and UNIX/Linux and we’re filling out our implementations of CIFS and AD and (soon) SMB2. We’re also heavily used in embedded systems – almost every disk drive in a box product you might buy at an electronics store is Samba inside :-).
If you have time, folks (on our site in particular) will want to hear about your take on the deal – its true meaning, its impact on Novell and on the community, and how you came to decide that there was no other choice but to leave Novell (what other avenues you explored from within first, and what responses were received).
Allison: Hopefully the text above covers much of that. The long term impact of the deal I think will be a negative for Novell and Microsoft, and I’m sorry about that. I don’t think it will allow Novell to change the market share equation for Linux, which currently is overwhelmingly Red Hat as it just tries to put Linux under more of a legal cloud, which of course was what Microsoft wanted in the first place. Novell gave it to them without Microsoft having to do anything risky like suing Linux users (all of which would also be Microsoft customers). It didn’t cost them much – only $400 million. At least when Sun sold out in the EU case they got $2 billion :-). This kind of money is irrelevent to a monopoly – they can simply print more. As Senator Everett McKinley Dirksen once said, “A billion here, a billion there, and pretty soon you’re talking about real money.”
Hopefully the GPLv3 will make this deal irrelevent, but the problem for Novell is that people will not forget why the GPLv3 had to be changed to exclude their sleazy deal. No one will blame Microsoft, people expect sleaze from Microsoft :-). It’s the previously clean and upstanding competitor who has been damaged by this, and I feel really bad for the excellent engineers at Novell who have had their reputations tarnished over this.
I think eventually even the deals strongest supporters will come to feel it was a big mistake.
We would like to thank you enormously for taking the time to respond.
Allison: No problem – Happy New Year to you all, you families and all your readers !
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