Summary: The days of Windows as “legacy software” are approaching, just as the days of desktops and laptops as the main (or most sold) computer type are ending
Microsoft’s and Novell’s marriage is a marriage between a pair that shares common problems. Microsoft and Novell both have debt and both companies shrink over time (layoffs included). Novell’s likely layoffs after the AttachMSFT deal is done (there is this new article about debt featuring a project manager at Novell) is a subject we will address at a later stage/post, but for the time being, the main question is about patents and CPTN. That’s where a lot of damage can be done, which is why Microsoft boosters lobby for FTC approval.
Novell used to be a company that matters, at least back in its NetWare era. There is this new article which goes back in time and speaks about the subject. It says:
When talking about disappointment, Novell merits special consideration. Once thought to be a legitimate competitor to Microsoft in network operating systems with their Netware Enterprise products, they are now left wondering what could have been. Through their own ineptitude, they allowed rivals (some smaller and bigger) to eat away at their market share until they saw no other option but to leave the market entirely. It remains sad to analyze their progression into technology obscurity.
Microsoft has a similar problem these days. Those that take up market share are UNIX and Linux, especially in emerging form factors. Assuming that “PC” is synonymous with “desktop”, mind the new article titled “PC Market Weakness is Bad News for Microsoft” (From Nasdaq.com Community):
Microsoft’s ( MSFT ) business is highly dependent on PC sales as Windows OS and Microsoft Office for PCs respectively account for about 40% and 36% of our $31.64 price estimate for Microsoft stock .
This is a serious factor because the remainder of the cash cows (mostly one) depends on Windows as a common carrier. Windows sales already decline, for several consecutive quarters even.
“The attitude in Redmond seems to be one straight out of the ’90s, maybe even the ’80s…” –Lee PenderOne trend we’ve noticed is, a lot of journalists stop covering Microsoft, which matters not so much anymore. Lee Pender, a Microsoft fan from their Redmond ‘press’, is also sensing a moment of weakness and in his column “Microsoft Isn’t Worth Waiting for Anymore” he cites another Microsoft booster and says: “What’s stunning, though — and this is really Mary Jo’s point — is that Microsoft doesn’t seem to care. The attitude in Redmond seems to be one straight out of the ’90s, maybe even the ’80s: “Hey, we’ll get to these new markets when we get to them, and when we do we’ll clean everybody’s clock. This is Windows versus OS2 all over again.”
“Hey, Microsoft: Not anymore. You’re slow and bloated, and your competitors have no reason to fear you anymore. Heed Mary Jo’s word — she probably knows more about your company than you do, after all.”
Microsoft’s relevance these days has little to do with technology or even marketing; it is to do with litigation — a subject we’ll tackle as a matter of priority here in Techrights. It’s not about “cheap shots”, it’s about addressing a serious subject. █
It seems that the SCO trial has finally come to an end but even in the settling of the dust the lawyers can’t stop filing motions. The Oracle-Sun deal looks to be the next long term big story in FOSS I believe. The possible implications for FOSS with Oracle now owning one of the most extensive technology patent portfolios outside of IBM mean that there are more exciting times ahead, if that is what you want to call it.
All the while Microsoft still puts out tasty pieces of FUD every so often and I have come to find it reassuring in its consistency.
That’s the part which Novell helped initiate. It backfired and Novell is left in the street. It is now being claimed that Novell has trouble selling just SUSE because it would leave the rest somewhat orphaned. As one site put it, “The trouble is Netware and other legacy properties that made Novell a force to be reckoned with in the days before Microsoft taught Windows how to network. It appears that Novell doesn’t want to sell SUSE unless Netware and identity management divisions are included in the deal at a premium price. Or else, they don’t want to sell SUSE unless they sell Netware first, at a premium price. Either way, they evidently want a lot of bucks for Netware. More that anyone seems to be willing to pay.” This is also covered in [1, 2, 3] and as Pogson puts it:
From my point of view, Suse Linux will be sold with or without the other baggage (except the identity stuff which will be important for a while) but the dealing and the price eventually agreed will indicate the value some serious players give in their assessment of the future of GNU/Linux. There is no need to buy Suse unless you figure they have a foot in the door and you want to ride it when the door opens.
As people who depend on Novell wait and watch Novell’s next steps [1, 2, 3], most Novell news is financial news about Novell’s sharp movements in the stock market [1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23].
Summary: The unfortunate effects of Windows replacing some of NetWare’s functionality
Novell is a company in decline and its old servers are being replaced, sometimes by Microsoft’s. Watch the new YouTube video whose description is “Novell Server AMSP03 was finally phased out, and ready for PowerDown.”
US, Spanish and Slovenian law enforcement authorities on Wednesday announced the arrest of the suspected creator of the “Mariposa Botnet,” a vast network of virus-infected computers used by criminal hackers.
The suspect, a 23-year-old Slovenian citizen identified only as “Iserdo,” was arrested by Slovenian police last week, the FBI, the Slovenian Criminal Police and the Spanish Guardia Civil said in a joint statement.
The FBI said the arrests were the result of a two-year joint investigation into the Mariposa Botnet, which may have infected as many as eight million to 12 million computers around the world.
That would be “eight million to 12 million” Windows computers in just a single botnet. They ought to call out Windows. █
• approved conversion from Novell to Microsoft Network software to be completed during the summer at a cost of $7,045.78. Novell will no longer be supported and all other school districts have either switched over already, or are in the process of changing over. Of the total cost, $4,500 will be taken from the district Permanent Improvement Fund for a new file server to run the software. The remaining cost will be taken from the general fund.
Significant changes to existing software will see an operating system refresh from Windows XP to Vista, as well as a move away from Novell Network and GroupWise to Microsoft Outlook and Exchange.
A new article about ZTE uses Novell as a textbook example of losing an installed base very rapidly and without chance of reversal.
The fact that no hack even mentioned Symbian to ZTE was extremely telling. It is reminiscent of the days when Novell had a huge installed base of network servers while the developer community had quietly switched its allegiance to Microsoft.
At present, this seems a bridge that ZTE will cross later.But Nokia must act fast if it is to avoid becoming the Novell of the handset sector.
Summary: Novell’s proprietary software under the magnifying glass
Novell’s Pulse has received a lot of attention upon its debut as a beta [1, 2, 3]. Pulse seems to be proprietary (there is no official word that we can find) and apart from some older coverage that we missed [1, 2], there is this introduction to new users.
In all the talk about New York financier Paul Singer’s plan to go all Gordon Gecko on Novell, one word has not been mentioned nearly enough.
Microsoft needs a viable Novell, and Novell’s Linux business was on the verge of becoming viable when Singer’s Elliott Associates swooped in with an offer to break up the company, seize its cash, split off the old NetWare business, and auction off Suse Linux.
I doubt Microsoft wants to actually buy that business. Owning a Linux would be a real complication. Suddenly all those patent cross-licenses that claim Microsoft has patent rights to the software take on a different odor, and Microsoft is forced to go down the SCO road to prove its claims.
Microsoft has been doing well against Linux through bluff. What the Elliott move does is threaten to make Microsoft show its hand.
Even the due diligence process could threaten Microsoft. Singer is going to get a look inside that 2006 agreement.
Microsoft’s friend Rob Enderle [1, 2, 3, 4, 5], who shilled for SCO and cursed its opposition for profit, says that “Another SCO Moment [is] Coming” (because of Novell). Given his proximity to Ballmer, maybe this is how Microsoft views it too. Novell has UNIX and it has many software patents. The ‘Microsoft press’ covered it too and one Microsoft booster over there says that these are “Exciting times in Waltham.”
Redmond too? One might suggest that on the one hand, Microsoft would benefit from having less competition in networking (except the fact that Novell may sell this bunch of assets). On the other hand, argues Peter Judge:
Why Microsoft Can’t Afford To Let Novell Die
Make no mistake – The hedge fund offer for Novell could effectively mean the end of the company. And Microsoft could suffer the worst, says Peter Judge
But Microsoft has staked any open source credibility that it has, on Novell’s SUSE distribution. If Novell falls to bits, then Microsoft’s efforts to gain open source cred pretty much disappear with it. It’s something that would have been impossible to imagine a few years back, but if we’re looking for someone to prop Novell up, Microsoft would now be a prime candidate.
Of course, given the hostility within the open source community towards Microsoft, Novell and the deal between them, as well as to Codeplex and other open source moves by Microsoft, there would be big questions about how commercially viable Novell would be within Microsoft. But Redmond would be looking at this as an essential purchase for credibility, not a profit centre.
Whoever makes a “White Knight” bid for Novell is going to have to move fast, because talent there is going to leave if it looks like the company will be broken up. And even if the Elliot deal goes through, there is still the possibility of deals behind the scenes, points out Updegrove. For instance, Elliot might agree to instantly sell on parts of Novell to a differnet player – say an IBM, a Microsoft or an Oracle – as soon as it seals a purchase for the whole company.
The Elliot bid is on the table and there is no going back. Novell, as we know it is going to end – and at this stage, we simply don’t know what will replace it.
Novell has been Microsoft’s credibility for patent extortion too. This is why this Web site exists. Other issues include Mono and Moonlight.
Scott M. Fulton, a Windows-oriented writer, argues that the “$1 billion takeover bid may mean the end of Novell’s makeover addiction”.
Elliott Associates is more likely to flip divisions of Novell to interested buyers than it is to oversee a long-term strategy for the company as it stands. Novell’s Linux business is most likely to be flipped first. At that point, companies ranging from Oracle, to VMware to IBM could be buyers, but smaller players could be too.
Though Elliott insists that isn’t its strategy, another buyer could result in a nice payday for Elliott, which began buying up Novell stock only in early January.
A rival buyer would guarantee at least $75 million in profit for Elliott’s 8.5% stake — not bad for two month’s work.
So who are the most likely suspects? IBM tops the list. The company is probably the biggest proponent of open-source software out there, such as Novell’s Suse Linux, which holds about a third of the Linux server operating system market, the rest held by Red Hat Inc.
“IBM could use its own Linux distro and x64 hypervisor as well as the systems management and identity management tools that Novell has taken possession of over the years,” opined The Register, “and it knows how to ride down a legacy software business like NetWare.”
An IBM-Novell merger has been suggested before. “Red Hat’s dominance leaves IBM almost entirely dependent upon SuSe/Novell,” wrote Sun Microsystems Inc.’s then-COO Jonathan Schwartz in 2004. “Whoever owns Novell controls the OS on which IBM’s future depends.”
Novell has had a hard time making profits ever since its NetWare product was knocked off the pedestal it occupied in the ’80s and early 1990s. In November 2006, the company signed a patent-licensing deal with Microsoft but has yet to show substantial gains from the deal.
As the former editor of Linux Today, the erudite Brian Profitt, points out, Elliott, like quite a good many other hedge funds, behaves like a vulture. It buys companies, dismembers them and sells them for a profit.
There will be no emotion where Elliott is concerned; the fund even purchased debt in a poor country like Costa Rica when it was possible to make a few million there, Profitt writes. In this respect, Elliott appears to follow in the grand tradition of asset management companies like the legendary Kohlberg, Kravis and Roberts.
Free software and open source types may agonise over a sale, since one of the better known GNU/Linux distributions, SUSE Linux, is one of the main assets that Novell still possesses.
But Elliott can probably only see dollar signs when it looks at Novell and if the commercial SUSE distribution suffers as a result, I doubt that there would be any tears shed.
Broadpoint AmTech analyst Bradley G. Whitt agreed that Elliot’s bid as it stands is unlikely to go through. He thinks the bid could trigger a sense of urgency among other large software companies that might have interest in some of Novell’s assets but cautioned that Novell’s broad product suite would make it hard to pinpoint any one software player that might be interested in an all-out acquisition. A more likely scenario would be Elliot, or whichever firm wins the acquisition, breaking up Novell and selling the pieces to various other players.
A Novell buyout is long overdue. The software maker’s shares have languished for 20 years, yet it generates healthy profit and has no debt. Moreover, a big chunk of the company’s $1 billion of cash is trapped overseas. Elliott Associates’ $2 billion bid could draw out other suitors that have dawdled.
Novell’s legacy enterprise networking business is a slowly shrinking cash cow. Clients are locked into paying highly profitable maintenance fees. The company should bring in about $300 million of revenue from this business this year, with roughly half of it flowing through as operating profit, according to analysts. Moreover, this business doesn’t require much capital expenditure.
Another attraction for some buyers is Novell’s overseas cash pile. The company can’t repatriate these funds without taking a tax hit. It could use the cash for international acquisitions. But with many of its rivals in the same position, attractive targets are hard to find.
Another attraction for some buyers is Novell’s overseas cash pile, according to Breakingviews. The company can’t repatriate these funds without taking a tax hit. It could use the cash for international acquisitions. But with many of its rivals in the same position, attractive targets are hard to find, it notes.
The investigation we mentioned the other day has more than just the initial coverage right now [1, 2]. Here again is the press release [1, 2, 3].
Kendall Law Group announced that it has launched an investigation into Novell Inc. in connection with the proposed acquisition by Elliott Associates, L.P. The firm is concerned that the Board of Directors of the Company may breach their fiduciary duties by failing to seek other deals to better represent the value of the company if they agree to this proposal.
Elliott began acquiring Novell stock on Jan. 4 and controls about 8.5 percent of the company.
The vulture fund probably waited for the results to come and made the bid just a few days afterwards. Here is new financial analysis of Novell [1, 2].
Institutional shareholders of Novell provided feedback on a range of issues, including capital structure, strategy, corporate governance and executive compensation. Participants responded to 20 specific questions, providing direct company assessments and detailed commentary.
– “Are You in Control of Your Sales Expenses?” — executive workshop presentation by Jim Parker, director of global finance at Novell.
For completeness, here is some additional Novell news which is more about money than technical issues relating to the bid [1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16]. “Novell Soars After Elliott Makes $2 Billion Offer,” says Bloomberg. They seem to have a deal with BusinessWeek (article sharing/aggregation) and HedgeFund.net says: “Novell, according to Elliott, has “meaningfully underperformed.” The company had manufactured its Netware operating system with considerable success until Microsoft, the software giant fueled by the ambition of its founder Bill Gates, began gobbling up marketshare with its Windows NT platform. Novell has also undergone a lot of management turnover. Current Google Chief Executive Officer Eric Schmidt used to head the company. But Novell is still considered valuable, in large part because of its Linux business.”
“The value, net of cash, is roughly $1 billion in enterprise value,” says another source (because Novell has cash too).