When Novell (NASDAQ:NOVL) and Microsoft (NASDAQ:MSFT) announced a cross-licensing and indemnification pact last year, I wondered what each of the partners meant to get out of that deal. Three months later, I'm still wondering.
What's up in Redmond?
Back in November, the two companies established a covenant with the following terms:
- Each promised not to sue the other over software patent issues.
- Each agreed to pay the other some money.
- Microsoft promised to hand out 70,000 copies of Novell's SUSE Linux operating system to its own Windows customers.
For Novell, the deal sounds great. The company is getting the lion's share of the benefits here, including a net monetary gain and some of Microsoft's considerable marketing heft. There's more to it than that, though -- more on that in a minute.
For Microsoft, the motivation is less obvious. If the Redmond giant wanted a presence in the Linux market, surely it could simply buy Novell or Red Hat (NYSE:RHT), or try to hire a few prominent open-source developers to build a new distribution. Why would the house of Gates give away millions of dollars and strengthen a direct competitor?
Some industry observers think it's a defensive move. Microsoft wanted to make sure that Novell -- which owns certain rights to UNIX source code, much to the chagrin of the SCO Group (NASDAQ:SCOX) -- doesn't file suit against Microsoft for possibly borrowing some of that code in its Windows family of products. That's the conjecture, and it does provide a strong enough motivator, albeit on some fast-and-loose assumptions. We don't have any evidence of that unwarranted code migration.
Right down the middle
Perhaps Microsoft wanted to create a rift in the Linux community? If so, the plan is working perfectly at present. A long-awaited update to the General Public License (GPL) that governs the use of Linux kernel code, the vital support programs forming the rest of the operating system, and thousands of other open-source projects, just reached its third draft, with new language very specifically aimed at breaking up the Novell-Microsoft pact.
"The recent patent agreement between Microsoft and Novell aims to undermine these freedoms," said Free Software Foundation (FSF) leader Richard Stallman in the draft release notes. "In this draft, we have worked hard to prevent such deals from making a mockery of free software."
Novell disagrees. From the company's initial response: "We will continue to distribute Linux. Nothing in this new draft of GPL3 inhibits Novell's ability to include GPL3 technologies in SUSE Linux Enterprise, openSUSE, and other Novell open source offerings, now and in the future. This is good news for our customers."
That cavalier attitude could come back to hurt Novell if it sticks by its guns. I think Stallman would take the company to court over these issues in a heartbeat. His GNU tools will most certainly be licensed under the final version of GPL3, since the FSF runs both of those shows. Without that vital glue, you don't really have an operating system, and the whole Linux platform falls apart. In fact, Stallman has long insisted that we call it GNU/Linux, rather than just naming the kernel, to give the GNU project its props. Either Novell convinces the FSF to drop its anti-Novell wording, or the Microsoft pact is history.
Novell's third option would be to effectively distribute unlicensed code to enterprise customers, who would then be open to legal attacks of their own for using illegal code. Meanwhile, some people think Stallman is trying to force his own view of development morality upon the rest of the world, and kernel creator Linus Torvalds remains skeptical of the new license. It's brother against brother. The software world is never boring.
This is happening just as Novell announces new ways of moving away from its legacy NetWare platform (and not a moment too soon). Now, you can run NetWare as a virtual machine under SUSE Linux, a move the company says "completes the migration of NetWare services to the Linux platform."
Final Foolery
If Novell was looking for a get-rich-quick scheme, it seems to have backfired badly. The company needs to convince a wounded community that what it's doing is in the best interests of the open-source movement at large, or suffer the consequences.
Microsoft might or might not have had defensive plans, but the whole affair turned into an offensive play regardless. It's working out very well for the company, to the point where the legal indemnification entendre starts to sound far-fetched by comparison. Maybe this was the plan all along -- a "divide and conquer" strategy based on a few huge egos clashing. Brilliant, if true.
Fool on, you crazy diamond:
Microsoft is a Motley Fool Inside Value recommendation. Discover more of the market's best bargains with a free 30-day trial subscription.
Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is always entertaining, too.
