Stocks: (MSFT)(NOVL)(RHAT)
Microsoft looked like a benign partner when it struck a deal with Novell recently to sell the open source Linux operating system side-by-side with the Suse version of Linux. MSFT agreed not to sue Novell clients over potential patent violations in the company’s software. Microsoft has long indicated that Linux may infringe on some of the intellectual property in Windows. Novell also agreed not to sue Microsoft for potential infringements by Windows
But, in a clever move, Microsoft picked the weakest Linux provider to cut its deal. Redhat, which has a much larger portion of the Linux OS business was left out. And, Microsoft is not ruling out patent infringement by the Redhat version of Linux.
Microsoft has made a devilishly clever move. Because Linux is free and competes with some Windows functions, MSFT has had to worry that customers might move to the software. And, Windows is Microsoft’s cash cow.
By setting up a partnership with Novell and putting hundreds of million of dollars into the deal, it gives the weaker Linux player a chance to compete with Redhat. It also sends a signal that Novell Linux is safe and infringement free, while Redhat may face an IP suit from MSFT over its version of Linux. Corporate customers can decide if they want the "safe" version of Linux, or the Redhat brand. A nice move to make enterprise clients think twice about Redhat.
MSFT. A pat on the back with one hand and a knife in the other.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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