Microsoft's Coupon Money Boosts Novell's Linux Numbers

It was a five year deal, but 18 months in to the hell-frozen-over cooperation agreement between Microsoft and Novell, Novell executives indicate things are still moving along swimmingly.

Part of the deal called for Microsoft to pony up $240 million to Novell so, in exchange, it could hand out coupons to customers for Novell's server Linux. From the looks of it, Microsoft hasn't exactly been wasting time.

"To date, we have invoiced $157 million, or 65 percent of the original five-year, $240 million agreement," Novell CEO Ron Hovsepian told financial analysts last week when discussing his company's most recent financial performance.

That was up from $141 million Novell had invoiced through the close of its previous fiscal quarter, suggesting Novell invoiced $16 million from Microsoft as part of its Linux business for the quarter that ended April 30. Overall, Novell invoiced a total of $38 million worth of Linux sales from all sources during the quarter. That would also suggest that the lion's share of that number came from the Microsoft coupons.

Volumes have been written, hours wasted and headaches generated by trying to read the tea leaves when it comes to Microsoft's real intentions for consummating and keeping up the deal with Novell. Some variation of trying to maintain world dominance is often given as a guess. But another question could emerge in the coming quarters: Can Novell maintain momentum in Linux growth once the $240 million from Microsoft is completely booked?

Quite possibly, since Microsoft's Hyper-V could give Novell further reach into networks that run Windows-based servers. No one, though, is handing out coupons for OpenSUSE, Fedora 9 or Ubuntu, (they're free anyway), and they all seem to work OK on Hyper-V so far.

Update: Matt Asay, whose company, Alfresco, is a Novell partner, suggests that this item is misleading because the amount of Microsoft-invoiced Linux revenue that Novell books is declining over time, while Novell-organic Linux revenue is increasing.

"Novell continues to make money from the Microsoft deal. But the value of that deal is decreasing over time as Novell begins to stand on its own," he writes.

Well, yes and no.

Yes, the aggregate amount of Microsoft coupon dollars that's left for Novell to invoice will decline every quarter until it's all gone. But consider that three quarters ago Novell invoiced $14 million worth of Microsoft coupons as part of its total of $38 million of Linux invoices overall. In the quarter that most recently ended, Novell invoiced $16 million worth of Microsoft coupons as part of its total of $38 million of Linux invoices overall.

So for now the numbers vary quarter to quarter. Once the $240 million from Microsoft is completely booked, then Novell will be on its own.

SHARE THIS ARTICLE