Sun Purchase Novell? Not Likely, Say Solution Providers
Yet that's the scenario posed in published reports Monday that state Sun is considering purchasing Novell solely for the purpose of obtaining the SuSE Linux operating system.
The reports were fueled by comments made by Sun President and COO Jonathan Schwartz that it would be a good idea for Sun to own the SuSE Linux distribution now that IBM is increasingly cozying up to Novell/SuSE as it faces stiffer competition from that other leading Linux vendor, Red Hat.
While acquiring more software to beef up both its Linux server and desktop OS endeavors wouldn't be such a bad idea, the economics of the deal just don't add up, solution providers and analysts said.
"Sun purchasing some of Novell's Linux-related assets makes sense--particularly, Ximian and SuSE," said Marc Maselli, president of Boston-based solution provider Back Bay Technologies. "But these companies would have cost Sun only a few hundred million last year. Surely Sun wouldn't buy the multibillion-dollar giant Novell just for those assets."
Michael Dortch, principal business analyst for the Robert Frances Group, put his opinion on the economic value of such a deal more bluntly. Dortch said that if Sun did indeed purchase Novell, Sun Chairman and CEO Scott McNealy's "single biggest challenge" would be to convince the marketplace it was a good investment.
"Otherwise, he faces having to hear the Sun-Novell deal described in terms like the ones with which he once described his expectations of the HP-Compaq merger--something about two garbage trucks headed toward each other at high speed, as I recall," Dortch said.
When asked directly by CRN if he was serious about Sun's intent to purchase Novell--or, in a more likelier scenario, if he had made the comments to stir up controversy on the eve of this week's LinuxWorld conference--Schwartz steered CRN to a recent entry in his blog about how the deal makes sense for Sun.
In that entry, he posited that IBM faces a dilemma not unfamiliar to Big Blue: The company has bet big on an operating system it doesn't own--namely, Linux. This is similar to how IBM encouraged customers to adopt Microsoft Windows in the early days of the PC, a deal that benefited Microsoft enormously, Schwartz wrote.
In the same way, Red Hat could stand to gain richly from IBM's support of its Linux distribution, leaving IBM hanging once again without valuable OS intellectual property to call its own. And that might be fine, if Red Hat weren't raising prices and becoming increasingly competitive with IBM by adding a Java application server to its portfolio that competes with IBM's WebSphere software, Schwartz wrote. These pressures mean IBM must find another Linux vendor to support, forcing the company to push customers to buy SuSE Linux instead of Red Hat.
This is where Sun's purchase of Novell, which owns SuSE Linux, could be a major boon for Sun, according to Schwartz. "IBM is in a real pickle," Schwartz wrote in his blog. "Red Hat's dominance leaves IBM almost entirely dependent upon SuSE/Novell. Whoever owns Novell controls the OS on which IBM's future depends. Now that's an interesting thought, isn't it? "
An interesting thought, perhaps--but also the source of a gaping hole in Schwartz's argument.
The idea that IBM will completely shut out Red Hat in favor of SuSE is, at this point, mere speculation. Though IBM's relationship with Novell/SuSE is getting increasingly tight--and IBM even kicked in a $50 million investment in Novell to help the vendor purchase SuSE--the company continues to support both Red Hat and SuSE Linux distributions.
Moreover, Red Hat owes a lot of its success to IBM because IBM's support of Red Hat Linux is what put the Raleigh, N.C.-based company's name on the map. Because of this, it's unlikely the two would ever completely part ways, said Joe Lindsay, CTO of eBuilt, a solution provider in Costa Mesa, Calif.
"Red Hat can't shut out IBM," Lindsay said. "IBM is one of the best things that ever happened to Red Hat."
And even if IBM sent all of its Linux customers to SuSE's camp and Sun bought SuSE, IBM is perfectly capable of taking the Linux kernel, building its own distribution of Linux and packaging it and selling it to customers, Lindsay said.
"If Sun buys Novell, they take away from IBM the ability to buy a company that knows how to package and distribute an OS called Linux," Lindsay said. "IBM on its own packages and distributes at least four proprietary OSes. It wouldn't be hard for them to pick that up if they wanted to."
For now, the industry will have to wait and see if Schwartz's latest idea of a fantasy acquisition for the beleaguered Sun will indeed become a reality. Until then, it might be wise for McNealy and Schwartz to consider carefully whether their financially strapped company wants to spend a substantial chunk of Sun's $7 billion-plus cash balance in a battle with IBM--one that Sun is not guaranteed to win.