Analysis: Industry upbeat about Novell-SuSE deal

Computing industry stalwarts such as HP, Oracle and even Microsoft have welcomed Novell's planned acquisition of SuSE Linux, saying the move will mean a financially stronger business partner for their own wares.

Novell, which has struggled for years to recover from Microsoft's victory in the server operating system market, announced on Tuesday its $210m plan to acquire SuSE Linux, the second-ranked seller of the open source operating system. The move would mate Novell's higher-level server software with SuSE's operating system foundation, the companies said.

The acquisition plan generated some angst among Linux enthusiasts who fear Linux companies are leaving behind hobbyists and home users but corporate computing powers generally welcomed the move.

"Customers went through this period where they were willing to buy from start-ups but that fad has run its course. Now customers are looking to buy from viable, long-term, stable players," said Martin Fink, VP at HP's Linux operation. With Novell's acquisition of SuSE, "what changes is the financial wherewithal behind the company, the global presence and support that's behind it as well".

HP sells servers that come with Linux from SuSE and its rival, number one Red Hat. In addition, it has a long relationship with Novell.

SuSE Linux will become a more compelling product for server companies to sell with the addition of Novell's software stack - seasoned products for email, file storage, print services, website hosting, for example - said Gartner analyst John Enck. "Novell also could help SuSE expand geographically out of its European stronghold," he added.

"I think SuSE is going to be looked at as a more favourable candidate" for partnership, Enck said.

Indeed, Oracle, the database giant that's betting heavily on Linux, agreed. "Novell's acquisition of SuSE Linux will strengthen SuSE Linux," leading to wider use of the software, the company said in a statement.

Computer Associates called the acquisition plan "excellent for the industry" and anticipated the arrival of Novell's global support abilities.

The strongest endorsement, however, came from IBM, the most powerful Linux advocate in the industry, which said it would invest $50m in Novell upon completion of the SuSE acquisition, expected by January 2004. IBM said the move ensures a future for Linux on its four server lines and as a foundation for its extensive server software collection.

Even Microsoft, the company with the most to lose from Linux's success, welcomed the move in its own backhanded way.

Microsoft said the acquisition is evidence that business practices of the proprietary software world - fixed release dates, products that go different directions off a common base - are necessary to make open source Linux a business success.

"The Novell and SuSE announcement is further evidence of the trends of consolidation and commercialisation in the Linux industry," said Martin Taylor, general manager of Microsoft's platform strategy, in a statement. The acquisition plan "puts additional commercial pressures on Linux".

But Microsoft shouldn't be happy, Gartner's Enck said. "They have to see the combination of Novell and SuSE as stronger than either one separately. Novell was already on a route to offer a competitive stack to the Microsoft server environment, and [the acquisition plan] strengthens that," he said.

Red Hat also stands to lose at the hands of Novell's software, he added. "I think this is a challenge to Red Hat. The Novell [software] stack is going to have components that have been in the market for years. It's going to be hard to compete against that," Enck said.

John Young, VP of marketing for Red Hat, had a rosier view. "Novell will be carrying the message that Linux is a strategic platform. As customers consider their Linux options, I'm absolutely sure Red Hat will be on their radar," said Young, who took over Red Hat's marketing group in August.

Sun Microsystems, which sells servers with both Red Hat and SuSE's Linux, won't be affected by a change in SuSE management, said John Loiacono, VP of Sun's operating platforms group. But he said the consolidation to just two business-oriented Linux sellers went faster than the company expected and that consolidation could damage Linux.

"The fact is, Novell/SuSE Linux is different from Red Hat. With the extensions these guys put on there, they get more and more differentiated," Loiacono said. What Sun would prefer is standardisation, so software could run on any version of Linux. "What we don't want to see is a repeat of what we took part in, in the early 1990s: the Unix fragmentation."

Linux analyst Stacey Quandt of the Open Source Development Lab sees more competitive pressure on Sun with the arrival of Novell's software on Linux.

"Sun should certainly be worried," Quandt said.

Stephen Shankland writes for CNET News.com.