Microsoft and Novell - who would have thought? Poor RHAT

Posted Nov 3rd 2006 11:51AM by Melly Alazraki
Filed under: Deals, Good news, Bad News, Industry, Consumer Experience, Competitive Strategy, Google (GOOG), Microsoft (MSFT), Sun Microsystems (JAVA), Oracle Corp (ORCL), Novell Inc (NOVL), Red Hat Inc (RHT)

Yesterday afternoon came a surprising announcement of partnership from two old-time rivals, Microsoft Corp. (NASDAQ:MSFT) and Novell, Inc. (NASDAQ:NOVL). The two said they would collaborate to build, market and support a series of new solutions to make Novell and Microsoft products work better together. That is, Linux Suse, the operating system distributed by Novell, would be able to work with Windows, Microsoft's operating system. Novell shares were up over 15% yesterday before the announcement on speculation/leaks.

Linux is a free open-source software platform, something Microsoft has been opposing for quite some time. In fact, Microsoft's very closed, almost paranoid approach to its proprietary software and code, as well as its dominance, probably caused the birth of Linux. In response to Microsoft's dominant position, programmers all around the world have developed a Unix-based operating system, collaborating and contributing to the system.

Novell had chosen a while back -- as Oracle, Corp. (NASDAQ:ORCL) had only last week -- to support the Linux platform. Now, with this truce--a technological and business partnership--the Linux system could increase even further in popularity, as evident by the significant share price hike of NOVL (even though the financial terms weren't disclosed).

Why would Microsoft choose to change its policy vis-a-vis Linux and open source? Well, many large companies and government offices -- estimated at 20% -- use both (Linux servers are more stable), and to facilitate operating both, Microsoft has decided to collaborate with Novell.

Another reason might be the growth of Web 2.0 applications from Google, Inc. (NASDAQ:GOOG), which had previously signed an agreement with Sun Microsystems Inc. (NASDAQ:SUNW) to help distribute OpenOffice, a free application similar to Microsoft's Office.

Regardless, this is another blow to Red Hat, Inc. (NASDAQ:RHAT), which was already hit by Oracle's announcement last week, as this gives credence to Novell's version of Linux. RHAT and ORCL are down more around 1% this morning, NOVL up another 2%, MSFT slightly down and SUNW down half a percent.

Tags: goog, google, linux, linux suse, LinuxSuse, microsoft, msft, novell, novl, oracle, orcl, red hat, RedHat, rhat, sun microsystems, SunMicrosystems, sunw, unix