By Stephen Shankland, 2 August 2004 08:35
NEWS Sun Microsystems is toying with the idea of buying Linux company Novell, claiming that springing for the $2.64bn company would hurt rival IBM.
Sun COO Jonathan Schwartz, said: "With our balance sheet, we're considering all our options. What would owning the operating system on which IBM is dependent be worth? History would suggest we look to Microsoft for comparisons."
IBM famously relied on Microsoft for an operating system for its personal computers. Schwartz said in a Sunday blog posting that IBM relies on Novell's SuSE Linux as a competition to keep number one Linux seller Red Hat from growing too strong.
But several factors could reduce the likelihood of such an acquisition. First, though Sun has cash and marketable securities of $7.61bn, Novell isn't cheap, with a market capitalisation of $2.64bn as of 30 July.
And Sun had an opportunity to buy SuSE Linux for much less in 2003 - indeed, it made an offer that Schwartz said forced Novell to increase its $130m bid. Novell ultimately paid $210m, receiving a $50m investment from IBM as part of the deal.
In addition, Sun's Java Enterprise System server software heavily overlaps Novell's software line. Schwartz said Novell's non-SuSE products are "far less interesting".
Novell and IBM couldn't immediately be reached for comment.
The possible acquisition was first reported by the Wall Street Journal.
Since taking over as Sun's number two executive, Schwartz has worked on several radical changes at Sun, for example, bringing its server software to rival operating systems and bringing its Solaris version of Unix to Intel's Itanium and IBM's Power processors.
Acquiring SuSE Linux, which runs on IBM's Power servers and mainframes, could speed Sun's effort to spread Solaris to other servers, Schwartz said.
Eventually, Sun plans to make Solaris open-source software.
Stephen Shankland writes for CNET News.com
Comments
There are 6 comments. Join the discussion
1. anonymous
As an ex-Novelli I've heard more rumours of takeover in the past 10 years than I care to remember. Maybe this one will resurrect the No.1 Novell rumour... that IBM will acquire them. Whichever way it goes, I’ll be happy as long as it pushes Novell's stock back above $14 so I can get some value from my residual shareholding!
2. Anonymous
I think this could only be another rumour that goes nowhere - Novell just doesn't fit Sun in any way shape or form. Novell is on its way to being somebody and Sun is on their way to being a nobody, so how would this benefit Novell
3. Andrew Libby
In some respects I think it makes sense for Sun, Novell has a lot to offer. Between Ximian and Suse there is a lot to gain, plus I believe they package Suse on some of their machines. They would gain back some credibility with the Linux community. They would also now have a real Directory, and could start competing with Microsoft in that area. Which is interesting considering how Sun wants to compete with .Net and Novell is building Onenet. The addition of both Red Carpet and Zenworks should be very interesting to Sun. How long do you think it would take them to be deploying updates for Solaris via Red Carpet...
However, I don't think it's worth dropping several billion to try and piss off IBM. That would require a lot of work at Sun and I don't know if they really want to tackle it. There isn't a way that this deal benefits Novell, so I don't see them going for it. I think it's just more FUD by Sun as part of their sleeping arrangement with Microsoft and SCO. If it actually happens Netware dies, Suse might survive (Sun is afraid of Linux), and some stuff will be taken from Novells other offerings.
If they are serious it will be to take a competitor out, and take some of the things the competitor has to improve their own offerings. Novell and Suse will be gobbled up, and that would be a major loss. Considering how Sun has been doing recently if this goes down then it will be bungled horribly.
But that's my 2 cents
Andy
4. John Brookes
Sun have lost the thread if they think IBM are their main competitors - they would do better to admit that Microsoft is the opposition and a strong Linux community is the only real opposition.
5. Jay Bennie
People seem to think this is just about linux - but sun would also be able to level the playing field in the competition between java and .net. Novells recent..ish aquisition of Ximian is more likly to be the reason that sun are interested, a solaris system capable of running java and .net(Ximians mono product is .net for unix system) applications is more important in the long term. However untill Sun do somethin about the cost of there Sparc HW, IBM will continue to have the competitiv egde as PowerPC64 technologiy bypasses SPARC oven the next few years, as a result sun need to buy time to address there processor issues, Suse Linux is a distraction, The OS is no longer important, the runtime environments of java and .net neutralise the competition at the OS level and take competition back to the application level.
6. anonymous
I fully agree that this is just another of those good for nothing rumor. But certainly hope that someone sensible company will buy up Novell so that at least the share has a chance to go beyong $14 and let us recoup some money.
Sun is in deep shit and it will take more than just buying Novell to get them back into a viable company. And SUN never knew how to sell software, they gave them away, which is their biggest mistake.