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November 07, 2006

Microsoft Spends $300 million to promote SUSE Linux

posted by MR WAVETHEORY at 11/07/2006 04:22:00 PM
Meet Suse, the frontman of the firm formerly known as Novell

Microsoft Corporation (Nasdaq MSFT) is paying Novell, Inc. (Nasdaq NOVL) $240 million upfront as part of a its plan to promote SUSE Linux according to press release. To put that into perspective, Novell has a market cap of $2.2 billion and cash of $1.3 billion. It's pretty amazing how much cash this company has. Now with another $300 million, that brings it to close to $1.6 billion of cash. Netting out the debt of $600 million, Novell has $1 billion in cash.

How does it stack up against Red Hat, Inc. (Nasdaq RHAT)? RedHat has a market cap of $3.2 billion and $837 million in cash but it also has $570 million in debt, so the net cash position is roughly $300 million.

Deal : $240 million upfront Plus $60 million of marketing

As part of the business cooperation agreement, Microsoft will make an upfront payment to Novell of $240 million for SUSE Linux Enterprise Server subscription certificates. Microsoft may use, resell or distribute them over the term of the agreement, allowing customers to redeem a single or multi-year subscription for upgrades, updates and technical support from Novell. Microsoft will dedicate $60 million total over the five year period for marketing Linux and Windows virtualized scenarios and will also spend $34 million over the five year term of the agreement for a Microsoft sales force devoted primarily to marketing the combined offering.

Patent Licenses: Another $108 million

Under the patent cooperation agreement, Microsoft will make an up-front net payment to Novell of $108 million, and Novell will make ongoing payments of at least $40 million over five years to Microsoft, based on percentages of Novell's Open Platform Solutions and Open Enterprise Server revenues.

If You Use SUSE Linux, Microsoft Will Not Sue You

Under the patent cooperation agreement, Novell's customers receive directly from Microsoft a covenant not to sue. Novell does not receive a patent license or covenant not to sue from Microsoft, and we have not agreed with Microsoft to any condition that would contradict the conditions of the GPL.

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