Attachmate acquires Novell for $2.2 billion

Novell, a software company that rose to power along with Intel-based computers but failed to keep up with rivals such as Microsoft and Red Hat, announced today an end to its independence with a Microsoft-boosted $2.2 billion acquisition by Attachmate.

Under the agreement, privately held Attachmate will pay $6.10 per share for Novell, a 9 percent premium over Friday's closing price of $5.59 and a 28 percent premium over the last public trading day before Elliott Associates made an offer of $5.75 per share in March. Novell rejected that offer.

Microsoft's interest, though, apparently helped make a deal happen this time around. Novell is selling "certain intellectual property assets to CPTN Holdings LLC, a consortium of technology companies organized by Microsoft," for $450 million in cash that's part of the payment through Attachmate.

According to a regulatory filing, CPTN will get 882 Novell patents: "Also on November 21, 2010, Novell entered into a Patent Purchase Agreement...with CPTN Holdings LLC, a Delaware limited liability company and consortium of technology companies organized by Microsoft Corporation. The Patent Purchase Agreement provides that, upon the terms and subject to the conditions set forth in the Patent Purchase Agreement, Novell will sell to CPTN all of Novell's right, title and interest in 882 patents...for $450 million in cash."

Attachmate, which is run by an investment group led by Francisco Partners, Golden Gate Capital, and Thoma Bravo, describes itself as a company that "enables IT organizations to extend mission-critical services and assures they are managed, secure, and compliant."

"We believe this transaction is great news for our customers. Novell has a long history of innovation and market leadership, and this tradition will be preserved and built upon through this transaction," Novell Chief Executive Ron Hovsepian told customers in an e-mail about the deal.

Novell rose to success through sales of its NetWare operating system, widely used in the 1990s on Intel servers to run services used by PCs running Microsoft's DOS and Windows operating systems. It also sold higher-level server software for functions such as e-mail and, for a time, the commercial rights to AT&T's Unix and the WordPerfect suite of software that competed with Microsoft Office.

Microsoft's server software outpaced Novell's, though. The biggest attempt to fight back was the IBM-assisted acquisition of the second-place Linux seller, Suse. Novell's Suse Linux Enterprise Server (SLES), however, never truly rivaled Linux leader Red Hat in the marketplace.

Under Attachmate, Novell's product lines will be split into two groups, one for Suse and one for the other server software, the companies said.

Novell's server software portfolio was well made, but the company was beset by a series of "curses," said Gartner analyst Earl Perkins in a post about the acquisition.

"In most of those cases the company made a good-to-excellent showing of technology and was quick to improve upon it and in some cases to outpace its competitors both in terms of vision and architecture," Perkins said. "But not in execution."

What's Microsoft's angle?
There are many possible Novell IP assets Microsoft might be interested in--Unix copyrights that figured centrally in Novell's Linux-related fight against the SCO Group, for example.

Microsoft isn't saying.

"We are pleased to be a part of the acquisition of certain intellectual property assets of Novell. Microsoft looks forward to continuing our collaboration with Novell into the future, to bring mixed-source IT solutions to customers," said Horacio Gutierrez, Microsoft's corporate vice president and deputy general counsel of intellectual property and licensing, in a statement. The company declined to comment further.

If that statement is a hint, that could indicate the intellectual property could be involved in the 2006 partnership between Novell and Microsoft. Under that partnership, Novell agreed among other things to adapt Suse Linux to run well on Microsoft's Hyper-V virtualization software, which lets multiple operating systems run on the same server simultaneously. Microsoft and Novell delivered the software in 2008 that would let SLES run well virtualized on Microsoft's technology.

That partnership was controversial, largely because it also involved Microsoft selling "coupons" that granted the buyer rights to use SLES with the assurance that they needn't fear Microsoft patent infringement lawsuits for using Linux. Microsoft's years-long stance that Linux and other open-source software projects violate its intellectual property has not sat well with open-source advocates, and news that Microsoft might be expanding its portfolio of IP is the sort of thing that doesn't calm open-source nerves.

Novell didn't respond to a request for comment about the matter, but Hovsepian had this to say in his letter to his customers: "The sale of certain intellectual property assets will not impact customers. Customers will continue to be authorized to use Novell products under this intellectual property.

Another possibility could be Mono, Novell's open-source project that brings Microsoft's .Net foundation to Linux.

Whatever the assets, Mono will continue under the Attachmate banner. "After the Novell acquisition, Mono continues as is, but our paychecks will come from Attachmate instead of Novell," tweeted Mono leader Miguel de Icaza.

Matthew Eastwood, an IDC analyst, thinks perhaps Microsoft is interested in the data center management software from PlateSpin, which Novell acquired for $205 million in 2008.

Novell expects the acquisitions of the company and its intellectual property to close in the first quarter of 2011.

Updated 10:15 a.m. PT and 10:53 a.m. PT with further details on the acquisition and the patent sale.