Microsoft ups its anti-Linux crusade by $100 million. Novell and Red Hat profit

"Follow the money" was Deepthroat's suggestion to journalist investigators in the Watergate scandal. Several decades later, that same advice helps to unravel the mystery of why Microsoft keeps upping its investment in Novell's SUSE Linux certificates...while simultaneously denouncing Linux for violating its intellectual property and generally wishing that Linux would cease to exist.

As context, Microsoft and Novell today announced an expansion of their 2006 interoperability agreement, which included a controversial covenant not to sue over patent infringement. "The investment focuses on enhanced programs from Novell to provide tools, support, training and resources for customers seeking an enterprise-class Linux platform and specifically, the optimal interoperability solution between Microsoft Windows Server and SUSE Linux Enterprise Server," writes Fox Business.

But it's not the interoperability provisions that anyone is going to be talking about. It's the $100 million in additional SUSE Linux certificates that Microsoft is buying. I know from friends at Novell that customers are indeed lapping these up, but not for the reasons publicly stated (patent protection (Microsoft) and interoperability (Novell). No, the primary reason is that they are cheap.

With this underwriting of Linux by Microsoft, Novell is able to sell its Linux software at highly advantageous pricing. As Novell's Linux business has grown, it has been able to stand more and more on its own and discount less, but to follow Deepthroat's counsel, you really need to ask why Microsoft would want this.

How do the two companies benefit? As eWeek's Joe Wilcox suggests:

Novell's benefit is obvious, if not self-destructive. The deal allows Novell to exist in the shadow of Windows Server, sustaining on its table scraps. Microsoft can offer customers that simply must have some Linux servers a sanctioned source for good tools ensuring interoperability with Windows Server.

This, however, is probably not polite enough to Novell and is far too polite to Microsoft. Microsoft wants to kill Red Hat. Period. If Novell were the market leader, Microsoft would have done this deal with Red Hat. (That said, inside sources tell me that Microsoft spent nearly a year trying to get Red Hat to agree before it ever approached Novell.)

It's just business for Microsoft, and business is better when Linux is limping. So Microsoft is trying to kill off the Linux market leader by giving Novell a compelling differentiator. The day that Novell becomes a threat to Microsoft's business, however, is the day that the deal is shut down.

It may be too late at that point.

Novell, for its part, is playing a dangerous but currently highly profitable game. Microsoft has helped to rejuvenate its once lagging Linux business. While I don't like the patent provisions included in the deal, I think Novell has done a good job of largely side-stepping these provisions, however much hay Microsoft has tried to make of them.

$100 million is $100 million (added to the $240 million Microsoft paid Novell before), and this investment is clearly paying off for Novell, though it has yet to even remotely slow Red Hat's pace.

In short, while Novell is treading a dangerous line in this deal, the only loser so far in it is Microsoft. Red Hat continues to thrive. So does Novell's Linux business. Microsoft's Windows server business has shown no signs of slowing, either, but $340 million into its efforts to cripple Linux it has yet to demonstrate a dime's worth of return.

I used to rebuke Novell for its complicity in helping Microsoft with this deal, but I'm having second thoughts. Novell has never dampened its enthusiasm for Linux, though it has occasionally let its hunger for greater Linux revenue lead it astray in its marketing messages. People make mistakes. On the whole, however, Novell is playing Microsoft against Microsoft to its own profit, and has thus far done so with aplomb.

Whether Novell can continue to pull it off is a different question, but for now both Novell and Red Hat continue to grow, and Microsoft is helping to feed that growth (at least, on Novell's side). The dummy, it would seem, is Microsoft.