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Novell takes control of India venture

The software maker bets on the emerging technology market for Linux software by acquiring the other half of Onward Novell in India.

Novell on Thursday confirmed it would acquire the other half of its joint venture in India, deepening the software company's commitment to a promising market for its Linux operating system platform.

The purchase, which Novell plans to formally announce Friday, will give Novell complete control over its Indian sales and distribution branch and enable it to fully integrate its Indian operations, said Bruce Lowry, a spokesman for Waltham, Mass.-based Novell.

Terms of the deal were undisclosed. The transaction is expected to close by Oct. 31, the end of Novell's fiscal year.

Indian software entrepreneur Harish Mehta owned half the venture, called Onward Novell Software (India), through his wholly owned company, Onward Technologies. Onward Novell was "the most profitable subsidiary of Novell," Mehta said in an interview.

Lowry declined to confirm or deny the statement by Mehta, who has been the venture's managing director and who will stay on in an advisory role.

Roughly 10 percent of Novell's 6,000 employees worldwide are based in India, where the company opened a development center in Bangalore in 1994, two years after forming its joint venture in the Indian city.

In India, Onward Novell's main networking business has a roughly 70 percent market share in segments such as banking technology. Since Novell's acquisition of Suse Linux last year, the local Novell unit has focused on stoking demand for Linux software in the personal computer and applications markets, targeting government institutions, universities and manufacturers.

"We look at India, China and Brazil as important emerging markets for open source," Lowry said.

Taking on Microsoft
Analysts and other observers said Asia and Central America could be fertile ground for Novell in its battle against Redmond, Wash.-based Microsoft, whose Windows platform dominates the operating system market.

"Especially in those countries where Microsoft is trying to enforce its copyright and license structure, in my mind that is what is going to push open source in those countries," said Osman Ahmad, president of TieBridge, a technology consultancy in Falls Church, Va.

"A very large number of Windows users are not properly licensed," Ahmad added, noting that the situation is especially prevalent in India and China, "where the legal system has been somewhat lacking or they don't have enforcement resources."

But Terry Tillman, an analyst with SunTrust Robinson Humphrey, said the company's future remains cloudy. Roughly 40 percent of Novell's revenue still comes from NetWare, the company's legacy operating systems software, which has seen ongoing double-digit declines.

"You're looking at a business that is a little more than a third of its original size," said Tillman, who estimated the company's NetWare business, which generated $1 billion in 1993, brought in revenue of less than $300 million in 2004.

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