Update: Novell buying SUSE Linux to expand its Linux reach

Computerworld - Just three months after it bought Linux desktop vendor Ximian Inc. (see story), Novell Inc. surprised the Linux world today by unveiling plans to acquire SUSE Linux AG.

In an announcement this morning, Novell said it's buying SUSE for $210 million in cash to help expand its foothold in the Linux marketplace. In April, Novell announced plans to adopt Linux as a migration path for its NetWare network operating system (see story).

Jack Messman, CEO of Novell, said in a statement that the acquisition is part of his company's response "to customer demands for open, standards-based computing ... and Linux is an increasingly important part of that strategy."

"The acquisition of SUSE Linux will complete Novell's ability to offer enterprise-class Linux solutions to our customers from the desktop to the server," he said. "Novell is bringing our significant resources to bear to help customers adopt Linux with more confidence, giving them the freedom of choice Linux provides without the anxiety over whether an open-source solution can truly be relied on for mission-critical functions.

"We chose SUSE Linux because they are a clear market leader in Linux technology for the enterprise," Messman said.

Richard Seibt, the CEO of Nuremberg, Germany-based SUSE, said in a statement that the combination of the two companies is a good fit. "Novell understands the power of open, standards-based computing and has been moving in that direction for some time. Novell's global reach, marketing expertise and reputation for security, reliability and global enterprise-level support are exactly what we've been seeking to take SUSE Linux to the next level."

The deal, which is subject to regulatory approval, is expected to close by the end of its first fiscal quarter in January.

Analysts said the Novell move is a good one, as long as SUSE is given the freedom to pursue its successful past partnerships with other vendors.

Novell "clearly saw this as an opportunity to breathe new life" into its product lines, said Dan Kusnetzky, an analyst at IDC in Framingham, Mass. For SUSE, "hooking up with Novell gives them an established relationship" with many potential new customers and "opens the door for a great deal more opportunity for SUSE," he said.

One loser, however, could be SUSE rival Red Hat Inc., which is the dominant Linux vendor in the U.S. market, Kusnetzky said. Raleigh, N.C.-based Red Hat has recently made stricter moves with licensing and support contracts and fees that have raised concerns in the open-source community, he said. That could help steer business toward SUSE and Novell.

Bill Claybrook, an analyst at Aberdeen Group Inc. in