Dark horse Attachmate buys Novell, Microsoft helps

VMware wanted to buy Novell, but the virtualization company didn't want to buy everything that Novell's board wanted to sell. At the same time, Microsoft had made it clear that it hated the idea of VMware, a Microsoft rival, ending up as Novell's owner. The result was that Attachmate bought Novell for $2.2 billion while Microsoft paid $450 million for as yet unnamed Novell intellectual property.

Attachmate has agreed to acquire Novell for $6.10 per share in cash. Attachmate, which got its start as a terminal emulation company in 1982, is privately held. Its primary owners are the private equity firms Francisco Partners, Golden Gate Capital and Thoma Bravo. Today, the Attachmate side of the company still works in X Window and terminal emulation. Its other half, NetIQ, sells and services systems and security management software.

Since Attachmate is a private company, it doesn't have to announce earnings. That said, it seems highly unlikely that Attachmate alone can afford Novell's multi-billion dollar price tag. The funding must be coming from its private-equity owners and possibly other partners.

While none of the parties to this deal have talked to me, sources close to the buyout tell me Attachmate and Microsoft partnered up to make the acquisition sweet enough for Novell's board.

Specifically, in its press release, Novell stated: "Novell also announced it has entered into a definitive agreement for the concurrent sale of certain intellectual property assets to CPTN Holdings LLC, a consortium of technology companies organized by Microsoft Corporation, for $450 million in cash, which cash payment is reflected in the merger consideration to be paid by Attachmate Corporation."

At this time, we don't know exactly what Microsoft has bought. We do know that Microsoft's goal of making sure Novell didn't end up in VMware's hands has been achieved. It's also likely that Novell's long-running WordPerfect lawsuit against Microsoft is now dead. And Microsoft may have gained intellectual property rights that it believes could be used against Linux vendors that don't partner with Microsoft.

As for Novell's future, Attachmate will split Novell into two business units, Novell and SUSE, to go with its other holdings, Attachmate and NetIQ. In a statement, Ron Hovsepian, president and CEO of Novell said, "We are pleased that these transactions appropriately recognize the value of Novell's relationships, technology and solutions, while providing our stockholders with an attractive cash premium for their investment ... We also believe the transaction with Attachmate Corporation will deliver important benefits to Novell's customers, partners and employees by providing opportunities for building on Novell's brands, innovation and market leadership."

In the same statement, Jeff Hawn, chairman and CEO of Attachmate, said, "We are very excited about this transaction as it greatly complements our existing portfolio. Novell has an established record of innovation, impressive technology and brand assets, and a leading ecosystem of partnerships and talented employees. The addition of Novell to our Attachmate and NetIQ businesses will enhance the spectrum of solutions we can offer to customers. We fully support Novell's commitment to its customers and we look forward to continuing to invest for the benefit of Novell's customers and partners."

Novell's customers and partners aren't too sure that this new ownership will be to their benefits. While no one was willing to go on record yet, several major partners said that that they would be reconsidering their strategic Linux relationships as a result of the deal. Until it becomes clear exactly what will be happening with Attachmate's SUSE and how Microsoft fits into this deal with its intellectual property purchase, I think any Novell SUSE Linux customers or partners would do well to be cautious for the next few months.

Copyright © 2010 IDG Communications, Inc.

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