Meanwhile, Microsoft CEO Steve Ballmer was in India and told India's Economic Times how he'd love to cut a similar deal "with anyone who distributes Linux software, Red Hat, whoever else."

Microsoft is going to pay Novell $240M upfront for those 350,000 SUSE Linux Enterprise Server subscription vouchers it said it would distribute in the next five years. It could sell them too. CIBC World Market did some back-of-the-envelope calculations and says the number implies an annual ASP per SLES subscription of roughly $685.

Microsoft is also supposed to spend $60M between now and January 1, 2012 marketing Linux-Windows virtualized scenarios and spend another $34M on the dedicated sales force it puts in the field.

For all of Ballmer's talk of a similar deal with Red Hat, it appears that Novell has a three-year exclusive on the virtualization-through-certificate program. Novell notes that IDC projects the market for virtual machine software will be worth $1.8BN by 2009.

Microsoft is also going to pay Novell $108M upfront under their shiny new "patent cooperation agreement" and Novell in turn will pay Microsoft at least $40M over five years - something like $8 million a year - "based on percentages of Novell's Open Platform Solutions and Open Enterprise Server revenues" - OES being Novell's mixed NetWare/Linux package and Open Platform all its Linux stuff.

Novell was at pains to explain that it wasn't paying Microsoft patent protection since the Free Software Foundation (FSF), the keeper of the GPL flame, at the mere mention of a patent agreement last week, started protesting that Novell couldn't - under section 7 of the GPL - distribute Linux if it was acknowledging patent infringement.

Novell claims it doesn't acknowledge that Microsoft has IP in Linux but the way the Microsoft and Novell attorneys sidestep the issue is by having Microsoft promise not to sue the SUSE customer, leaving Novell out of the equation.

Novell spokesman Bruce Lowry declined to explain exactly what Novell is paying Microsoft the $40M for or what Novell patents Microsoft is interested in. It's "just the way the deal was financially structured," he said. Whether that satisfies FSF attorney Eben Moglen remains to be seen. Novell is still negotiating with him, Lowry said.

Novell also posted a new FAQ trying to address the flood of questions it's been getting about the Microsoft deal from the open source community. In it, it says the $40M is "for Microsoft's covenant directly to Novell's customers."

So is Novell paying Microsoft to go out and scare Red Hat users?

In a canned statement, Novell general counsel Joseph LaSala said:

"Many people want to know whether this agreement is compatible with Novell's obligations under the GPL, especially section 7. This was an important consideration for us as well. Under the patent cooperation agreement, Novell's customers receive directly from Microsoft a covenant not to sue. Novell does not receive a patent license or covenant not to sue from Microsoft, and we have not agreed with Microsoft to any condition that would contradict the conditions of the GPL. Our agreement does not affect the freedom that Novell or anyone else in the open source community, including developers, has under the GPL and does not impose any condition that would contradict the conditions of the GPL. Therefore, the agreement is fully compliant with the GPL."

There are exceptions to the "won't sue" covenants that aren't spelled out.

Rumor - underscore rumor - has it that Microsoft did the Novell deal because Novell threatened it with IP, which might explain why Microsoft is paying Novell $108M under their "patent agreement." As a side benefit, Microsoft gets to threaten Red Hat and try to contain Linux to a guest on a virtualized Microsoft infrastructure, work up to staring down VMware - especially now that VMware has taken to articulating its hopes of ending the dominance of the operating system - and perhaps even suggest to Novell that pushing Linux on the desktop is fruitless anyway.

See http://www.novell.com/linux/microsoft/faq_opensource.html

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