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Who'll Buy Novell First, Sun or IBM?

"If IBM acquires them, the community outrage and customer disaffection is going to be epic," says Sun's president and COO.

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    Even before LinuxWorld Conference and Expo opens here today in San Francisco, two of the main players, Sun Microsystems and Novell, have already hit the headlines. Might Sun possibly be contemplating using its substantial cash reserves to buy Novell, is the question of the day after a remark to the press - reported first in the Wall Street Journal - by Sun's president and COO Jonathan Schwartz.

    "With our balance sheet," Schwartz said in an interview on Sunday, "we're considering all our options."

    "What would owning the operating system on which IBM is dependent be worth?" he continued, going on to add a comment that has already unleashed considerable resentment and disbelief here among the Linux faithful in San Francisco: "History would suggest we look to Microsoft for comparisons," Schwartz remarked. 

    What the open source community is asking is whether Sun is perhaps just playing footsie with such an acquisition idea in order to steal the thunder from Novell's highly successful SUSE Linux distro. Certainly Sun's own Linux-based Java Desktop System, reviewed recently at LinuxWorld.com, will get a huge publicity boost.

    But what is the true story? Is Sun genuinely considering such an acquisition?

    The answer to that, undeniably, is yes. As befits a major public company with a long history in the technology industry - cash and marketable securities of $7.61 billion, according to the latest figures - Sun is in good financial health, balance sheet wise. It has deep pockets right now. As such it has every right to be looking at acquisitions, and Novell's market cap of $2.64 billion based on July 30 figures puts it within range.

    But the likely real story is that Sun is horrified at the thought that someone else might buy Novell. Especially if that someone else turned out to be IBM.

    "IBM is in a real pickle," Schwartz wrote yesterday in his increasingly widely read blog. "Red Hat's dominance leaves IBM almost entirely dependent upon SUSE/Novell. Whoever owns Novell controls the OS on which IBM's future depends. Now that's an interesting thought, isn't it?"

    The Schwartz blog continued:

    "But if IBM preemptively acquires Novell/SUSE, the world changes: Linux enters the product portfolio of a patent litigator not known for being a social-movement company. But where else will IBM go? With its current market cap, Red Hat seems unacquirable - but absent action, IBM's core customers will be eroded by Red Hat's leverage. And Sun's ability to leverage our open Solaris platform (on industry standard AMD, Intel or SPARC), or Java Enterprise System, even on IBM's hardware, gives us a significant - and sustainable - competitive advantage. With the demise of AIX, IBM is once again vulnerable." 

    "I'd keep a close eye on the Novell/SUSE conversation," Schwartz concludes. "If IBM acquires them, the community outrage and customer disaffection is going to be epic... but where else does IBM go?"  

    Meantime here at LinuxWorld, Sun will today announce availability of its Sun Studio 9 IDE, with C/C++ tools for building applications on Sparc, Xeon, and Opteron, and for Java Desktop System (JDS) 2003, SUSE LINUX Enterprise Server 8, and Red Hat Enterprise Linux 3, and will demonstrate its "SunRay" server software running natively on Linux.

    It remains to be seen what visitors to LinuxWorld will make of the fact that the Novell and the Sun exhibit booths are just a stone's throw from one another in the Moscone Center here in San Francisco.

  • More Stories By Jeremy Geelan

    Jeremy Geelan is Chairman & CEO of the 21st Century Internet Group, Inc. and an Executive Academy Member of the International Academy of Digital Arts & Sciences. Formerly he was President & COO at Cloud Expo, Inc. and Conference Chair of the worldwide Cloud Expo series. He appears regularly at conferences and trade shows, speaking to technology audiences across six continents. You can follow him on twitter: @jg21.

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