Summary: In recognition of the fact that companies routinely combine Windows software with a Linux open-source operating system, Microsoft and Novell reached an agreement yesterday. Microsoft makes its money selling Windows and its Office suite software, while Novell profits off providing customer service for its version of Linux, Suse Linux. "This builds a very important intellectual-property bridge between the open source and proprietary sides of software," -- Brad Smith, Microsoft's general counsel. CEO Steve Ballmer added: "It all comes down to recognizing there is a mixed environment out there." Novell shares gained $0.92 (+15%) on the news, while Microsoft shares were flat. One company that continues to suffer is Red Hat, the nation's number one provider of Linux-based customer support services: Oracle recently announced it would begin providing support for Red Hat's version of Linux in a bid to undercut the company. Now, Microsoft has also seemingly snubbed them, choosing to partner with America's number two Linux company instead of Red Hat, whose shares fell nearly 5% on the news. While financial details of the deal were left undisclosed, the Wall Street Journal reports Microsoft will be paying Novell, "for a minimum of roughly 70,000 'coupons' that Microsoft customers can convert into annual subscriptions to receive support." The coupons will be worth between "$400 and $1,500 a year according to Novell Chief Executive Ron Hovsepian," according to the Journal.
Related links: Linux v. Microsoft: Third World Showdown - SeekingAlpha • Microsoft and Novell - Foes Now Friends? [Digg.com] •Yahoo! Dips its Toe Into Open Source • Oracle's Linux Announcment: A Load of Bull? • Panic Exit From Red Hat Shares - Overdone? • Microsoft, Novell Reach Accord on Linux [WSJ]
Potentially impacted stocks and ETFs: Microsoft (NASDAQ:MSFT), Novell (NASDAQ:NOVL), Red Hat (Red Hat), Oracle (NYSE:ORCL) • iShares Goldman Sachs Software Index (NYSEARCA:IGV), PowerShares Dynamic Software (NYSEARCA:PSJ)
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