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October 27, 2005 | Comments: (0)
Memo to Microsoft : Buy Novell or JBoss, or both
In a previous post I suggested that Microsoft buy JBoss. After much thought and discussion, I think that Microsoft should also buy Novell (market cap of $2.8 billion). Not only would this give MS an instant place in the open source market but it would also allow them to cut marketing expenses geared toward killing Linux. With just RedHat left as the main enterprise Linux vendor IBM or HP would have to buy RedHat before MS stomped them out of existence. Novell sits with $1.6 billion in cash and revenues of $1.8 billion. This is far better than RedHat's $517 million in cash and revenues of $235 million, despite what Matt Szulik might lead us to believe.
Or, how about Microsoft buying JBoss? JBoss is a much easier pill to swallow-figure that acquiring JBoss wouldn't cost more than $200 million (being very generous) and MS has $37.75 billion in the bank. I bet they wouldn't even need an executive signature on that low of an expenditure. Think of the fact that Microsoft could own the most prevalent Java app server along with a Linux vendor. It's not that hard to imagine. And we certainly should be afraid.
Alternatively, Sun could buy JBoss and actually have a viable Java server product. The angle that puzzles me is why Sun didn't try to buy Novell or RedHat instead of piddling away $4.1 billion on StorageTek. Maybe they did and we don't know, but my guess is that short-term gain overpowered strategy. If Jonathan Schwartz wants us to believe him when talking about being open, blah, blah, blah where is the proof? CDDL? Nope.
Meanwhile, Sun investors approved the "anti-poison pill" initiative by an overwhelming 84 percent, but a second shareholder proposal to rein-in executive options failed to pass. This means that Sun can now be acquired, but not before Schwartz and McNealy manage to get as much stock as possible. Either way, that would be a shocker, I don't see the corporate culture surviving without McNealy.
How much is Novell actually worth?
Enterprise value (EV) represents a company's economic value -- the minimum someone would have to pay to buy it outright.
To calculate enterprise value, start with a company's market cap, add debt (found on a company's balance sheet), and subtract cash and investments (also on the balance sheet). To get total debt, add together long- and short-term debt.
Novell EV=$2.8b-$1.6b+600m
Novell Enterprise Value=$1.8 billion
Even if the purchase price was double the enterprise value, Novell is still a pretty good buy. Novell sits with $1.6 billion in cash and revenues of $1.8 billion. This is far better than RedHat's $517 million in cash and revenues of $235 million
Sun
Market cap: $13.3 billion
Cash: $3.40 billion
Microsoft
Market cap: $266.21 billion
Cash: $37.75 billion
Novell
Market cap: $2.8 billion
Cash: $1.6 billion
Revenue: $1.8 billion
RedHat
Market cap: $3.8 billion
Cash: $517 million
Revenue: $235 million
JBoss
Funding: $10 million
Valuation (this is a guess): $50 million
Posted by Dave Rosenberg on October 27, 2005 03:39 PM
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That is just a lot of mental masterbation worrying about brand buyouts and takeovers. With the GNU licensing there is an endless number of splits and forks to avoid proprietory names and licensing. If Suse and Redhat where lost , Debian or Madriva would become the "Linux Du Juir" and the number of developers would increase for those distros. There are currently too many developers working in parallel , and not together on any one given universal software issue as a team.
Posted by: Kajack at October 28, 2005 06:31 AMJust a quick point of correction from the Novell PR guy... Novell's revenues in the last fiscal year FY2005) were $1.166 billion, not $1.8 billion.
Thanks.
Posted by: Bruce Lowry at October 28, 2005 08:36 AMKajack - a small correction to your post: "Linux du jour"
Avez-vous un bon apres-midi.
Posted by: Walter Moore at October 30, 2005 09:36 AMThis would be a good move for MS if they could get away with it. But they are good reasons we they wont be able to:
1. It will bring the question of anti-trust actions to the fore again.
2. IBM will have no alternative but to try to block it, possibly by trying to purchase Novell iself.
Posted by: chemicalscum at October 30, 2005 09:43 AMAlso, something to think about.. would Microsoft be able to retain ALL of the key SUSE developers? The Ximian folks mean virtually nothing and the US Novell people who aren't working on SUSE mean nothing. Their marketing and sales people mean nothing. It's all about the S. ;) And I just don't believe that those at SUSE would stay to help Microsoft crush or hurt Linux. Then the result would be that Microsoft owns the brands Novell and SUSE.. while the real meat of the company jumps ship and goes to RH or Ubuntu.
Microsoft buying Novell would do nothing but get them in hot water with the U.S. Dept. of Justice, The European Union and the South Korean government.. just to name a few. It would be a stupid move and they'll never do it.
The whole blog is just silly speculation.
[Dave says: yes it is speculation]
Posted by: Ben Rosenberg at October 30, 2005 10:46 AMWhy would anyone want to further MS hold on the market? Is it becuase MS has always been on the side of the user? Is it because MS is a model net citizen? Is it becuase MS products have been safe, secure and innovative?
MS has been a bully for too long. Security only became an issue when the possibility of lost sales came to the forefront. MS does not want to cooperate with open standards, they want the world to use their "pseudo standards", with all the MS licensing restrictions. MS isn't very innovative, despite what they say. A great example of MS methodology is Internet Explorer. When IE became the dominant browser, development and new features basically stopped. IE6 has been around since 2002, IE7 is coming in 2006 and the only reason it is coming is because the competition is beginning to erode MS market share.
The only way MS will keep creating new and better products is if there is competition.
Why would anyone want MS to be in a stronger position?
Alex C.
[dave responds: I was being facetious about the whole thing]
Um, it's "mental masturbation" with a 'u', not mental masterbation with an 'e'. ;-)
Posted by: Charles McKnight at October 30, 2005 08:20 PMMaybe you (the author) should come to the point (which is missing in my opinnion)?
What is really bad in this situation?
That money can buy things like companies?
That Microsoft gained so much by selling its products?
But please don't spread FUD!
Posted by: euneuber at October 31, 2005 12:16 AMI can just imagine Microsoft getting its hands on Novell's SUSe's Linux, with Microsoft Windows Vista in the background and Linux being GPLed...
Nobody would believe that Microsoft is capable of building a Chinese Wall between Linux and MS WinVista; they completely failed to do any such thing when they got chummy with GO and its PenPointOS. There'd be questions of when is Microsoft going to be porting MS Office to Linux; endless speculations on the amount of GPLed software in MS WinVista; and countless demands to show that they haven't committed copyright infringement ...
In a word, "corporate suicide".
Posted by: Wesley Parish at October 31, 2005 01:31 AMPlease buy them. Watch how fast new distros move up. Only it will not be 1, but at least several others (mandrake, ubanto, etc). They will all become profitable overnight. In addition, just about every linux developer will jump ship to a different distro.
One of the biggest mistakes that MS can make is to buy one of the distros. And I suspect that even they are bright enough to realize that.
Posted by: grr at October 31, 2005 03:24 AM
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