Novell prepares to take on Red Hat

NEW YORK (11/04/2003) - Novell Inc.'s purchase of Linux developer SuSE Linux AG sets the company up to build a full portfolio of Linux-based software and to challenge Red Hat Inc. as the leading vendor of corporate Linux products, Novell executives said Tuesday in a conference call following announcement of the US$210 million acquisition.

Industry analysts agreed that the purchase, coupled with Novell's August buyout of Linux server and desktop software developer Ximian Inc., makes it a formidable player in the evolving Linux market.

"No one offers a directly competitive solution as broad as what Novell has," IDC analyst Al Gillen said.

Novell, based in Provo, Utah, has been working on developing a new software suite of Linux networking services called Novell Nterprise Linux Services, which a spokesman said is now in beta testing and scheduled to ship by the end of the year.

Owning a Linux operating system complements that suite, Gillen said. With the SuSE operating system, the upcoming Nterprise services, and the software picked up in the Ximian purchase, Novell can offer a broad Linux platform robust enough to compete against Windows and Unix, he said.

Novell Chairman and Chief Executive Officer Jack Messman made clear during the conference call that his company isn't just seeking to take share from the makers of other operating systems. It's also gunning for the current Linux market leader, Red Hat.

"We will now be the only $1 billion company offering a full Linux stack, from the server to the desktop," he said. "Together, (Novell and SuSE) are an effective competitor to the current number one company in Linux."

Novell won't immediately end its support for Red Hat operating systems, but it will now lean heavily in favor of SuSE, said Novell executive Chris Stone, who also participated in the conference call.

"We do expect to continue to provide certification on Red Hat for a period of time, and we'll see how that goes, but as of now, obviously, SuSE is our lead platform," Stone said.

Novell executives sought to reassure SuSE users that Novell will be a good corporate parent for SuSE's technology. Novell will continue supporting and contributing to the open-source community, Messman said. SuSE CEO Richard Seibt said teaming with Novell will help SuSE expand its worldwide reach.

One current SuSE customer said he's optimistic the acquisition will benefit users.

"I definitely view the acquisition as a positive move," said Peter Laubsch, IT director of SuSE customer ARS Altmann AG, in Germany. "It will give SuSE a larger global reach and additional financing for product development."

While SuSE has a strong presence in Europe, it hasn't made comparable headway in the North American market, a problem Novell is well positioned to address, said analyst John Enck of Gartner Inc. The acquisition also helps Novell tap into the promising enterprise Linux market at a time when the company has been struggling to find new growth areas, he said.

Novell will need to be careful, though, in balancing the proprietary nature of its products with the open nature of SuSE's, Enck cautioned.

"Novell has to continue convincing the open-source community that this is a good thing," he said.

(John Blau, in Dusseldorf, Germany, contributed to this report.)

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