Novell, VMware Reportedly in Talks over SUSE Linux Sale

Just weeks after signing a deal to make VMware an even bigger Linux partner than it had been to date, Novell is reportedly considering selling off its Linux business to VMware.

According to the Wall Street Journal, Novell is in “advanced talks” with at least two buyers, one of which is VMware, which is interested in the Linux business. The Journal said that the other potential buyer is Attachmate, which is interested in others parts of the Novell portfolio, including the Netware operating system.

VMware’s pursuit of Novell’s SUSE Linux business is a solid strategic play as the company vies to offers a complete cloud stack.

In a recent announcement of its cloud strategy, Paul Cormier, executive vice president of Red Hat, proclaimed that only Red Hat and Microsoft had the technical wherewithal to deliver a true cloud stack from top to bottom.

In fact, Cormier said, Red Hat is the only vendor that has the infrastructure capable of delivering an open-source, flexible cloud stack, incorporating operating system, middleware and virtualization.

Meanwhile, in an interview with eWEEK, Tod Nielsen, chief operating officer of VMware, said “The operating system alone is not the only factor. You have to look at what are the core services. The operating system is at best a character actor in this play.”

Nielsen’s observation is correct in that VMware has built and continues to build and acquire the core services that make up a cloud stack. However, an operating system could be a checklist item for customers who want to go with a vendor that delivers its own OS. Enter Novell, and VMware’s interest in SUSE Linux.

In an August press release describing extensions to its cloud strategy, Red Hat said its stack is designed to run consistently across physical servers, virtual platforms, private clouds and public clouds. Red Hat's comprehensive solution set enables interoperability and portability, recognizing that customers have IT architectures composed of many different hardware and software components from various vendors. Cloud Foundations is offering capabilities that allow customers to use multiple clouds effectively.

Red Hat introduced Cloud Foundations in June 2010 during the Red Hat Summit in Boston. Cloud Foundations includes Red Hat's comprehensive line of products for implementing a private cloud, coupled with a detailed reference architecture and implementation cookbook, consulting services, and training offerings.

Meanwhile, Novell has been on the block for some time. The recent deal with VMware to deliver the SUSE Linux Enterprise Server for VMware helped buoy the company, but more needs to be done to see Novell return to relevance.

Moreover, according to the Wall Street Journal:

“The terms and structure of these potential deals are still being discussed. One factor slowing discussions is determining how to divide Novell's sales force, as well as its patents and other intellectual property. These complications are slowing an announcement, which could still be weeks away, the people familiar with the matter said. A final deal may ultimately break down, they cautioned.”

In a research note about a pending acquisition Jeffries & Co. said:

“VMware could leverage their #1 position in server virtualization and move beyond their core roots inside the corporate firewall by bundling the SuSE OS with the low end vSphere Essentials package. Such a combination could be positioned as directly competitive with RHEL/KVM, but would carry the added benefit of being manageable by VMware's existing tools and eligible for private cloud creation via vCloud Director. The RHEL/Xen and RHEL/KVM bundles have done well in the public cloud arena because they are low cost and can be finely tuned for performance. The acquisition would also synch with VMware's larger strategic vision of becoming a full stack vendor.”

Added Jeffries: “We look at the impact on Red Hat's competitive position of a Novell SuSE Linux purchase by various potential strategic buyers, including IBM, VMware, Oracle, and Red Hat itself. While current expectations favor VMware, we wouldn't rule the others out.”