Novell, Microsoft Partnership Proves Profitable

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Microsoft and Novell entered into a landmark Linux to Windows interoperability, patent and sales deal in 2006 and today, three years later, the partnership is still going strong as it begins its next phase.

The two partners now say they have more than 400 joint customers and are expanding their efforts around improving Windows to Linux interoperability on virtualization, directories and systems management. The third year anniversary comes as the initial $250 million investment nears exhaustion and a new outlay of $100 million is waiting in the wings.

“We’ve seen some nice update from our joint customers over the past year,” Ted MacLean, general manager for strategic partnerships and licensing at Microsoft (NASDAQ: MSFT) told InternetNews.com. “In the context of a really challenging economic environment we’re proud of the fact that we’ve grown our joint customer base by 58 percent year over year.”

When the Novell/Microsoft partnership celebrated its second anniversary in 2008, there were 200 joint customers, a triple digit gain over the first year of the partnership. Though the percentage growth from year two to three was not as high as year one to year two, Novell and Microsoft do not see a slowdown in customer adoption.

“From year one to two we saw a big jump because year one we were in a ramp up where we started in the U.S and then moved to Germany, the UK and China,” Susan Heystee, vice president and general manager for strategic alliances at Novell (NASDAQ: NOVL) told InternetNews.com. “We have seen pretty steady customer growth, but definitely a good uptick this year and I definitely don’t see it slowing.”

The original 2006 deal included a provision whereby Microsoft would resell up to $247.5 million dollars worth of Novell’s SUSE Linux Enterprise Server (SLES) subscriptions. As of Novell’s third quarter 2009 which ended on July 31st, Heystee noted that Novell has invoiced 91 percent of the original total for $226 million in revenue.

In August of 2008, Novell and Microsoft inked a deal for up to $100 million in additional Novell SLES subscriptions. Some of that $100 million may now be in play, though Novell can not be specific about the amount at this time.

Heystee noted that Novell is currently in its financial quiet period with its fiscal fourth quarter 2009 earnings set to be reported on December 3. At that time she note that there would be an update on the current value of the deal. That said, she did provide a hint that some of the $100 has been tapped.

“We have over 20 joint customers in the new expanded program which is the up to $100 million commitment,” Heystee said. “So while we haven’t disclosed those dollars at this time, with 20 customer wins clearly we’re making some progress there.”

Some of those new customers come by way of an expanded support offering from Novell and Microsoft targeting migrations of existing Red Hat Linux and unpaid Linux users. The program offers existing Linux users the option of having Novell support them and their existing non-Novell Linux installation while they are in the process of migrating to SLES.

Neither Novell nor Microsoft could provide a specific breakdown at press time of how many unpaid Linux users versus paid Red Hat users have taken advantage of the program, which launched in late 2008.

“Our largest most complex enterprise customers typically require some kind of paid support in the same way they expect it for their Microsoft environment,” MacLean said. “So we’re seeing customers coming to us from a paid environment.”

Article courtesy of InternetNews.com.