A Bar-Room Tale Of Novell’s SuSE Adventure

Attachmate has announced the restructuring of its business to accommodate the influx of new product lines following the take-over of Novell.

The products will be distributed across an expanded Attachmate comprising four divisions. The current Attachmate products will remain under that branding, Novell’s security products will be integrated with Attachmate’s NetIQ business, and the remaining traditional Novell products will form a new branch that will keep the Novell branding. SuSE Linux will form a fourth division.

It is worth watching this SuSE Linux division. This was not a focus for the original Attachmate acquisition but it could be a lucrative area for growth. Novell failed to really capitalise on the acquisition – not that it did badly, just that it could have posed a bigger challenge for the enterprise Linux market at a time before Red Hat had really taken hold of that space.

Getting Down For An Uphill Struggle

Just after Novell bought SuSE, I attended the Novell BrainShare 2005 conference. Financially, Novell was in the doldrums and needed a boost.

I remember writing for The Guardian afterwards: “Every year, Novell takes a group of journalists to the ski slopes of Utah to relax before its annual BrainShare conference at the Salt Palace in Salt Lake City. And, let’s face it, when it comes to going downhill fast, who better than Novell to act as host?”

Despite this gloomy, attention-grabbing slight, the rest of the article was relatively upbeat. Although Novell had grasped defeat from the jaws of victory in its battle for LAN supremacy against Microsoft Windows NT (Windows Server), the Linux buy gave the company a new hope of regaining its lost role as a leading force in IT.

“Novell is negotiating the gates in its downhill race against time without too much hindrance,” the article concluded, “but will it become king of the piste or end up on an apres-ski binge, moaning that it could have been a contender.”

Prescient in two ways, my comment has sadly proved true with the Attachmate acquisition six years after writing. But, between times, it also led me to an interesting conversation with a former and embittered Novell executive who had been involved in the SuSE deal.

Not quite an “apres-ski binge” but, nonetheless, an alcohol-fuelled encounter around 10pm in a London hotel bar during an Infosecurity conference. I fell into conversation with a fellow delegate who claimed to be a pig farmer involved in RFID tests. Given my agricultural background, he had picked the wrong journalist to con and I soon blew his cover. After around four hours of elusive badinage about his real identity, he eventually cracked and confessed to being a former Novell employee.

Admittedly, not the most reliable source of insider information I have ever encountered, my drinking partner had reached the nadir of despair that strikes some drunks in the dark hours before dawn.

In Vino Veritas?

His tale of woe, which may or may not be true, was that he had been involved in the buy-out of SuSE. The $210 million (£130m) cash acquisition was seen as a great opportunity for Novell to fight back off the ropes against long-term foe Microsoft and to unseat Red Hat as the foremost Linux distributor. IBM, a powerful backer of the deal, made a $50 million (£30m) investment in Novell to help with the cash flow.

As my drinking partner saw it, the IBM interest potentially opened the door to Big Blue’s even bigger blue-chip market. All Novell had to do was to undercut Red Hat and the revitalisation of the company would be assured.

At the time of the take-over, RedMonk analyst James Governor said, “IBM was a very important broker in the deal. It’s prepared to be the kingmaker to counterbalance SuSE against Red Hat.”

Unfortunately, Novell, a very moral company, either saw the strategy as underhand, could not afford the gamble, or was discouraged by IBM whose partnership with Red Hat was, by that time, consolidating. The way my new “best friend” saw it was that IBM could have used a low-cost Novell SuSE offering as a bargaining chip to bring Red Hat cap in hand, so to speak, to the renegotiating table and drive down costs.

As one barfly to another, he confided that he actually thought Novell’s management was too arrogant and it reckoned that, if Red Hat could charge what they did, so could Novell and the company name alone would carry them through to drive Red Hat down.

Whatever the strategy may have been, it only worked in the short term and Red Hat’s rise continued unabated. Novell could have been a contender but never managed to step up to the mark.

A Degree Of Truth

After extricating myself from the hotel bar, I returned home and made a quick Google search on name and job title for my informant. The personal details checked out and the former job title would certainly imply that the “pig farmer” could have been involved in the SuSE negotiations.

The information he gave could all have been a total fabrication but the basic facts hold true that IBM gave Novell a leg-up into the open-source market and, after an initial stock price jump, the company settled back, a distant second to Red Hat in the commercial Linux market.

Worse than this, Novell found a strange sparring partner in Microsoft, the company that had beaten it to a pulp in the 1990s. Although a fierce and powerful competitor, Microsoft had become a major backer of Novell, and vice versa, through support coupon sales worth an estimated $340 million (£210m) so far. Novell also gained a few brownie points when IBM chose SuSE to power its flagship Watson analytical supercomputer project.

Attachmate’s Jeopardy

Attachmate has now returned SuSE to the fray as a German-based division with everything to play for. How committed the new owners are to building up the Linux business is a matter for dispute with analysts divided on the subject.

Red Hat has shown that there is plenty of scope for profiting from the still-growing Linux market but Attachmate has to settle its users’ fears and then show some resolve to make Red Hat feel that it needs to glance back over it’s shoulder.