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Microsoft bankrolls Novell to tune of $348m

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Microsoft is spending less than $500m on its ground-breaking deal with Novell to promote SuSE Linux and shut Red Hat out of Windows accounts.

Microsoft is to pay Novell $240m for 350,000 subscription coupons of SUSE Linux Enterprise Server (SLES, to be released in annual batches of 70,000, according to a Novell regulatory filing. Coupons can be redeemed from Novell for single- or multi-year subscriptions, upgrades and technical support. To refresh your memory, $240m is roughly a quarter's revenue for Novell.

Microsoft will spend another $94m on sales and marketing of Windows and Linux during the five-year lifetime of the companies' deal. Also, a patent co-operation agreement will see Microsoft make an up-front payment of $108m to Novell. In return Novell will pay Microsoft a minimum of $40m, based on a percentage of Novell's Open Platform Solutions and Open Enterprise Server revenues

Novell has been stung by criticism of the patent provisions of the deal and has published an FAQ to tackle "a flood" of questions. Reaction has ranged from uncertainty to accusations that Novell is selling out by effectively accepting the concept of closed-source patents in open source, and so giving Microsoft a legal toehold against other open source and Linux vendors.

Novell says that while Microsoft would not sue Novell customers Novell itself has received no such covenant or a patent license from Microsoft - a quid pro quo that means it doesn't flout the GPL (the GNU General Public License).

According to Novell, its relationship with Microsoft is not an admission that Novell's products contain any Microsoft patents; and Novell will not include Microsoft patents in future products. ®

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