Microsoft forms consortium to assist $2.2bn sale of Novell

MICROSOFT HAS stepped in to help seal the $2.2 billion (€1.6 billion) sale of Novell, a struggling US software company, in the latest sign of the latter’s strategic significance to some of the industry’s biggest players.

The world’s leading software company said it had put together a consortium of other technology companies to inject $450 million into Novell, in return for carving out part of its portfolio of intellectual property rights.

The rights were not disclosed, but Novell has played a central part in the struggle over rights to Linux, the open-source operating system that at one time was considered the biggest threat to Microsoft’s business.

The Microsoft-led initiative has greased the wheels of a deal that had been held up for months over the complexity of unscrambling Novell’s broad collection of rights and agreeing a valuation for its declining core business.

After the injection of cash, Novell said it would be sold to Attachmate, a smaller software company owned by the private equity firms Francisco Partners, Golden Gate Capital and Thomas Bravo.

Following a failed attempt in the 1990s to take on Microsoft in the desktop software business, Novell has struggled for years to build a new business on top of its main cash cow – a “groupware” product designed to help collections of machines talk to each other.

The attempts to revive its business included the 2004 purchase of German Linux company Suse, the second-biggest player in the Linux business after Red Hat.

Some leading tech companies, including IBM, have seen Suse as an important counterweight to both Red Hat and Microsoft, raising questions about its future following the Novell sale.

Attachmate said it would run Suse as a separate business unit after the deal, prompting several observers to suggest that it was paving the way for a later sale of the business.

VMware, which has emerged as one of Microsoft’s main rivals in corporate software, had been among those to express an interest in the Suse business as part of the Novell sale process, people familiar with the matter have said. – Copyright The Financial Times Limited 2010