More Evidence Flows In That Red Hat is the Big Winner After Novell's Buyout

by Sam Dean - Apr. 21, 2011Comments (2)

Late last year, when Novell was acquired by Attachmate, following the acquisition of Sun Microsystems by Oracle, it became difficult to ascertain exactly what might happen to Novell's expansive set of technologies and patents. We noted then, in a post called "Novell's Acquisition By Attachmate Has a Microsoft Twist, But Red Hat Is the Big Winner" that a consortium of technology giants called CTPN, headed up by Microsoft, was paying big bucks for many of Novell's patents, and we noted that Red Hat would become the only public, U.S. company focused primarily on open source after the Novell buyout. Now, it turns out that there are major twists in the Microsoft-led patent deal and even more probable benefits to Red Hat as a result of the Novell deal.

Open source-focused groups, such as OSI, were quick to call for governmental scrutiny of the CTPN deal due to the sheer number of patents that Novell held that could have a seismic impact on Linux and open source if those patents were used in the wrong ways.  Now, the U.S. Department of Justice has issued a statement saying that the tech giants included in CTPN Holdings have been forced to adjust their agreements regarding the Novell patents to comply with antitrust regulations:

"The Department of Justice announced today that in order to proceed with the first phase of their acquisition of certain patents and patent applications from Novell Inc., CPTN Holdings LLC and its owners have altered their original agreements to address the department’s antitrust concerns.  The department said that, as originally proposed, the deal would jeopardize the ability of open source software, such as Linux, to continue to innovate and compete in the development and distribution of server, desktop, and mobile operating systems, middleware, and virtualization products."

No doubt, as the DOJ scrutinized this proposed patent deal, there was much complexity in the analysis. Novell goes back to the early days of local area networking and the PC industry, and its patents are influential and valuable. It's good news that a Microsoft-led consortium won't be permitted to simply run roughshod over the power of those patents. Oracle, Apple, and EMC are included in CTPN Holdings as well. 

"To promote innovation and competition, it is critical to balance antitrust enforcement with allowing appropriate patent transfers and exercise of patent rights,” said Sharis A. Pozen, Deputy Assistant Attorney General of the Justice Department’s Antitrust Division. Amen.

Our original conclusion in the wake of the Novell buyout was that it would benefit Red Hat, and yesterday, Red Hat's stock jumped in the wake of new analysis that reached that same conclusion. The jump in the stock came after a research note from Piper Jaffray analsysts was released concluding that "44% [of business survey respondents] indicate that businesses will spend more on Red Hat due to uncertainty surrounding Novell's future as part of Attachmate, while only 4% expect the opposite."

This conclusion from Piper Jaffray's survey was implied the instant the Novell deal was announced. Make no mistake, Red Hat is the big winner in the wake of the Novell deal, and the tech giants behind CTPN Holdings have had their wings clipped in the wake of it, which is good news for open source. 


Khürt Williams uses OStatic to support Open Source, ask and answer questions and stay informed. What about you?


Novell wasn't acquired last year. It was announced last November that they would be acquired. That process is nearly complete now, but the acquisition hasn't happened yet.

Given that you got that basic fact wrong about the transaction, why should I trust anything else that's written here?

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Your quote from the analyst is inaccurate. It should say "46 key Red Hat (NYSE: RHT) partners". Why is it a big shock that 46 of Red Hat's partners would say that. I hope Red Hat's hype machine didn't pay to much for this report.

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