Although Novell hasn’t been a big name in consumer computing since the days when WordPerfect was duking it out with Microsoft Word, there’s some big news to report today: the company has agreed to go private by being acquired by Attachmate Corporation in a deal valued at $2.2 billion. But that’s not the only part of the deal: as part of the transaction, Novell has agreed to sell nearly 900 patents to a consortium of companies led by none other than industry giant Microsoft for some $450 million in cash. And Microsoft isn’t uttering a peep about what those patents might be.
“After a thorough review of a broad range of alternatives to enhance stockholder value, our Board of Directors concluded that the best available alternative was the combination of a merger with Attachmate Corporation and a sale of certain intellectual property assets to the consortium,” said Novel president and CEO Ron Hovsepian, in a statement. “We are pleased that these transactions appropriately recognize the value of Novell’s relationships, technology, and solutions, while providing our stockholders with an attractive cash premium for their investment.”
Earlier this year, Novell rejected a buyout offer from the Elliot Associates hedge fund.
Attachmate specializes in server management tools and terminal emulation software. At first glance, Novell and Attachmate would seem to have little overlap in their primary businesses, save that the companies that invest in Attachmate products are also likely to consider Novell products for their enterprise environments. Attachmate is a privately held company owned by an investment group headed by Francisco Partners, Golden Gate Capital, and Thoma Bravo.
In recent years, Novell led the court battle over Unix copyrights against SCO (it took years, but SCO lost), removing a significant legal cloud hanging over the head of Linux and its derivative distributions. (Novell also teamed with rival Red Hat to defeat another patent challenge to Linux.) Novell has also become a significant Linux player itself—second only to Red Hat. Novell’s SUSE Linux operating system has gained traction in enterprise environments—in no small part because Novell has made a number of deals with Microsoft to integrate SUSE Linux into Microsoft environments and shield SUSE Linux customers from potential future patent litigation if Microsoft ever decides to purse patent infringement claims against Linux. For years, Microsoft has claimed Linux infringes on many Microsoft patents, but has yet to bring any litigation.
Novell’s relationship to Microsoft in relation to Linux raises significant questions about what patents and intellectual property the company sold to a Microsoft-led consortium prior to entering into the Attachment merger. The consortium—CPTN Holdings, LLC, registered in Delaware—will get full rights to 882 Novel patents for $450 million. Neither Microsoft nor Novell is specifying what those patents involve (Microsoft deputy general counsel Horacio Gutierrez said in an email statement only that the company “looks forward to continuing our collaboration with Novell”), nor are the patents detailed in the SEC filing discussing the merger. Some of the intellectual property may belated to the long-running litigation Novell has engaged in with Microsoft over WordPerfect, but it’s also possible some is related to SUSE Linux.
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