Novice Investing - Novell and Microsoft Join Forces

Date: Monday 13th 2008f October 2008 06:18:07 PM

Novell and Microsoft Join Forces - 11/02/2006

By: Novice Investing Staff

In a move aimed to solidify their own respective positioning, Novell Inc. (NOVL) and Microsoft (MSFT) announced that Suse Linux, an open source operating system distributed by Novell, to work with Microsoft's Windows. The partnership is a way for Microsoft to tap into the growing users of open source software without leaving its Window platform entirely. This move might be exacerbated by Oracle Corp. (ORCL) last week where it will provide support for customers using Red Hat's linux for less than half the price.

As part of the deal, Microsoft will not claim patent suits against individuals or other corporate Linux users for using a mixed system. Furthermore, the collaboration will call for both companies to team up in sales and marketing. The latter is mightily beneficial for Novell since it has smaller work force and resources than Microsoft.

It also signals the beginning of an era for the dominance of Microsoft's Window in the software arena. In the past, the company has adamantly stand firm on its position to stick with Windows platform only. While, Microsoft is not trading at a lofty P/E ratio, we feel that Microsoft stock will continue its range-bound way. Valued at $ 280 Billion, and backing an open source movement, what else would move the stock to say $ 350 Billion or so for the next several years?

Late last week in the heel of Oracle's announcement, we feel that Novell is the weakest Linux vendor compared to Red Hat, mainly due to past executions. Now, as Novell has the backing of software giant Microsoft, the odd has tilted in Novell's favor. In fact, Red Hat is in a no man's land. Both Oracle and Microsoft has acknowledged that Linux is a threat and yet, they both go against Red Hat in their own separate manners. As to ascertain the deal, Novell's shares was up 16% to $ 6.79 and Red Hat shares plunge 3% to $ 16.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Novell Inc. (NOVL) or any other securities.

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