Posted by Jonathan Penn on November 22, 2010
My colleague, Chris Voce, has posted about what this means to Infrastructure & Operations professionals.
Here are my observations regarding the impact on and implications for the vendor community:
- This is a deal focused on systems management. It's a deal for what Novell gives Attachmate in the systems management space by way of market share (led by ZENworks), portfolio-expanding technology (BSM, CMBD, etc.), and tech innovation (virtualization and cloud).
- This puts SUSE on the auction block. Most of Novell is staying as a separate brand alongside NetIQ and Attachmate. SUSE is also becoming another brand. Given that there are so many ways to divvy up Novell (e.g., merging Novell's systems and security management with NetIQ), SUSE is conspicuous as its own brand. It's certainly not core to Attachmate, and this brings up all sorts of speculation as to whether they plan on selling off SUSE (or be made an offer too good to pass up). There are the obvious acquirers worth speculating about: IBM and HP. Other candidates include Oracle, EMC, Cisco, or Dell: Anyone with an appliance business moving up the stack, or in Oracle’s case a platform business expanding to sell appliances, could potentially turn SUSE into a key asset. SAP is another contender. Any acquisition of SUSE could, in turn, put RedHat into play.
- There's a cautionary tale behind all this. Look at the financial aspects of the deal: Attachmate is paying $2.2 billion. But Novell has about $1 billion in cash. Novell is also adding $450m to its coffers in a side-deal selling patents to CPTN (i.e., Microsoft) for which no detail is available: Though speculation ranges from Linux patents (unlikely) to (more probably) Linux-Windows interoperability jointly developed out of an arrangement they had established several years ago. So Attachmate is out of pocket only about $750m for a company with $800m revenue run rate, and earnings run rate around $80m. Compared with other big deals this year (e.g., HP/ArcSight and Intel/McAfee), it's clear Novell is coming to the deal table from a position of weakness.
Clearly, Novell failed to execute on its many attempts at corporate transformation and expansion. Vendors who expand too far afield beyond their core competencies, or who simply fail to execute on them, will certainly fall prey to competitors. Yet today, vendors can't avoid this fate simply by staying in their respective comfort zones. As the market shifts further to a solutions orientation, the lines between product areas blur. Furthermore, the lines between product vendor, hosted provider, and services firm are all also becoming less distinct. So companies do have to extend beyond their traditional core competency, and do so without diluting its strategy and value.
- Where's the not-so-invisible-hand of Thoma Bravo? While it's Attachmate who's acquiring Novell, there are other companies in the Thoma Bravo portfolio that offer great synergy to the combined NetIQ/Novell solution set: LANDesk most recently, and also Embarcadero Technologies, Entrust, and SonicWALL. Yet there are no signs of cross-pollination or coordination among these companies. There could be a fascinating roll-up of security and systems management solutions here. Having Attachmate operate independently of — and sometimes in competition against — these other companies seems more like a lost opportunity than a shrewd hedge. The power of consolidation is being lost on this portfolio.