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November 7, 2006

Novell discloses financial terms of Microsoft deal

Posted by Benjamin J. Romano at 3:23 PM

Microsoft is paying Novell $240 million for 70,000 subscription certificates a year until Jan. 1, 2012, as part of the broad pact the companies announced last week.

The detail comes in a Novell regulatory filing today, indicating that the transactions are material to the company. Apparently not so for Microsoft, which has not made a filing.

Here are some other details from the filing:

The combined offering from the two companies, for customers who want to run both Windows- and Linux-based servers, will include SUSE Linux Enterprise Server, along with a support subscription; Microsoft Windows Server, Microsoft Virtual Server and Microsoft Viridian.

Microsoft will spend $12 million a year to market the combined Linux and Windows offering. It will also spend $34 million over the term of the agreement for a Microsoft sales force devoted primarily to marketing the combined offering.

Microsoft will not enter into an agreement similar to this one with any other Linux distributor for three years.

To compensate each other for the patent covenant agreements, "Microsoft will make an up-front net payment to Novell of $108 million, and Novell will make ongoing payments of at least $40 million over five years to Microsoft based on percentages of Novell's Open Platform Solutions and Open Enterprise Server revenues."

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