Elliott's proposed acquisition of Novell promises to shake up the software industry, which has grown a bit staid in the past year or two. But what will it mean for Red Hat, and for the broader open-source software industry?
In particular, Novell's acquisition might well spur a mergers and acquisitions revival, as Barron's notes. But will it create overwhelming pressure for Red Hat to sell, too?
Red Hat has been the subject of buyout rumors for well over a decade, but has never been particularly close to indulging the temptation, according to sources close to the company. Through it all, Red Hat continues to churn out record quarters while slowly building out its infrastructure arsenal with the acquisitions of Qumranet and JBoss.
But if Novell's SUSE Linux business finds its way into Oracle's or VMware's or IBM's hands, Red Hat's ability to remain independent goes down even as its value shoots up. With SUSE Linux controlled by one of the big enterprise vendors, it's hard to imagine the others refraining from bidding on Red Hat
Would a bidding war result in increased attention to other open-source companies, providing exits for Zenoss, Pentaho, and other open-source vendors?
It's not clear, in large part because it's no longer clear how much value the market places on open-source vendors as open-source vendors.
Over the past year, open source has become essential infrastructure for most software companies, including those that don't style themselves as such, like Facebook and Digg. As open source has become standard operating procedure for all vendors, the marketing distinction of being an "open-source company" has faded a bit.
So, we have Marten Mickos arguing that Oracle is the world's largest open-source company, a distinction I give to Google, but which others reserve for Red Hat.
Each of these companies uses open source in very different ways, and only Red Hat seems to care about companies that wear open source on their sleeves. The others are just as interested in open source, but for the purpose of driving proprietary services, developer communities, or other reasons.
In this light, it's doubtful that Novell's acquisition, and the resulting feeding frenzy around Red Hat, would do much to spur broader open-source vendor M&A. To date, most open-source companies have been bought by proprietary companies (e.g., Zimbra by Yahoo, SpringSource by VMware, XenSource by Citrix, etc.). Such activity will neither be retarded nor expedited by the fates of Novell and Red Hat.
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