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Oracle chief opens door to buying Novell
[April 18, 2006]

Oracle chief opens door to buying Novell

(Boston Globe, The (KRT) Via Thomson Dialog NewsEdge) Apr. 18--The database software titan Oracle Inc., already engaged in an multibillion-dollar acquisition spree, is showing interest in Novell Inc. of Waltham, a Linux software vendor.

Oracle's chief executive, Larry Ellison, speculated about acquiring Novell, the world's second-leading supplier of Linux operating system software, or the top Linux firm, Red Hat Inc. of Raleigh, N.C., in an interview published yesterday in the Financial Times.

Such a deal would put Oracle into the operating system business for the first time, and let the company sell a complete line of high-end business software, including database and application server products.

"We're missing an operating system," Ellison said. "You could argue that it makes a lot of sense for us to look at distributing and supporting Linux."

In the past two years, Oracle has paid $19 billion dollars for a host of firms, including $10 billion for PeopleSoft Inc. and $5.8 billion for Siebel Systems Inc.

In addition, Oracle has long supported Linux, an "open source" operating system that is available free of charge, but usually sold to corporations as part of a package of service and support. Oracle has business alliances with Novell and Red Hat. Last week, Red Hat said it would buy JBoss Inc., of Atlanta, for $350 million. JBoss is a leading maker of open source "middleware," software used by businesses to simplify the creation of specialized commercial programs.

The Red Hat-JBoss deal puts Red Hat in competition with Oracle, which has its own middleware products.

"They may no longer view Red Hat as a reliable partner," said John Rymer, an analyst with Forrester Research Inc. in Santa Clara, Calif. Rymer said Red Hat could continue to build itself into a formidable rival to Oracle, possibly by buying an open source database company like MySQL AB, of Sweden. Such a move would threaten Oracle's core database software business.

Rymer also said that acquiring Novell could be a "preemptive strike" to ensure the company doesn't fall into the hands of IBM Corp., which competes against Oracle in middleware and database software.

But Stephen Walli, vice president of Optaros Inc., an open source consulting firm in Cambridge, said buying Novell or Red Hat would be a mistake for Oracle.

"They would have to carry all that cost on their balance sheet," Walli said. "I think it would be a really bad idea."

Instead, Oracle can benefit from alliances with the two big Linux companies, without having to bear the cost of developing and upgrading its own operating system.

Oracle and Novell refused to comment on Ellison's remarks.

Novell, which moved its headquarters from Utah to Massachusetts in 2004, was the leading supplier of networking software for personal computers during the 1980s. Once one of America's leading software companies, it began to decline during the 1990s, after Microsoft Corp. added networking features to its Windows operating system. But thousands of businesses still use Novell's NetWare products. The company carries a $2.9 billion market capitalization, and last year posted $1.2 billion in revenue and net income of $378 million, thanks to a $448 million payment from Microsoft Corp. to settle a legal dispute.

In 2003, Novell bought SUSE AG of Germany, the world's number-two Linux supplier. Novell has since launched a comeback strategy based on adapting its NetWare products to Linux, and on selling Linux software and services.

Novell shares rose 17 cents to close at $7.68, while Oracle stock climbed six cents to $13.74, both on the Nasdaq stock exchange.

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