Is Microsoft considering acquisition of Red Hat?

Summary:It's amazing what happens when you step back from the trees for a view of the forest, as Doc Searls did in his post today (see Conceivable?).

It's amazing what happens when you step back from the trees for a view of the forest, as Doc Searls did in his post today (see Conceivable?).  Wrote Searls, "When I read Microsoft-Red Hat Warming Trend on CNET, a question leaped to mind:  Would Microsoft buy Red Hat? Money surely wouldn't be a problem. PR surely would be."   Yesterday, I was the one in the trees, speculating on what if anything could be implied by the fact that Microsoft CEO Steve Ballmer and Red Hat CEO Matthew Szulik recently dined together in New York City. Microsoft's acquistion of Red Hat never crossed my mind.  Perhaps the idea is so insane that my brain refused to consider it.  But now that Doc has, I'm not so sure. 

So, how might have that come up in a discussion between the two? And, how might such a move play out?  Feel free to comment below, but here are a few thoughts.  As I've written before, an agreement between Sun and Microsoft has subtley positioned Microsoft to go on the intellectual property offensive against Red Hat. If OpenOffice infringes on Microsoft's intellectual property (IP) and if Red Hat's distribution of OpenOffice with Linux all these years turns out to be worthy of damages (backpay), the damage to Red Hat would be unimaginable. 

Not only was the Limited Patent Convenant and Stand-Still Agreement between Sun and Microsoft a reaffirmation of Microsoft's position when it comes to the importance of the IP behind the Microsoft Office franchise; so, too, was Microsoft's agreement to settle one of two suits filed against it by Novell for $536 million.  As I wrote at the time that agreement was announced, if Microsoft has plans to sue Red Hat, any capitulation to Novell over WinWord (or any other part of MS-Office for that matter) could be viewed as an admission that Microsoft’s intellectual property in Office was an illegal monopoly control point rather than a proprietary technology that Microsoft should be allowed to protect.  

Whether or not Microsoft actually has any legal leverage over Red Hat remains to be seen.  But if it does, the conversation between Ballmer and Szulik might have gone something this.  

Ballmer: Our lawyers are primed and ready with the first salvo.

Szulik: <momentarily chokes on food> Bring 'em on.

Ballmer: Maybe there's a way for no one to get hurt.

Szulik: I'm listening.

Ballmer: Support a buyout.

Szulik: Waiter?  Check please.

Ballmer: I'll pay that.

On the one hand, an acquisition of Red Hat by Microsoft seems ludicrous.  On the other, consider the bigger picture.  In the tug of war for industry supremacy, there's IBM and Microsoft.  Then, there's everybody else -- many of whom are pawns in the Armageddon-like battle. While Microsoft and IBM often play nice in front of the cameras, the two backstabbing 800-pound gorillas will stop at nothing to rip the rug out from under the other when the other isn't looking. 

Let's suppose for a moment that Microsoft was able to acquire Red Hat. (Is Szulik's or the stockholders' approval all that's required?) It would be a stunning blow to IBM who, if you put two and two together, is attempting to once and for all wean itself from dependence on Microsoft--with Red Hat being one of the lynchpins to its declaration of independence.  Whether Microsoft would be successful at such a bid is another story.  I don't profess to be an expert on how such acquistions go, but after watching the tug-o-war between Verizon and Qwest over MCI, I can't imagine IBM not countering.  

Of course, IBM--as one of Red Hat's early investors--has always had the option of buying out Red Hat.  Publicly, it has stated that it prefers neutrality between Linux distributors like Novell (with SuSE Linux) and Red Hat.  But the legal community has always speculated that Red Hat was something of a legal hot potato that was open to an IP infringement suit and that for this reason, IBM has kept itself at an arms distance while still managing to use Linux to its complete advantage without ever becoming a distributor of the operating system itself.  If Red Hat is a legal hot potato and the IP it's potentially infringing on is Microsoft's or Sun's, then it's not a hot potato to either of those two companies (especially now that they're in cahoots with each other).  However, it would still be a legal hot potato to IBM, even moreso should it become the property of Microsoft, who might relish the idea of having legal leverage over IBM.

Quite frankly, it's doubtful that intellectual property is a factor. What many people forget is that IBM has the old Lotus Ami Pro software in its portfolio by virtue of the company's acquisition of Lotus Development Corp.  If it did come down to a battle for a Linux distributor, Microsoft might be able to outbid IBM.  But even if it did, IBM could respond in kind with an acquisition of Novell, which interestingly would embroil Big Blue in Novell's currently outstanding suit against Microsoft and would put it in possession of an open source clone of Microsoft's .NET (Ximian's Mono).  This wouldn't be totally out of character for IBM, now that the company has acquired an open source version of J2EE (Gluecode).

Messy, eh?

Topics: Microsoft

About

David Berlind was fomerly the executive editor of ZDNet. David holds a BBA in Computer Information Systems. Prior to becoming a tech journalist in 1991, David was an IT manager.

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