Is Microsoft considering acquisition of Red Hat?

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?).

TOPICS: Microsoft

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?

Topic: Microsoft

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  • Green envy and spam

    First posted to slashdot in reply to What's the Business Case for Microsoft and Open Source

    With apologies to Dr "Suse", to the tune of "Green Eggs and Ham".

    [i]Linux can. Linux can .Use Linux.[/i]

    That Linux can! That Linux can! I do not like that Linux can!

    [i]Do you like open sourcing plan?[/i]

    I do not like that Linux can. I do not like the open sourcing plan.

    [i]Would you like to free source share?[/i]

    I would not like to free source share. I would not like it anywhere. I do not like open sourcing plan. I do not like that Linux can.

    [i]Would you like it very stable? Would you like it to enable?[/i]

    I do not like it very stable. I do not like it to enable. I do not like to free source share. I do not like it anywhere. I do not like the open sourcing plan. I do not like that Linux can.

    [i]Would you use it in a X-Box? Would you use it if it ROCKS?[/i]

    Not on X-box. Not if it rocks. Not if very stable. Not to enable. I would not let them free source share. I would not let them anywhere. I would not allow open sourcing plan. I do not like that Linux can.

    [i]Would you? Could you? In your biz? Use it! Use it! Here it is.[/i]

    I would not, could not, in our biz.

    [i]You may like it. You will see. You may like it if it's free![/i]

    I would not, could not if it's free. Not in our biz! It should never be!

    I do not like it on the X-box. I do not like it that it rocks. I do not like it amongst our biz. I do not like it that it is. I do not like they free source share. I do not like that anywhere. I do not like that Linux can. I do not like you Linux man!

    [i]Service! service! service! service! Could you, would you, as a service?[/i]

    Not as a service! Not if it's free! Not in my biz! Man! Let not it be! I would not, could not, on a X-box. I could not, would not, if it rocks. I will not use it if its stable. I will not use it even to enable. I will not let them free source share. I will not let them anywhere. I do not like open sourcing plan. I do not like that Linux can.

    [i]Say! if in copyleft? always free copyleft! Would you, could you, copyleft?[/i]

    I would not, could not, in copyleft.

    [i]Would you, could you, why so nervous?[/i]

    I would not, could not, I'm NOT nervous. Not as copyleft. Not as a service. Not in my biz. Not if it's free. I do not like that it can, you see. Not if it's stable. Not on X-box. Not to enable. Not if it rocks. I will not let them free source share. I do not like it anywhere!

    [i]You do not like open sourcing plan?[/i]

    I do not like that Linux can.

    [i]Could you, would you use what we wrote?[/i]

    I would not, could not, use what you wrote!

    [i]Would you, could you, to avoid your bloat?[/i]

    I could not, would not, avoid bloat. I will not, will not, use what you wrote. I will not compete with them as a service. I will not because it makes us nervous. Not in our biz! Not if it's free! Not if it is! You let me be! I do not like it on the X-Box. I do not like it that it Rocks. I will not use it if it's stable. I do not like that it does enable. I do not like they free source share. I do not like it ANYWHERE I do not like open sourcing plan!I do not like that, Linux can.

    [i]You do not like it. So you say. Try it! Try it! And you may. Try it and you may, I say.[i]

    Man! If you will let me be, I will try it. You will see.

    Say! I like open sourcing plan! I do! I like that, Linux can! And I would use it because it's stable. And I could use it to enable...

    And I could charge for providing a service. And I could copyleft without being nervous. And in my biz. And still source free. For you can still charge for a service fee!

    So I will use it on the networked X-box. And I will promote it because it ROCKS. And I will use it because it's stable. And I will use it to enable.

    And I will use it here and there. Say! I can use it ANYWHERE!

    I do so like open sourcing plan! Thank you! Thank you, Linux man!

    By The Cat with the Red Hat
    David Mohring
  • What about anti-trust issues?

    Whether it would be in Microsoft's interest to buy Red Hat, the unstated issue is would they be permitted to do so? Owning the most used operating systems in the world and combining it with ownership in a significant competitor would raise anti-trust questions and opposition in seconds. My belief is that it would be an immediate deal-killer.

    Whether Microsoft might be interested in driving Red Hat out of business by claiming patent infringement would be a whole other issue that I don't feel qualifid to comment on.
    LT Player
    • I agree ...

      MS could not touch EITHER Linux or Unix ... the courts would have them for lunch (and I mean THEY would be the lunch). And thats not even imagining what the Euros and Asians would do. MS is having problems in the EU now, buying Red Hat would drive the Euros up the wall. They would all but banish MS from Europe. No, this would be unimaginable. But pressure yes, veiled threats yes, these would be typical MS MO.
      George Mitchell
      • I don't see how

        It's not like Red Hat is the ONLY supplier of Linux systems. In fact, people can get Linux for FREE. So how does Microsoft purchasing Red Hat become anti-competitive? Isn't that a point that's been touted concerning OSS -- that it's "impossible" for any company to control it?

        Carl Rapson
        • Its deeper than that ....

          Red Hat as a company supports a huge network of free software developers. If MS were to purchase Red Hat, it would put them in a position of being able to purposefully and maliciously disrupting that network. I wouldn't see any problem at all with MS buying a lesser distributor, but to buy any of the key distributors along with their unique ecosystems, budding IP, and customer bases would likely be off limits and would be hotly challenged in the courts by IBM and other Linux oriented companies. Although MS could never control Linux, they could attempt to disrupt it and that would be veiwed just as negatively by the courts worldwide as any attempt at control.
          George Mitchell
        • The enterprise doesn't care about OSS ...

          They care about having a place to go for support. Without a robust mission-critical support infrastructure Linux is just another "TOY" OSS. The enterprise that doesn't go to RedHat (or Novell/SuSE) directly for Linux will NOT go get a FREE version of Linux because they want and need a level of support only available from a first tier vendor like IBM or Sun. This is the same reason why people who buy UNIX buy it from IBM, or Sun, or HP and NOT from SCO!
          M Wagner
    • What anti-trust issues, hmmmm?

      How many distros of Linux are out there anyway? Besides - anyone can download a kernal and go there own way anytime they feel like it.

      So what anti-trust situation is being created here?

      In that Red Hat is the almight Open Source GPL protected transparent to all and free to use by everyone (I'm getting all the maxims, right?) what is it that MS would be buying? Hmmmmmmmm? Lessee here, a marque (kinda cute in a way, cartoon of a dude in a red hat), a distro of a freely available by anyone kernal (which according to the purists of the pure out there has - shocking I know - Proprietary Red Hat Code - oh the shock! the shame! put a fork in it Edith it's done....) and the ability to (ahem, here is the next area of screams and howls of anguish from the Penguinistas - ready for it?) certify Red Hat Engineers!!! Oh the delicious thought of it!!!

      Seems all MS would really be getting is the name, the ability to put together a CD, a logo and trademark and a certification program. It'd be hard to put forward a restraint of trade and monopolization argument in that case - but I'm sure it would be done.
  • never happen

    Such a deal would be instant suicide for RedHat. Most of RedHat's customers use it in order to get away from Microsoft. They would be scared to death that Microsoft would abuse the relationship, and drop the software like a red-hot horseshoe. Oh, and all the open source developers who contribute to RedHat would quite immediately.

    Also, can you imagine Microsoft being in the oss business? How could Microsoft have its "Get the Facts" campaign that claims Windows is better than Linux, and at the same sell a version. Would it produce a version of Office that ran on RedHat's linux, but no other version?

    This whole idea makes no sense whatsoever
  • Buy what?

    Aside from the Red Hat brand, Microsoft wouldn't end up with anything. About a week later, some company named "Blue Stetson" would be operating in North Carolina with the former Red Hat employees and shipping the exact same software (with trademarks changed.)

    Within a quarter, Blue Stetson Enterprise Linux would be up and running as a brand and customers all over the world would be lining up to cut their support over as soon as the older arrangements ran out or MS fails to deliver the goods. Hordes of application houses such as Oracle and Cadence would announce certified support for Blue Stetson Enterprise Linux.

    Within a year Red Hat would be a fond memory of the dear departed, valiant (but fallen) hero in the history of Linux. And life would go on hardly missing a beat.
    Yagotta B. Kidding
    • I'm assuming

      that you know for a fact that Red Hat employees have no non-compete clauses. Because that would certainly throw a temporary wrench in things.
      Michael Kelly
      • Different take

        Its a different model, an open source model. Red Hat owns
        very little of the source used in it's distribution, and what it
        does have copyright over it has released under the GPL.

        The non-compete clause is a non-issue. People employed
        by the various Linux benefactors routinely switch

        [quote from article]
        Just supposing for a second 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 2 and 2 together, is attempting to once and
        for all ween itself off its dependence on Microsoft with Red
        Hat being one of the lynchpins to its declaration of

        For the reason above (and Yagotta's post) it will mean
        nothing to IBM. IBM is backing Linux and other open source
        projects to ween itself of MS. Linux is not Red Hat, or
        Novell, or Debian. They either own little or none of the IP in
        their respective distributions.

        If MS was to buy Red Hat all it would do is give credibility to
        Linux. Some Red Hat's customer would continue with their
        subscriptions, others would change to another. and
        possibly many more would take up a subscription based on
        MS support.

        MS make nearly 100% of its revenue from windows and
        Office. The margins of both products are very good.
        Supporting any Linux distro will only damage those
        margins. Now when those margins are put under significant
        pressure all bets are off:-)
        Richard Flude
      • Non-compete?

        Szulik and other Red Hat management have commented in the past about the fact that they have to be pretty purist about, for instance, the GPL because their employees would leave in a heartbeat if they weren't.

        That strongly implies that the employees don't have handcuffs. The stars of the F/OSS world are amazingly nomadic, and in general the employers seem happy with that -- it makes for a more efficient market, after all, when the workers can go where they're most valuable.
        Yagotta B. Kidding
      • Non-compete in North Carolina?

        Non-compete is very difficult to enforce in a right-to-work State, which North Carolina is. The terms of such non-compete are not allowed to extend past four months for those earning less than a certain adjusted gross income (45K) as I recall. Those renegades who flee Microsoft would require four months just to set-up a website, organize office space, and cash out stock. Hardly a one jewel screwdriver let alone a wrench would be thrown into the works...
        John Le'Brecage
    • Its a game

      called Whack-a-mole! Buy Red Hat - up pops Blue Stetson. By SuSE and up pops WooZY! Buy Mandrake and up pops Houdini! This could be VERY entertaining!
      Roger Ramjet
    • Bingo - and thanks by the way

      cause you added another pin into the anti-freetrade balloon that was getting pumped full of hot air.
  • Oh my goodness.. this is not funny.

    If Microsoft put out a Linux distro (and somehow played by the rules) I don't know what I'd do..

    I can always take up needlepoint.. or basket weaving... oh my..
  • And Gentoo, Slackware,OpenBSD, all open source?

    Why stop at Redhat? MS would have to buy them all and if they had the chance to stop Open source in it's tracks they would have! Didn't MS pay like $250mil for winamp? Today, Open source is a very LARGE friendly giant! There are many many Linux Distrebutions. Not even MS can do anything to control it. Here's an idea.. yeah buy Redhat and throw Windows in the trash can!
    • What's left?

      We would ALL be going to Red Flag Linux for our "free" (as in freedom) OS! OOOPS, that "Red" means something that escapes me . . .
      Roger Ramjet
      • There's only Red Hat and Novell SuSE

        The reason IBM is beholden to those two above all other distros is that those are the distros that have been modified to run on it's bigger iron... the i, p, and z series. Red Hat and Novell also have the support infrastructure in place to support IBM's enterprise clients in ways that most other distro providers do not. I'm not saying that one of the others couldn't rise to the occasion, particularly with IBM's help. But, in the enterprise business, particularly when you're talking about non-x86 systems, Linux and Linux support are not commodities and switching is not nearly as simple as some of these posts make it out to be. Not just for IBM, but for end users too. That's because the applications they run on their Linux systems (SAP, Oracle, etc.) are all qualified to run on very specific distros (starting with Red Hat). Most of those enterprise customers already have Microsoft as a vendor and unless they're just totally disatisfied with Microsoft's support (and if they were, they would be ditching the company anyway), they wouldn't switch just because of an acquisition. Personally, I don't think an acquisition of Red Hat by Microsoft is plausible. But, then again, I never in a million years would have imagined other events: (1) Steve Ballmer and Scott McNealy on a stage together acting as though they were old chums, and more recently (3) AT&T being acquired.
        • Won't work

          The same reason that Sun didn't buy AMD - your reputation comes along with your purchase and "stains" the new company. If Sun purchased AMD, would IBM and HP continue to back Opteron? NOPE. That's why Sun didn't do it. Same thing applies to M$ and DeadRat. DeadRat ALREADY has some negative connotation around its M$-like marketing - adding the albatross called M$ to its neck would break it! Company "F" rejected DeadRat because IBM could offer SuSE (2000 processor licenses so far! Stupid DeadRat, tricks are for kids - and losers like you), and since we are in bed with IBM, the switch WORKED!

          After my personal, business experience with DeadRat, I cannot fathom why ANYONE would go with them. Sun's RAILING against them has MUCH basis in fact. But the IT automatons blindy follow the "absolute" Linux "leader". Hey, wait a second! Maybe people WOULD accept this buyout . . .
          Roger Ramjet