Microsoft to pay Novell $442 million

Microsoft Corp. will pay $442 million to Novell Inc. in a technology accord signed last week to make their rival server software work together.

The companies will jointly develop and market software that lets Microsoft's Windows and Novell's Linux operating systems co-exist on the same machine. Under a patent cooperation agreement, Novell agreed to pay at least $40 million to Microsoft over the next five years, the companies said Tuesday in a statement.

Microsoft, the world's largest software maker, will make an up-front payment of $240 million for certificates to Novell Suse Linux upgrades and support that it can use or resell to customers. Microsoft also plans to spend $60 million on marketing and $34 million for a sales staff over five years that will be dedicated to selling solutions based on the joint technology.

"This is our skin in the game and reflects our confidence in this opportunity," Brad Smith, general counsel for Microsoft, based in Redmond, Wash., said Tuesday in an interview.

Shares of Novell, based in Waltham, Mass., rose 29 cents, or 4.5 percent, to $6.79 in extended trading after the announcement. They fell 12 cents to $6.50 at 4 p.m. New York time in Nasdaq Stock Market composite trading. Microsoft shares rose 11 cents to $28.95 on the Nasdaq.

About one-third of Novell's 5,200-person work force is in Provo.

The agreement, announced Nov. 2, dulls a long-standing rivalry between Microsoft and Linux software makers, which had become the biggest threat to Microsoft's Windows Server. Microsoft will recommend Suse Linux for customers who want to run computers with both systems, and the two companies agreed not to sue each other's customers if their software encroaches on their patents.

Novell and Microsoft plan to establish a joint research facility to make sure customers can consolidate multiple Linux and Windows systems on a single server machine. The facility also will work to improve interoperability between documents created with Microsoft's Office and its open-source rival OpenOffice.

"We're on our way," Novell Chief Executive Officer Ronald Hovsepian said Tuesday in an interview. "Our teams have actually been meeting in New York over the past few days."