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Microsoft Making Millions Off Novell Linux

Microsoft CEO Steve Ballmer once called Linux a cancer. Now, thanks to his company's alliance with Novell, he's probably labeling the open source OS as something much more benign.

Like, say, "Cash Cow!"

Evidence is emerging that Microsoft is making money, lots of it, from selling 'certificates' for Novell's SUSE Linux. Microsoft gained the right to distribute the certificates a little more than a year ago under a marketing and technical alliance with Novell.

As InformationWeek.com sister site ChannelWeb noted Monday, Novell in its annual report said that it received $355.6 million from Microsoft last year through their "Interoperability Alliance."

Novell in its 10K doesn't provide a more specific breakdown of the number ... but a spokesman confirms that $240 million of that is what Microsoft has remitted back to Novell for the certificate sales.

Microsoft sells the certificates at a markup to what it pays Novell for them, meaning that Microsoft itself must be netting millions of dollars in revenue from the program.

Each certificate can be redeemed for three years worth of SUSE Linux support and service from Novell.

The list of companies that are buying the certificates from Microsoft is long and filled with blue chippers like Wal-Mart, Southwest Airlines, Costco, Siemens and BMW.

Even the Mormons are in on the deal. Microsoft apparently has sold SUSE Linux certificates to The Church of Jesus Christ of Latter Day Saints. (Being from Utah, why didn't they go straight to Novell?)

All told, Microsoft has now sold more than 40,000 SUSE Linux certificates to businesses and governments around the world. The company does not, in its own financial statements, report how much revenue that represents.

But given that Novell credits the interoperability alliance for generating $356 million in cash inflows, then Microsoft, too, must be raking in millions from selling SUSE Linux service and support.

So, while Linux -- free software that competes with Windows -- may still be a "cancer" for Microsoft, the company has found a way to profit from it. That's a good trick . . . perhaps Microsoft should next enter the pharmaceutical market?

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