Microsoft will provide sales support for Novell's Suse Linux and protect Suse users against patent infringement claims from Microsoft, according to the terms of a broad agreement unveiled Thursday by the two companies, formerly bitter rivals.

Microsoft and Novell agreed to work on virtualization technology to simplify the process of running Linux on a Windows machine and vice versa. In addition, Microsoft agreed to hand out coupons for maintenance and upgrades of Suse Linux. Novell would be responsible for the actual sale.

Chief executives Steve Ballmer of Microsoft and Ron Hovsepian of Novell announced the deal at a San Francisco news conference, held shortly after the deal closed.

Microsoft promised not to sue Novell for patent infringement stemming from code currently in Suse Linux, or future technology codeveloped by the companies or contributed by third-party developers.

The deal is designed to alleviate business concerns that Microsoft could one day claim Linux contains patent-violating technology. But the "patent covenant" doesn't protect all Linux users, only Suse users. "Novell is acting as a proxy for its customers, and only its customers," Ballmer said. "If they [businesses] want patent peace and interoperability, then they'll have to look to Suse Linux."

Microsoft and Novell were once bitter rivals. Ray Noorda, the CEO who built Novell, spent more than $1 billion to acquire companies to help compete against Microsoft in operating systems and office applications.

Microsoft still considers Linux and open source one of its main threats. Ballmer said in May that competing with Linux is one of the company's top priorities.

But the two companies were motivated to cut a deal because their joint customers demanded better interoperability between the platforms in virtualization environments, the executives said.

Virtualization allows IT departments to run multiple operating systems and their applications on the same computer server or PC. Virtualization can lead to higher efficiency in the use of hardware, but can also introduce management challenges.

While the companies agreed to work together on building bridges between their platforms, both plan to push their products first, offering the other as an alternative if the customer asks.

"Both companies will continue to compete," Ballmer said. "We both recognize the need for interoperability, so while we'll compete, we'll also cooperate in the right way."

For Microsoft, the deal isn't a response to customer demand alone. Microsoft recognizes that supporting Linux is pivotal if it hopes to overtake VMware, the EMC-owned market leader in virtualization software.

Microsoft in April stunned LinuxWorld attendees by pledging it would support Linux virtual machines on its Virtual Server. In addition, Microsoft unveiled free virtual machine additions for Red Hat Linux and Suse Linux.

Another element in Microsoft's virtualization strategy is to boost sales of its Systems Center management tools. The tools need to support virtual and physical environments to be successful.

More than eight in 10 companies are exploring, testing, or using virtualization technology, according to an INS survey of 100 IT execs.

Along with interoperability between Linux and Windows, the companies' engineers will also be looking to do the same between Microsoft's Active Directory and Novell's eDirectory, as well as develop better document translation technology for Microsoft Office and OpenOffice, an open source productivity suite.

In addition, the companies said they would work together on Web services technology for managing physical and virtual servers.

On the patent front, Microsoft counsel Brad Smith said the two companies had built a legal "bridge" between proprietary and open source software.

"I think that's a historic thing for our industry," he said.

The patent deal, however, doesn't cover the pending antitrust lawsuit Novell filed in 2004, challenging Microsoft's tactics in competing against Novell's desktop applications, WordPerfect and the Quattro Pro spreadsheet.