Novell Snaps Up PlateSpin and SiteScape

Published: February 26, 2008

by Timothy Prickett Morgan

When you are a public company sitting on more than a billion dollars in cash, with investors who want to see growth and profits, you have some options. And commercial Linux distributor Novell, which has been trying for the past four years to manage the transition from a proprietary maker of the NetWare platform to a mixed source supplier of software and services, has been under a lot of pressure to do stock buybacks and acquisitions with its pile of money. Yesterday, Novell shelled out a good-sized chunk of change to acquire system management specialist PlateSpin.

Two weeks ago, Novell spent an undisclosed sum to acquire SiteScape, the commercial entity behind an open source collaboration product called ICEcore. Novell was an OEM partner for the product already, having inked a deal last year to put the ICEcore product at the heart of its own Teaming + Conferencing real-time workspace, Web conferencing, Voice over IP, chat, instant messaging, and blog extensions to its GroupWise groupware. (GroupWise runs on Linux, Windows, and NetWare, but Novell is obviously pushing for SUSE Linux Enterprise Server these days.) The ICEcool product is distributed under the GNU GPL license (which one is not clear).

At $205 million, which is more than 10 times the annual sales run rate of the company, the PlateSpin acquisition is a much bigger deal and more central to Novell's desire to be a platform and systems management vendor for desktops and servers.

PlateSpin is located in Toronto, Ontario, and was founded in 2002 in the wake of the launch of VMware's first server virtualization product, GSX Server. (That's the virtual machine hypervisor that runs atop Windows or Linux and that is known as VMware Server and distributed free by VMware today.) While VMware supplies the basic hypervisor most companies use on X64 iron today, PlateSpin has built a policy-driven set of management tools and software that can roam the networking to build a profile of physical and virtual servers that it can then manage. (VMware has added some of this functionality with its own VMware Infrastructure 3 stack, of course, but not all of it.) With VMware making such a high-profile initial public offering last summer and with Citrix Systems paying such a premium to acquire XenSource, the creator of the open source Xen hypervisor, you could guess that PlateSpin would fetch a pretty penny. The company had a little more than $20 million in sales last year, and Novell was compelled to pay $205 million cash--no stock--to buy it. Novell only paid $210 million a little more than five years ago to buy SUSE and thereby get into open source software in a big way and quite probably rescuing Novell from oblivion.

PlateSpin has two products. PowerRecon is used to survey the software that is in use on servers out on the network. It collects data on operating systems, middleware and applications, and groups them according to functions, which PlateSpin calls a workload; it then provides a reporting capability that allows companies to figure out exactly what they have running. This is an important first step, and one that many companies are not tackling properly as they virtualize on X64 platforms. PlateSpin's other product is called PowerConvert, which is similar to the physical-to-virtual (P2V) conversion tools created by VMware, XenSource, and Virtual Iron for their hypervisors. PowerConvert is interesting in that it can do P2V conversions, and then it can also go the other way, moving a virtualized server environment to a specific physical server in the event that it becomes memory, I/O or CPU constrained in a virtual environment. Think about it: If you virtualize a workload and it doesn't work out, it is really useful to be able to move a workload over to a physical box. And, the same software used to doing P2V and V2P conversions can also be used to move workloads from one physical box to another one.

According to Stephen Pollack, PlateSpin's founder and chief executive officer, Novell and his management team got together in September 2007 to talk about an OEM relationship between the two companies and after the two hammered out a product integration strategy, the talk eventually turned to the possibility of an acquisition. In a conference call with Wall Street analysts, he said further that any rumors about PlateSpin doing an initial public offering or talking to other potential suitors were just that--just rumors. Pollack will stay on as vice president of business development for Novell's Systems and Resource Management unit, which is headed up by Joe Wagner. All key employees of PlateSpin are being retained by Novell, according to Wagner, and the PowerRecon and PowerConvert product names and roadmaps are as yet unchanged. Ditto for Novell's various ZENworks system management tools, including ZENworks Orchestrator, which does some virtual machine management already but which was missing the network discovery function in PowerRecon.

So why would Pollack sell to Novell instead of going IPO or selling to someone else? Did you look at the stock market lately? Or VMware's share price?

But seriously, Pollack had a simple answer for that question. "Together, we can become a powerhouse in this space." Novell, for all of its woes as it makes the transition from NetWare to Linux, has more cash than PlateSpin, a global support organization, a reasonably tight relationship with Microsoft, and a need to have the PlateSpin products to round out its own catalog. The PlateSpin products are currently closed source, and it seems like they will stay that way since Novell is not keen on open sourcing everything--as Sun Microsystems, by contrast, is. Anyway, the fit between Novell and PlateSpin is good, and the wonder is why it took this long, really.

Novell also said in the conference call that it remained committed to supporting the management of other Linuxes as well as Windows and Unix platforms with its ZENworks tools and with the PlateSpin tools, which would support the Xen hypervisor inside SUSE Linux Enterprise Server 10 and Red Hat Enterprise Server 5 , VMware's ESX Server, and the forthcoming Hyper-V hypervisor from Microsoft for its Windows Server 2008 operating system. Windows Server 2008 is launched this Wednesday, and Hyper-V is coming later this year.

Ron Hovsepian, president and CEO at Novell, said in the call that the boards of directors at both companies have approved the deal and that Novell expected it to close in Novell's second fiscal quarter ended in April. Novell will provide more details on the transaction and the PlateSpin business after the market closes this Thursday, when it reports the financial results for its fiscal 2008 first quarter, he added.

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