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Novell Acquires SuSE Linux

Novell Inc. said on Nov. 4 it has agreed to acquire SuSE Linux AG for $210 million in cash, a move that would make the network software company the No. 2 seller of the open source operating system and intensify competition with Microsoft Corp.

Along with the purchase, the Provo, Utah, company said it was negotiating with IBM to extend agreements to support SuSE Linux on Big Blue's eServer and software infrastructure products. In addition, IBM plans to buy $50 million of Novell convertible preferred stock.

The acquisition, which is subject to regulatory approval, is expected to close by the end of January 2004. The extended agreement with IBM, as well as IBM's investment, is scheduled to close at the same time.

Investors responded quickly to the news, driving up Novell's stock 32.05 percent, or $1.94, to $7.99 a share in afternoon trading on the New York Stock Exchange. Shares of Red Hat Inc., the No. 1 Linux seller, dropped 14.11 percent, or $2.17, to $13.21 a share.

The acquisition means Novell becomes an immediate market leader in Linux and will have a worldwide technical staff of more than 600 people supporting the OS, Jack Messman, chairman and chief executive of Novell, said.

"The acquisition of SuSE Linux will complete Novell's ability to offer enterprise-class Linux solutions to our customers from the desktop to the server," Messman said in a statement.

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