Once bitter rivals, Microsoft Corp. and Novell Inc. entered into an agreement to allow open-source Linux software to work with Windows.
After years of trying to crush open-source rivals, Microsoft said it will provide support and technology to allow Linux to work on Windows. At the same time, it agreed not to assert patent claims against customers of Suse Linux, Novell's operating system.
In its second major partnership with an open-source software company this week, Microsoft sought to assure a growing number of Linux users, especially in the computer server market, that the two platforms can co-exist.
"We appreciate that open-source software plays an important role in our industry and it's here to stay," said Brad Smith, Microsoft's general counsel. "This will enable a new level of cooperation between open source and proprietary software."
Unlike proprietary software, open-source software lets developers share code and add functions. Users pay for custom features, maintenance and technical support. Linux is the most popular variant of open-source software.
The Microsoft partnership provides a boost to Novell, a distant second to open-source rivals and Linux leader Red Hat Inc., since corporate customers increasingly run both Windows and Linux machines.
The agreement came two days after Microsoft struck a long-term partnership with open-source software maker Zend.
News of the Novell partnership sent Novell's shares up 16 per cent while pushing Red Hat stock down two per cent. Microsoft shares were mostly unchanged.
"Linux has grown up," said Katherine Egbert, an analyst with Jefferies & Co. who covers Red Hat and Novell. "This is a mainstream technology that major technology vendors are struggling to find a way to support."
Microsoft is not the only software giant eyeing Linux. Last week Oracle Corp. made its boldest move yet into Linux software, offering cut-price technical support in a surprise bid to wrest away Red Hat customers.
Microsoft and Novell said their pact, which will run until at least 2012, is a broad set of business and technological agreements to make their products work better together.
They will pay each other up front for a release from any potential liability for use of each others' patented intellectual property. Since Microsoft sells more products, it will pay a larger sum.
Novell will also make royalty payments to Microsoft based on a percentage of its revenue from open-source products. Neither company disclosed any financial figures.
The agreement focuses on three main technological areas: virtualisation to allow Linux to run on Windows machines and vice versa, management services to help customers work with a mix of Linux and Windows products, and document format compatibility to allow users to more easily share documents.
"This announcement gives our customers interoperability and peace of mind, all in one," Novell Chief Executive Ron Hovsepian said at a news conference in San Francisco.
Although Linux has made little progress in unseating the Windows operating system from PC desktops, it has continued to gain market share in recent years. According to industry data from Gartner, 21 per cent of worldwide server shipments in 2005 run Linux versus 67 per cent of servers running Windows.
More than a decade ago, Novell assembled the pieces of a full-scale Microsoft competitor by buying database software from Borland and WordPerfect, an alternative to Microsoft Word. It bought rights to a rival to Microsoft's Disk Operating System (DOS) and a version of Unix, a predecessor to Linux, seeking to fuse them with Novell's own operating system.
But the strategy failed amid surging demand for Windows, leading Novell to file an antitrust lawsuit against Microsoft. Two years ago, Microsoft paid $536 million to Novell to settle part of those claims.
Shares of Novell rose 15.7 per cent, or 92 cents, to $6.79, while Red Hat shares fell two per cent, or 33 cents, to $16.10 in regular Nasdaq trade. Microsoft shares fell four cents to $26.77.