Microsoft/Novell: Breaking Down the Coupon Numbers

How many SUSE subscriptions can you get for $240 million?

Today I read a thought-provoking article over at SD Times, which detailed the state of the partnership between Novell and Microsoft.

According to David Worthington's missive things are going pretty good for the two competitor/partners, though if you really read the piece there seems to be a key detail missing: what Microsoft is getting out of their investment in this partnership.

And what an investment it has been: an initial payment of US$348 million to Novell... with US$240 million tagged specifically for those infamous subscription certificates for SUSE Enterprise Linux to hand out or resell to interested customers. Indeed, this was the thrust of the SD Times article: that Microsoft is almost through passing these coupons out.

The thought that was actually provoked came from this sentence in the article: "A total of 475 customers have used an unspecified number of coupons, according to Microsoft."

This struck me as a very interesting figure, because after firing up XCalc, I figured out that if indeed just 475 customers have received these coupons, then Microsoft has essentially subsidized SUSE Linux Enterprise Server (SLES) deployments an average tune of US$505,263.16 per customer.

Keep in mind that while we have no idea of how many actual single- or multi-year subscriptions were actually used with these disbursements, we can get a very rough idea based on Novell's current pricing structure of how many boxes this may represent.

If we put forth the supposition that each customer purchased a single-year Standard subscription for each server, this average figure represents 632 SLES machines per customer. (For the sake of argument, let's also pre-suppose that all servers in this discussion are x86 or x86_64 boxes. This is a thought exercise, not an attempt to make our heads explode.)

Run that average number for single-year Priority subscriptions, and the number of SLES machines drops to 337 per customer.

How about with Novell's three-year subscriptions? A Standard-level multi-year plan for every box comes out to 233 servers, and the Priority plan comes out to about 125 machines per customer.

Let me emphasize that all of these numbers must be taken with a huge grain of salt: the coupon's customers are surely mixing and matching their plans for different machines; I'm only using the x86/x86_64 pricing, not Itanium and Power pricing; and Novell does offer volume pricing--so these figures are prone to huge deviations from reality.

Still, if these numbers don't put us in the ballpark of how many SLES subscriptions were deployed for Novell with Microsoft's money, they will at least get us in one of the tailgating parties outside on the parking lot.

Just as a continuation of this exercise, I thought it would be edifying to calculate how many potential server subscriptions you can get for US$240 million. The table below provides the number of SLES machines my calculator and I came up with:

 StandardPriority
One-Year Subscription300,375160,106
Three-Year Subscription111,11159,259

So, depending on the types of subscriptions actually used, Microsoft may have paid for roughly 60,000-300,000 SLES subscriptions--likely even more if Novell applied volume discounts.

This inaccuracy of these figures precludes us from drawing any big conclusions. But it is interesting to get a peek behind the curtain and see just what kind of deployment numbers this partnership may have produced. It certainly seems like more than a token number.

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