back to article Micro Focus offloads Linux-wrangler SUSE for a cool $2.5bn

SUSE, a 25-year veteran of the Linux world, has been acquired by private equity outfit EQT after less than four years in the hands of former owner Micro Focus. The deal, announced today, puts a price tag of $2.535bn on the enterprise open-sorcerers, should it be approved by Micro Focus shareholders and the relevant authorities …

  1. Anonymous Coward
    Anonymous Coward

    Here goes yet another Suse branding exercise.

  2. Steve Davies 3 Silver badge

    VC's and Hedge Funds

    seem to me to be nothing more than 'Debt Generators'.

    By that I mean they leave a lot of generated debt behind when they take their money and run.

    IMHO, the involvement of these sharks in a business is as good as the Grimm Reaper telling you that you are going to die.

    1. Nick Kew

      Re: VC's and Hedge Funds

      You may be reading the wrong Penny Dreadfuls.

      I have quite a lot invested in VC: the dividends pay the rent! No debt involved: just supporting growing business.

      Though not mature business like SuSE: that's a different ballgame. In the absence of actual knowledge, I shall reserve judgement on the new owners.

    2. FIA Silver badge

      Re: VC's and Hedge Funds

      IMHO, the involvement of these sharks in a business is as good as the Grimm Reaper telling you that you are going to die.

      It works the other way too, businesses don't have to take the money.

  3. Blockchain commentard

    Not bad price for free software !!!

    1. Doctor Syntax Silver badge

      "Not bad price for free software"

      And written by amateurs as so many shills commentards seem to have been told to say think.

    2. steelpillow Silver badge
      Pint

      "Not a bad price for free software"

      Though still not a smidgin of what RedHat is worth.

      Have to say I have had little to do with SuSE over the years, but it is good to see choice still thriving and even better to see F/LOSS as a "social responsibility" bling thing.

      May I wish EQT a handsome and healthy return on their "free as in freedom, not free as in beer" (icon for irony) acquisition.

      1. Mister Goldiloxx

        Re: "Not a bad price for free software"

        Where is beer free? Please advise!

        1. BebopWeBop
          Pint

          Re: "Not a bad price for free software"

          Rees Mog and Johnson have promised us it. We can have our beer and drink it - trebbles all round.

          1. John Smith 19 Gold badge
            Unhappy

            We can have our beer and drink it - trebbles all round.

            And not get fat.

            Don't forget the not getting fat part.

  4. This post has been deleted by its author

  5. Michael H.F. Wilkinson Silver badge
    Happy

    Cut-and-shut

    Reminds me of HMS Zubian, built from damaged halves of HMS Zulu and HMS Nubian in WW-I.

    1. JacobZ
      Headmaster

      Re: Cut-and-shut

      Great story, but I think you mean "undamaged halves"?

      1. Yet Another Anonymous coward Silver badge

        Re: Cut-and-shut

        Great story, but I think you mean "undamaged halves"?

        You are obviously unfamiliar with government procurement procedures

        1. BebopWeBop

          Re: Cut-and-shut

          The undamaged halves were sold off to India.

    2. FlossyThePig
      Facepalm

      Re: Cut-and-shut

      I remember a cartoon in a car magazine (Practical Classics?) where the front half of a VW Beetle had been attached to the rear half of a Morris Minor.

      1. mjflory

        Re: Cut-and-shut

        I'd never heard of anyone trying that except Red Green.

        http://www.youtube.com/watch?v=wfOZ-uajfNE

        1. Alistair
          Coat

          Re: Cut-and-shut

          @mjflory:

          Eh, I thought he'd used duct tape.

    3. Anonymous Coward
      Anonymous Coward

      Re: Cut-and-shut

      Also the name of an unorthdox female sterilisation procedure.

      With not much fun to be had afterwards either.

  6. Velv
    Boffin

    Revenues of $164.4m a year and growing at 13%. OK, I know I don't fully understand business markets, that's why I'm in IT, however even if $164.4m was profits that's nearly 15 years for a return on investment.

    So either the new owners know something we don't, or something smells very fishy here.

    1. AMBxx Silver badge
      Paris Hilton

      Underpant Gnomes

      1. Sell software available free elsewhere

      2. Um,

      3. Profit!

      Come on - even Paris understands the business model!

      1. Anonymous Coward
        Anonymous Coward

        Re: Underpant Gnomes

        > 1. Sell software available free elsewhere

        I think in SUSE's case, what they sell is not so much the software, but the certainty that it runs on extremely big iron.

    2. bjr

      Makes no sense

      Is there a mistake in the reported price? It makes no sense to pay $2.3B for a 25 year old company with revenues of $164M, it makes even less sense for an also ran like SUSE. Redhat is trading at 8.25X revenues, at that multiple SUSE would be worth $1.3B. But SUSE isn't Redhat, it's 1/18th the size of Redhat, it's essentially irrelevant and has zero potential to disrupt anything so you would expect a much lower multiple, frankly I think the price is too high by 10X.

      1. I am the liquor

        Re: Makes no sense

        The numbers quoted equate to a P/E of 14.3, which is historically pretty average, and well below the current market rate (P/E ratio for the S&P500 at 1315 EDT today: 24.61). So on the face of it, not an unreasonable price,

        The buyers might take the view that Red Hat being 18 times SUSE's size represents growth potential for SUSE.

        1. Anonymous Coward
          Joke

          Re: Makes no sense

          > The buyers might take the view that Red Hat being 18 times SUSE's size represents growth potential for SUSE.

          And, as we all know, 2018 is the year of the Linux desktop so big opportunities await.

        2. RudyF

          Re: Makes no sense

          The numbers quoted do NOT equate to a P/E of anything; the article has no mention of P for profits, instead quoting an R for revenue figure.

          Having said that, a comparison to Red Hat (revenue 800 odd million, market cap 23 odd billion) suggests the price paid for SUSE (revenue 200 odd million) is very reasonable. Btw, Redhat's P/E is a whopping 59!

          1. diodesign (Written by Reg staff) Silver badge

            "the article has no mention of P for profits, instead quoting an R for revenue figure."

            SUSE's operating profit for the 6 months to Oct 2017 was $49m, more or less matching the year-before's $50m.

            I've added this to the article.

            C.

          2. I am the liquor

            Re: Makes no sense

            Well P in P/E is price, not profits. But yeah, I was wrong to pick out the revenue figure (which was actually 6 months revenue anyway) instead of net earnings. All I can say was it was a long lunch.

            $2.535b / $98.7m = a P/E of 25.7, slightly above the average of the S&P500, but the point stands that on the face of it the price is not completely unreasonable.

      2. Anonymous Coward
        Anonymous Coward

        Re: Makes no sense

        The $164m figure was for a 6 month period (last public reporting by Micro Focus)

      3. diodesign (Written by Reg staff) Silver badge

        Re: Makes no sense

        The $164m is the 6 months of SUSE revenue to October 31 2017 (up 13% on the year-ago period). For the 12 months to April 2017 (last full annual report), it was $303m (up 21% year on year).

        (Don't forget, Microsoft splashed out on GitHub that wasn't particularly profitable.)

        C.

    3. Anonymous Coward
      Anonymous Coward

      I believe the article said $164m over a 6 month period.

    4. CrazyOldCatMan Silver badge

      So either the new owners know something we don't, or something smells very fishy here

      It's clear you are not a VC - the usual pattern is:

      1) Buy something undervalued (preferrably using debt raised against the company that you are buying).

      2) Run the company into the ground, making sure that you extract as much cash as possible by selling off stuff and making them pay "management" fees to to for anything and everything

      3) Sell off twitching corpse to someone with more money than sense

      .. Profit!

  7. Brian Miller

    Swelling price tag, if not profits

    A value that went from $112 million to $2.5 billion, and a miserly growth? I'm not a financials man, but that seems steep for a Linux outfit.

    The last time I'd looked at Suse was just after it was acquired by Novel. There wasn't enough to recommend it over Red Hat.

    1. Anonymous Coward
      Anonymous Coward

      Re: Swelling price tag, if not profits

      SuSE is so much better than RHEL it isn’t even funny. For grins, go download a SRPM/.src.rpm for a major package (eg, OpenSSL) from both vendors and compare the work that both of them put into it. Even the code quality is lightyears apart.

      1. Nick Kew

        Re: Swelling price tag, if not profits

        Interesting comment (I use neither). If true, the deal makes a lot of sense: the new owners expect to translate SuSE's merits into profitable business (whereas it didn't really fit at Micro Focus).

      2. TVU Silver badge

        Re: Swelling price tag, if not profits

        "SuSE is so much better than RHEL it isn’t even funny. For grins, go download a SRPM/.src.rpm for a major package (eg, OpenSSL) from both vendors and compare the work that both of them put into it. Even the code quality is lightyears apart"

        SUSE is relatively strong in Europe, it is profitable and it fits in with some of EQT Partners' other IT investments (although most of their investments are non-IT). Above all, I hope that they treat SUSE well.

      3. CrazyOldCatMan Silver badge

        Re: Swelling price tag, if not profits

        Even the code quality is lightyears apart.

        However, it still uses systemd..

        (I've looked at SuSE for many years - its USP is stability since it never uses the latest and greatest but implements stuff that's been used elsewhere for years. I think they use systemd only becuase of Gnome requiring it).

    2. Teiwaz

      Re: Swelling price tag, if not profits

      Started on Suse in 1999 - dropped it when Novell bought it - not a protest thing, for two releases consecutively, the desktop setup had gone downhill. Think I switched to Mandrake after that (tried Red hat, couldn't get of that fast enough).

      tempted to try Suse out again occasionally.

      1. Anonymous Coward
        Anonymous Coward

        Re: Swelling price tag, if not profits

        > tempted to try Suse out again occasionally.

        OpenSUSE is probably your friend, then. It's already been announced that the newly independent SUSE will continue to support the community version, which remains free-as-in-beer. The OpenSUSE chair confirmed on a list this morning:- "Nils Brauckmann (CEO of SUSE) personally called me this morning to assure me this news will have no negative impacts on openSUSE."

        Quite a relief, as I run OpenSUSE on quite a few systems, and it has been amazingly solid. Upgrades are a joy. There was a lot to learn for one coming from a preference for Debian and Debian-style systems, but these days it seems harder to go back. It feels more unix-y somehow. I assume this is because OpenSUSE backs directly into what will become the paid-for mainframe-powering full fat SUSE.

        We used to run SuSE (as it was capitalised in those days) on most servers, and had bookcases of the full box sets as each new version arrived. We came to the conclusion that, from 5.3, the odd point-numbered versions were great, but the even numbered and point-zero versions were best avoided. Then Ubuntu came along and changed the game for the better, especially when we didn't really need to run a "certified" OS. I came to prefer Ubuntu as a desktop OS, but came back to OpenSUSE around 12.1, probably out of nostalgia. What I found was remarkable quality and a satisfying experience.

        I wish them well as independents under new owners.

      2. Anonymous Coward
        Anonymous Coward

        Re: Swelling price tag, if not profits

        > tempted to try Suse out again occasionally.

        If you want to try something a bit out of left field, try one of the BSD's.

    3. Rusty 1

      Re: Swelling price tag, if not profits

      And CentOS is considerably cheaper again.

      At least with RHEL/CentOS you can pick and choose which of your systems need support (those that run Oracle, and few other other third party apps). For those that don't need support, run CentOS, and be happy.

  8. Andy The Hat Silver badge

    A company with revenues of $164m and a value of $2.5bn? That would smack of a company with silly levels of capital asset and, in the hands of an asset stripper, little future ...

    1. Nick Kew

      What interest would SuSE have for an asset stripper? The only substantial asset is the ongoing business itself: the whole, not parts that could be stripped.

      1. Missing Semicolon Silver badge

        The value is not the revenue

        .. it's the ability to use the company as collateral for a huuuge loan. Then the encumbered husk can be allowed to blow away.

        1. Nick Kew

          Re: The value is not the revenue

          And who would lend on that basis?

          Debt may be attractive because it's artificially cheap and benefits from a more favourable tax regime than equity funding. But lenders want to lend to good businesses, who will live to service and repay the loans.

    2. Anonymous Coward
      Anonymous Coward

      Does nobody read any more?

      The $164m figure was for 6 months, not a full year. Micro Focus reports half-yearly results, so that would be from the last public period.

    3. diodesign (Written by Reg staff) Silver badge

      The $164m is the 6 months of SUSE revenue to October 31 2017. For the 12 months to April 2017 (last full annual report), it was $303m.

      C.

    4. Alan_Peery

      $164 million was six months income.

  9. Anonymous Coward
    Anonymous Coward

    Suse does more than desktop linux. It offers its own variant of Openstack, Ceph, management, SAP and most importantly the support to go on top.

  10. GrumpenKraut
    Linux

    Bits about SUSE (especially versus Red Hat)

    SUSE was (back when I worked there) pretty shit at marketing: RH got the Press even with rather trivial things vs. we were the first to get Linux on a new architecture on forgot (I kid you not) to tell anyone.

    SUSE has very very good developers (as RH does), their visibility seems still behind the RH folks (dunno why that is, shit marketing may help).

    Back than Red Hat was at times shitty arrogant and some people switched to SUSE just to get rid of them.

    If you look at potential (developers, business partners, knowledge, customer base) you may find that the price is not really that high.

    Btw. RH got traded just at the right time and SUSE missed that opportunity: if that wasn't so, both would be much more likely on the same level now.

    1. JLV

      Re: Bits about SUSE (especially versus Red Hat)

      surely the corporate market can accommodate, and benefit from, more than 1 big publicly traded Linux vendor. If the VC plays its cards right, they could IPO them solo later as a competitor to RH.

      Plus, MicroFocus is the vendor that wanted a pound of flesh $2000+ for a COBOL compiler a while back (still?), so anything they’re involved with gets an automatic black mark in my book. Good escape for SUSE.

    2. Anonymous Coward
      Anonymous Coward

      Re: Bits about SUSE (especially versus Red Hat)

      In the olden days, SuSE certainly got credit for coming with very good manuals, being European (and therefore somewhat less purely mercenary in their commercial efforts than Red Hat), and good supporters of KDE (well, at least until KDE got ridiculously bloaty, from KDE 4 onwards).

      But Debian/Ubuntu/Raspian/etc seem to have the grassroots developer mindshare (and not unreasonably so, if you ask me) these days (probably not at all unrelated to the fact that they are genuinely free, although you can of course pay for support).

      It's bad enough trying to find packages for a lot of popular software in the Red Hat repos (without having to dig all over the internet looking for independently packaged RPMs), and I'm not sure if finding packages that would work for SUSE would really be any easier, whereas it really is the case that virtually everything is just there already in the Debian (etc) repos.

  11. IGnatius T Foobar ✅

    Trials and tribulations

    Micro Focus is a company that deals primarily in supporting obsolete technologies (such as COBOL) on modern hardware and software platforms. Attachmate was an excellent acquisition. SuSE, not so much. SuSE needs to be out on its own where it can thrive in the Linux world.

    Most of the damage to SuSE was done by Ximian (aka "Novell") where the entire operation was sabotaged by Miguel de Icaza and Nat Friedman. They never really recovered from that assault on what had previously been an excellent Linux company.

  12. Anonymous Coward
    Terminator

    The Microsoft way of doing business ..

    As a Microsoft "Gold Certified Partner"microsoft, Micro Focus isn't going to let Suse threaten Microsoft customer base. i suspect the strategy with Suse is to, keep the patent just alive enough to soak up 'open source' developers but not alive enough to divert customers away from Microsoft. As part of the deal MS promises to not sue Suse or its customers for using Linux through the provision of 'mutual IP assurance'.

  13. tempemeaty
  14. Anonymous Coward
    Boffin

    Going short

    You invest in SUSE, you lose.

  15. fluffybunnyuk

    always had a soft spot for suse. Back in the 90s they used to do this really chunky manual when others had moved to pdfs. The 5 disc box set was worth it just for the manual. I still have it, and use it once in a while for the odd reference.

    Hated microfocus taking it over. Always used to rely on SuSE for a stable back-patched distro.

  16. ecofeco Silver badge
    Paris Hilton

    My head hurt

    I can't keep up with whose sister is whose cousin's second aunt by marriage to the grandmother of the uncle's nephews other cousin.

    So yeah, OK, SUSE. Whatever.

  17. Jove Bronze badge

    EQT

    An interesting list of divestment - including that if Vertu before it hit the wall.

  18. Anonymous Coward
    Anonymous Coward

    this is interesting....

    mind that OSE login details are being kept so far by MicroFocus, so those are sold to a debt collectors firm now?

  19. wayward4now
    Flame

    They sure managed to blow Caldera out of the water, who was giving Red Hat the fits, before SuSE got involved.

    1. Richard Plinston

      > They sure managed to blow Caldera out of the water

      Caldera renamed itself 'The SCO Group' (TSG) when it bought the business of collecting Novell's revenues from SCO. They then tried to give _everyone_ "the fits".

      1. wayward4now
        Linux

        But, SCO wasn't Ray Norda's baby, as was the original Caldera. He wouldn't have condoned that bit of expensive and disruptive nonsense while he was alive.

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