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 …
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.
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.
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.
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Reminds me of HMS Zubian, built from damaged halves of HMS Zulu and HMS Nubian in WW-I.
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.
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.
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.
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!
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.
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.
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!
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.
"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.
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).
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.
> 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.
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.
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.
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.
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.
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'.
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.
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