As I wrote in my report for ADMIN Magazine, SUSE is like a seasoned football player who changes ownership after a few successful seasons. This time the Swedish group EQT is buying SUSE from British-owned Micro-Focus. This is the fourth sale of SUSE since its inception in 1992, a year after Linus Torvalds announced the Linux kernel.
But what does it all mean? What does it mean for SUSE? What does it mean for Micro Focus? What does it mean for EQT? And more importantly what does it mean for openSUSE? We set up a call with Michael Miller, President of Strategy, Alliances, and Marketing at SUSE to get answers to some of these questions.
Who is EQT?
Miller calls EQT is a private equity growth investor that invests in growing businesses to help accelerate their successful growth and the create a return on that investment later.
Typically, private equity investors are known for acquiring promising businesses to squeezes as much juice as they could very quickly, some acquire businesses to operate them for a very long time to get a profit.
Miller said that EQT is different, in a sense that they find successful growing businesses to inject additional support and investment faster and more successfully to generate a return on that investment. Such growth investors keep a time frame of 3-5 years to see a ROI in an acquired company. Which also means SUSE has over 3-5 years to grow exponentially under EQT.
“That’s why I call them a growth investor,” said Miller.
What does SUSE need to grow?
As open source and emerging technologies are changing the face of the industry, veterans like SUSE have a very large room to grow. But it can grow only so much without additional support. SUSE needs to hire more talent to grow its teams in order to support the growing business. At the same time, SUSE needs newer technologies to serve its customers better. Developing such technologies in-house, organically, is a very long process and at times not practical. That’s why companies opt for acquisitions to get quicker access to technologies and talent pool. Despite the promising growth, at the moment SUSE doesn’t have enough resources to do both. That’s where EQT can come in and help the company.
“Additional resources takes two forms: (a) the ability for SUSE to take its profitable growth and reinvest the profit back into our business and (b), the ability to support both organic and acquisition strategy. So they give us an ownership structure in which we can reinvest our profit and funding for a build and buy strategy,” he explained.
Why did Micro Focus sell SUSE?
SUSE has been showing fast growth under the stable umbrella of Micro Focus. The company generated revenues of $303.4 million in 2017 as compared to $253.8 million in 2016. So why is Micro Focus selling off a promising business? It’s more about Micro Focus than SUSE. The company has been going through a rough patch since HPE acquisition for a whopping $8.8 billion. Its CEO left the company, and its shares have been tanking ever since. The $2.5 billion offer by EQT gave Micro Focus the much-needed cash. At the same time, this sale ensured that SUSE wouldn’t go on the chopping block as Micro Focus looks at cost cutting. It’s a win-win situation for both companies.
What does it mean for SUSE?
In a previous interview Nils Brauckmann told me that when Micro Focus agreed to acquire Attachmate (the then owner of SUSE), he ensures that his ace leadership team remains intact and SUSE continues its business as usual, as a business entity within Micro Focus. “… it would mean business continuity. All the things that make us strong: our commitment to open source, our commitment to quality, our commitment to enterprise customers (mission-critical workloads, heterogeneous environment), we will continue to do all of that,” said Brauckmann.
As SUSE switches owners, Brauckmann would bring the same green team to EQT. In fact, for the first time, SUSE will be operating as an independent business, instead of a business unit of another software company.
Miller said that while the ace team will remain intact, being an independent company would mean SUSE will be appointing new leaders in roles like CFO and CIO. “Additional leadership roles will be necessary for those functions that we previously were getting from Micro Focus. Now we’ll be creating those additional roles within the SUSE business. It’s an opportunity for us to expand our leadership team,” he said.
Focus areas for SUSE
SUSE was the first Linux vendor that came into existence after Linus Torvalds announced the Linux kernel. The company is gradually evolving beyond its core Linux business and focus on emerging technologies. Under EQT, SUSE will be looking at investing in emerging technologies and emerging markets like containers, machine learning, IoT, serverless and so on.
“There’s so much dynamic innovation going on there right now that our focus needs to be making sure that we can enable our customers and our partners to experiment and innovate and develop all these new technologies on top of the SUSE platforms,” said Miller.
SUSE is not looking at survival; they are looking at expansion and growth. EQT will provide them with the steroid SUSE needs at the moment.
May benefit from Brexit and trade war
The acquisition of German SUSE by Swedish EQT from British Micro Focus may be good news for SUSE under the changing political landscape. After Brexit next year, things are going to get complicated for UK-based companies. And it would undoubtedly be even more complicated for SUSE which was founded in Germany as is based in Germany. EQT buyout can be seen as ‘Brexit’ for SUSE; they now don’t have to worry about all the complications UK-based companies are facing.
At the same time, the reckless trade-war triggered by US president Donald Trump is forcing organizations to reconsider how much they should rely on US-based companies. Being a pure European based company, EQT/SUSE may have better bargaining chips.
Miller said that we have to wait and see what shape would the trade war take. “I think we are well positioned now and will be, we’ll be even better positioned afterward to be a global business,” he said.
Can there ever be SUSE Inc.?
As someone who has been covering SUSE since Novell days, I always wanted SUSE to be an independent company like Red Hat or Microsoft.
“That’s an opportunity or an option that could have been pursued by the Micro Focus to spin off SUSE as an independent business. But EQT acquisition provided them with a better return on investment,” said Miller.
He felt that at the moment it’s good for SUSE to have a growth investor supporting the company as it rapidly builds and expands its business. But there are possibilities for SUSE to be an independent company, owned by itself.
“Over the next three to five years as we prepare ourselves for yet another transition to the next stage, I think we will be very well positioned to consider multiple options after we move through this next phase,” said Miller.
That said, under EQT, SUSE will run as an independent company; it’s no more yet another business unit of another software vendor. So, in one way SUSE is already inching towards its 4th of July.
What does it mean for openSUSE?
Nothing. Nothing will change for SUSE’s relationship with openSUSE or the open source community. Open Source is the heart and soul of companies like SUSE. In fact, Brauckmann called Richard Brown, the chairman of openSUSE board who was vacating in the UK, to deliver him the news early morning and reassure him that nothing will change. In a chat, Brown told me, “As a SUSE employee I’m excited about my employer’s new owners. As an openSUSE contributor, I’m not only excited but thrilled at the proactive steps SUSE has taken to reassure the community, which shows just how well SUSE understands how to operate as part of the open source world.”
I feel this is excellent news for SUSE, openSUSE and the open source community. With EQT acquisition, SUSE has gained a bit more independence. We all know that the market is driven by Open Source technologies and as much as we love to talk about emerging technologies, most of those are going to run on platforms offered by companies like SUSE. At the same time, SUSE itself is investing in emerging technologies. I wish SUSE was moving at a much faster rate than it’s doing now and also expand its US presence. EQT may do precisely that and provide SUSE with all the support it needs to emerge as that leader.
Good luck SUSE!