In a significant acknowledgement of the viability of Linux as a desktop OS, Microsoft has announced a deal with Novell to support Suse Linux on machines that run Windows.

Microsoft will offer sales support for Suse Linux and also co-develop technologies with Novell to make it easier for users to run both Suse Linux and Microsoft Windows on their computers. Microsoft plans to distribute 70,000 coupons for SUSE Linux Enterprise Server maintenance and support to customers that want to run both Windows and Linux in their environments.

As expected, Microsoft Chief Executive Officer Steve Ballmer announced the news in a San Francisco press conference. He was joined by Novell's chief executive officer Ron Hovsepian, as well as other executives from both companies and customers.

"This is to bridge the divide between open source and proprietary source software," Ballmer said. "It gives customers greater flexibility in ways they have certainly been demanding."

However, he added that the deal does not mean that Microsoft is now going to be a huge Linux proponent. "If you want something, I'm still going to tell you [to buy] Windows, Windows, Windows," Ballmer said.

As part of the deal, Microsoft also will agree not to assert rights over patents to any software technology that might be incorporated into Suse Linux. Protected under this are individuals and noncommercial open-source developers that create code and contribute to the Suse Linux distribution, as well as developers getting paid to create code that goes into the distribution.

Brad Smith, senior vice president and general counsel for Microsoft, said it was difficult to come up with a "covenant" between the companies to marry open-source code and proprietary code, but "we sorted out the economics so Novell's customers don't have to."

That said, under the patent cooperation agreement, both companies are paying each other upfront in exchange for a release of patent liability. Additionally, Novell also will make running royalty payments to Microsoft based on a percentage of revenue from open-source products.

Basically, the agreement ensures that Novell Suse customers are protected against patent litigation from Microsoft.

However, at the event, Smith declined to comment whether Microsoft thought that Novell rival Red Hat's Linux distribution violates Microsoft's intellectual property.

Microsoft has been relenting lately on its tight hold on patents through a program called its Open Specification Promise. Through the program, Microsoft has promised not to take any legal action against developers or companies that want to use specifications for a host of technologies for which it has patents.

Microsoft and Novell plan to work together on three key areas of technical collaboration: virtualization, Web services management and the Open Document Framework spec. Specifically, the companies will build technology that will allow customers that want to run Windows on top of IT environments that primarily run Linux and vice versa, said Jeff Jaffe, Novell's chief information officer.

The companies also will build connectors between the open-source OpenOffice and Microsoft's own Office productivity software, which have different document formats, as well as facilitate integration between the companies' rival directory products.

Thursday's deal between Microsoft and Novell seemed eerily similar to one struck between Microsoft and Sun Microsystems in 2004 that ended the Java dispute between the two companies and promised better interoperability. That deal also was announced with little notice. However, few concrete effects of that deal have been seen in the industry since it was struck.

The deal between Microsoft and Novell will certainly be a blow for Red Hat, the second in as many weeks. Last week, Oracle said it would begin selling technical support for Red Hat Linux, a plan that both validates Red Hat Linux while undermining Red Hat's own support and maintenance business. Red Hat is the leading supplier of Linux and the biggest rival for Novell's Suse Linux distribution.

Novell is one in a line of companies that has been forced to change its core business because of Microsoft, and so makes a strange partner for the Redmond, Washington, vendor.

Novell built its business on the back of its Netware network OS, but the appearance of Windows NT on the scene as a viable alternative was a primary reason for Netware's ultimate demise. In recent years, Novell has rebuilt itself into an open-source software company through purchases of companies such as Suse Linux and Ximian.

The deal also will not only pit Microsoft and Novell against Oracle and Red Hat, but also IBM, which was an early supporter of Linux, particularly Red Hat's distribution.

(Robert McMillan in San Francisco contributed to this report.)