Red Hat to acquire JBOSS for $350M. Novell now clearly in play.

Red Hat to acquire JBOSS for $350M. Novell now clearly in play.

Summary: Via ZDNet News,  Reuters has the details: Linux distributor Red Hat said on Monday that it signed an agreement to buy open-source company JBoss for at least $350 million, a move that expands Red Hat's product line and adds to its growth potential. The transcation is 40 percent cash and 60 percent in Red Hat stock, with an additional $70 million owed, subject to financial performance....

TOPICS: Open Source

Via ZDNet News,  Reuters has the details:

Linux distributor Red Hat said on Monday that it signed an agreement to buy open-source company JBoss for at least $350 million, a move that expands Red Hat's product line and adds to its growth potential. The transcation is 40 percent cash and 60 percent in Red Hat stock, with an additional $70 million owed, subject to financial performance.... Red Hat currently sells support for a competing open-source application server, called JOnAS, from the France-based consortium ObjectWeb..... For a growing number of open-source start-ups and their investors, the $350 million acquisition number is a validation of the open-source business model and an attractive pay out. JBoss was largely self-funded and took in $10 million in venture investment in 2004.

The implications of this deal are very wide ranging.  Should Red Hat decide to include an implementation of JBOSS in its distributions of Linux (including Fedora), this acquisition will in fact be a serious blow to JOnAS (JOnAS is an open source implementation of the Java Enterprise Edition specification).  The numero uno most important thing to enterprises is stack certification.  To the extent that Red Hat certifies certain builds of JBOSS with certain builds of its Linux distributions, JOnAS (the previous throne sitter in Red Hat's stack) will end up at a huge disadvantage. 

This move puts a huge amount of pressure on some other players as well in a couple of different contexts.  Traditional Java Enterprise Edition (JEE) players like IBM, BEA, and Oracle -- all of whom market their solutions with Red Hat's Linux -- have a new and very dangerous threat on their hands because they'll have to explain to customers why their commercial JEE implementations on Red Hat make more sense than Red Hat's open source implementation of JEE (JBOSS).  For WebSphere-seller IBM which has already been dabbling in open source-based JEE but who as been perceived as a tightly bound partner to Red Hat,  this could really force IBM's hand in new directions. 

For example, might Big Blue look to make SuSE Linux maker Novell its most preferred Linux partner over Red Hat now that Red Hat is a direct competitor to any and all of IBM's JEE solutions?  Or, now that there are three one-stop shops for operating systems and middleware runtimes (Microsoft with Windows and .NET; Red Hat with Linux and JBOSS; Sun with Solaris and its Java Application Server), will IBM have to buckle and acquire Novell to be the fourth?  It's probably not a bad idea given how SuSE Linux runs on IBM's big iron and how IBM could use an additional way to turn up the heat on Microsoft.  In fact, between IBM's portfolio which includes app servers, database servers, the Lotus collection, and the Rationale stuff and Novell's portfolio of which Linux and its directory services stand out, a merger of the two not only allows IBM to go more toe-to-toe with Microsoft, it does so with a lot more open source flair; one of Microsoft's biggest problems right now.  

Whether or not Oracle will just sit on the sidelines and wait for something to happen remains to be seen. Knowing CEO Larry Ellison, I can't imagine him letting others control the fate of his company.  Anything can happen at this point.  If I had to guess, an acquisition of Red Hat makes the most sense for Oracle. The result would completely change the character of the software titan, but better position it against both IBM and Microsoft both of whom are have been putting more pressure on Oracle anyway.  Particularly on the database front.  If IBM makes a play for Novell, Oracle would have almost no choice in the matter.  For Oracle, the question is about making a pre-emptive strike or not.  If it waits too long -- perhaps until after IBM goes after Novell -- then suitors of Red Hat would probably have to pay a huge premium to complete such an acquisition. 

Two other suitors that shouldn't be counted out are HP and Sun.  Sun, which has a huge amount of cash in the bank, is another company that can't exactly afford to sit around and wait for something to happen.  HP got out of the software business a while ago but may be left with no choice to get back in.  Not only has Sun hinted at an acquisition of Novell before, such a deal would represent a return of a prodigal son (bits and pieces of Unix intellectual property) to one of its forbears.  What the final configuration of such a consolidation sweep would mean for the ongoing legal battles involving SCO, IBM, Red Hat and Novell is anybody's guess.

Meanwhile, BEA could easily get marginalized or acquired as a result of all this consolidation.  BEA doesn't have the cash or the clout to play in the big leagues (it might be able to make a play for Novell but IBM or Sun would almost certainly sweeten the deal).  Should Novell and Red Hat get acquired by a companies other than Oracle, Oracle would have probably have no choice but to acquire BEA (making BEA one of the few companies that could end up doing some acquiring or being acquired).  Toolmaker Borland would probably get sucked into the vacuum in some way as well. 

In a way that seemingly minor conflicts around the world can erupt into flash points between superpowers, the bottom line is that if a consolidation wave sweeps through the industry in 2006, it's this acquisition of JBOSS that will have sparked it. 

Topic: Open Source

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  • Now THAT'S more like it

    $350 million is a tad steep, but JBOSS is worth it. Compare and contrast that to Skype for $3 billion. JBOSS has an "almost" unique position as an open-source JVM. Skype is the leader of a thousand also-rans. Which is a better deal?

    NOT that I like DeadRat getting their claws into JBOSS! I can see proprietary Stronghold+JBOSS going against Websphere and Weblogic . . .
    Roger Ramjet
    • JBOSS is not a JVM!

      JBoss is just a collection of software (written in Java). Anything (any web server) that has the hooks to run Tomcat can run JBoss.
      • *Shaking head*

        Whaaaat? What about JBOSS nagging at Sun to get their "verification" for Java? I thought that they were writing a JVM and wanted to become "official" - thus all of the static between Sun and them. If they are *just* another toolkit for Java, then why all the fuss in the first place?

        Weblogic and Websphere are just toolkits for making it easier (but proprietary) to create enterprise applications. You CANNOT switch from one to another. Adding JBOSS in the mix makes it CHEAPER - but still proprietary.
        Roger Ramjet
  • Look for an IBM counter-stack

    As I say in my blog:
    Dana Gardner
  • Wait

    I think you are onto something--IBM or Oracle could be angling in on Novell.

    I'll wager IBM will snatch up Novell in 'three shakes of a Lamb's tail'.

    But, please, if this week news runs the pace of last week's 'head-spinning' changes, let's not be premature--at least wait a few hours! ;)
    D T Schmitz
    • IBM Already Owns

      Quit a bit of Novell- That is how they were able to buy SuSE.
      Edward Meyers
    • I don't like IBM either...

      ... but I wouldn't wish Novell on them.

      They'll buy it in, to quote a line from a Lurel & Hardy movie, three shakes of a - dead - lamb'sd tale/.
      Anton Philidor
      • Well

        [i]"Well there's another NICE mess you've gotten me into!"[/i] ;)
        D T Schmitz
  • RHEL/JBoss SUSE/Websphere

    The deal makes sense. Red Hat is a committed open source
    company, Novell likes the hybrid model (closed and open

    Novell has already announced the availability of the no cost, but
    closed Websphere/DB2 stack with SUSE.

    Both moves so i) the importance of middleware and ii) the
    extensive benefits to business having them bundled.

    I've said before the upcoming versions of RHEL and SLES will see
    a divergence. More choice is the result.
    Richard Flude
  • No mention of the big googrilla?

    What's up with that?
  • Novell is already in "aquire me" mode

    Consider the following items:

    Novell's last downsizing took many departments to the bare bones, incluing tech support. The techs uniformly report they are not staffed well enough to keep up, even in the face of recent rate hikes to $650 per incident (yes, that's right, $650).

    Novell's CEO is well aquainted with mergers and aquisitions, having been part of Novell's aquisition of Cambridge, and overseeing the aquisition of SuSE, etc. Otherwise, given the performance of the company in the past 2-3 years, one would think that he'd be gone.

    Novell has failed to do any marketing in the past year, even the crappy marketing they normally do. They released Zen7 with absolutely no marketing, for instance.

    Novell keeps talking about its $1.2 billion in cash assets, but aside from a stock buy-back program (another key factor in the aquisition mode) they've not spent it. Certain they aren't investing into their products or marketing.

    THE LAST COMPANY I witness that did these things was Ameritech. They fired massive numbers of employees, delayed any expenditure they could, and artificially pumped up their worth as much as they could to get the highest price when they were aquired by SBC. Novell seems to be doing the same thing.
    • RE: Novell in acquire me mode

      What about a play by Cisco to envelope eDirectory into their offerings? There appears to be growing tensions between the two and both are searching for areas of growth.
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