JBoss Boss Mum as Buyout Talk Grows Louder

By Darryl K. Taft  |  Posted 2006-02-12

JBoss Boss Mum as Buyout Talk Grows Louder

BURLINGTON, Mass.—The buzz is growing: Middleware maker JBoss is for sale and is about to be acquired, possibly as early as the week of Feb. 13, for hundreds of millions of dollars.

In a Feb. 11 keynote address at an event hosted by the MIT Enterprise Forum of Cambridge, JBoss founder and CEO Marc Fleury deflected questions about reports of his companys acquisition by Oracle Corp.

But offstage, Fleurys reticence didnt slow talk of Oracles buyout plans among attendees familiar with terms of the deal and the open-source middleware developers efforts to find a buyer.

Fleurys speech focused on his companys history, not its future. During the event, titled "Charting Your Course Through Open Source," he described the open-source business models on which he built JBoss, and took a few shots at his competitors.

Fleury, who reminisced onstage about JBoss humble beginnings, is tied to a possible multiple acquisition deal in which Oracle acquires JBoss as the linchpin of the deal with its leading application server, Zend, as a development front end to shore up Oracles Java tools, and Sleepycat Software to round out a low-end open-source database play for Oracle.

Sources familiar with the JBoss deal valued it at about $437 million. Some sources estimated Fleurys cut of that sum at $100 million and others at substantially more.

Executives from different companies told eWEEK that JBoss had discussed possible mergers with them over the past year to 18 months. And sources said there have been at least two additional companies the application server leader looked to hook up with.

Sources said Novell, IBM, Hewlett-Packard, Red Hat, Oracle and BEA took hard looks at JBoss as a potential merger and acquisition target before Oracle made its offer.

Click here to read more about speculation that Oracle plans to acquire JBoss.

One executive who spoke on the record with eWEEK, Marge Breya, chief marketing officer at BEA Systems, in San Jose, Calif., said, "Weve been talking to JBoss over the last year. They were definitely shopping themselves for the last year. We had a number of different meetings with everybody but Marc Fleury," she said.

"Finally, we kind of looked at the range [of what JBoss wanted to be paid] and said we couldnt make it work. We said we could do something better with Apache and our blended strategy," Breya said.

The "something better" Breya was talking about is a lower-end application server model play akin to the one IBM has with its offering around the Geronimo application server, which IBM acquired when it bought JBoss competitor Gluecode last May.

BEA is pursuing a different strategy that involves integration with the Spring framework and other open-source components.

"The range they came to us with was $100 million to $200 million, nothing close to the 400-plus million dollar range," Breya said of JBoss. "The business model isnt there. And as for their community model, we didnt like the fact the model they were running was very closed."

Indeed, Breya said BEA had to question the purpose of taking in JBoss, another application server, other than to acquire the installed base.

"You have to look at why Oracle needs anther app server," she said. "They would have two app servers disconnected. Whats the revenue model other than the support stream?"

Next Page: What an Oracle acquisition would mean for JBoss, and for open source.

What an Oracle Aquisition

Would Mean for JBoss, Open Source">

Michael Goulde, an analyst with Forrester Research, in Cambridge, Mass., said that as IBM acquired Gluecode for what amounted to around 10 times its worth, he would not be surprised to see a deal for JBoss going for around $400 million, since JBoss is valued at about $40 million.

However, some observers said they believe that should Oracle acquire JBoss, most of the JEMS (JBoss Enterprise Middleware Suite) would go away, because Oracle has comparable or superior offerings in most categories.

The JEMS suite consists of the JBoss Application Server, Apache Tomcat, Hibernate, JBoss Portal, JBoss jBPM (business process management), JBoss Rules, JBoss Cache, JBoss Transactions and JBoss Eclipse IDE.

And with pieces of the JEMS suite gone, key developers of those technologies are likely to go along with them, the source speculated.

"If the components go, therell be a massive bailout" of the top talent that built those components, one observer said.

Besides, said another, "I think it would be hard for Oracle to put together a comparable package to compete with IBM."

Meanwhile, Forresters Goulde said a non-independent JBoss indicates "that you can build an open-source business and sell it. And for the short term theres this market for these businesses. If you cant sell the software, dont. Sell the business," he said.

"This will stimulate the creation of even more open source-based companies to build up a brand and then shop the company," Goulde said.

"There are other open-source companies out there that are ripe for picking and that have innovative solutions and have high barrier to entry, like Black Duck and Palamida. The application portfolio management companies could use the types of solutions they provide. Open source becomes a source of technology for proprietary software companies."

Meanwhile, another observer said Oracles move to acquire Sleepycat is an attempt "to cut MySQL off at the knees."

Read more here about the relationship between Oracle, Sleepycat and MySQL.

Approached for a short interview after his own talk at the event, David Skok, a principal investor in JBoss and a general partner at the venture capital firm Matrix Partners, in Waltham, Mass., said he could not comment on any rumors about a JBoss deal. Speaking hypothetically, however, Skok said that if JBoss were to merge with a larger company, it would likely be for reasons other than sheer economics.

"The interesting thing here is that JBoss is doing extremely well," Skok said. "JBoss doesnt need to merge with a bigger company; they could stay independent. However, there are a bunch of very large, conservative buyers out there who wont buy from a small company."

Indeed, Fleurys talk emphasized his companys advantages against larger competitors such as IBM Corp. He told the crowd of lawyers, entrepreneurs and techies that the clash of JBoss and IBM is like a jungle fight between a tiger and and a big, lumbering elephant.

In his speech, Fleury offered a personal look at the process of building an open-source business. After leaving his job at Sun Microsystems, "I go to see my wife who was pregnant with our first kid," Fleury said. "And I say, Baby, Im writing software for free. And she turns around and says, Youre stupid. So I was a little taken aback."

Then, "We moved to Atlanta to my in-laws," Fleury said. "So were not even a garage company: Im my-in-laws garage company. And so I told my wife that if I could do one year and make 60K I could make a living. I did training and 20 people came to the first one, and I made 60K. I am king of the world! I couldnt believe it," he said, smiling.

However, "My father-in-law had the big-boy talk with me that amounted essentially to, Why dont you get out of my place, you bum?" Fleury said. "And I didnt get it at the time. He was like, A young man your age needs his own place.

"My mother-in-law was a great cook, I put on 10 pounds, my wife was happy after a difficult time in Silicon Valley. It was a happy time for me."

Fleury added, "Then David Skok [venture capitalist at Matrix Partners] came along and things got difficult for me."

Things are about to get a lot less difficult if a deal to acquire JBoss goes through.

When asked what his exit strategy was, Fleury at first joked, miming picking up a phone and saying to the audience, "Hold on, thats Larry [Ellison, CEO of Oracle] now."

Then he added, "There was never an exit strategy; there was a naked ambition…"

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