Red Hat just announced its intent to acquire JBoss for $350 million. Marc Fleury, CEO of JBoss, spoke with eWEEK Senior Editor Darryl K. Taft on March 30 after word that a potential deal with Oracle had fallen through. Though Fleury would not address the Oracle situation directly, he spoke candidly about what he wanted for JBoss. And with the Red Hat deal it seems he got it.
What can you tell me about the future of JBoss?
What I can tell you is that No. 1 I am firmly here and committed to the future of JBoss and that the future is going to be bright and consistent with what weve done so far. There are many options in front of JBoss. There always were. And so far Ive been lucky enough to pick the option that maximizes the professional open-source potential, and grows the company and furthers our goals in our mission statement, which is to transform the way software is developed, distributed and supported. And whatever option is in front of us, if we choose it, it will be because we strongly feel that thats the way to continue with our mission.
So is it true that JBoss has been in play?
I personally have not tried to sell the company. The allegation that JBoss has had a “For Sale” sign on it is just false. Weve been approached. Were always evaluating these options. Did we ever go out and tell somebody we wanted to sell? Never! And if anybody did they were not speaking for me.
Is there a magic number at which you would sell?
Look at Red Hats numbers and apply that [formula] to our numbers and youll have a valuation. And very soon were going to be too expensive for anybody. There is no magic number. The valuation is important, but its just how the game is played.
OK, so let me be clear, I wont be hearing in the next week or so that JBoss has been sold?
[Laughter.] Well, what is today? No, JBoss will not be sold within the next week. [More laughter.]
OK, so what is the status of any acquisition or merger?
Im not going to directly comment on rumors. But what is surprising this time is that JBoss is always approached by partners. There have been rumors around that CA was going to buy us, that Sonic was going to buy us, or TIBCO or Microsoft. And this time around the rumors got a little bit out of hand. The status of the rumor itself is that its still alive, still producing some interesting nonsense. For example, I heard that I was supposed to appear on TV with Larry Ellison. It was news to me. It was funny to read this as an outsider almost. There was just outrageous stuff.
So that has calmed down. Thank God.
But there are always partners who approach us. That is normal. I dont know why people are so surprised by what they hear. But you can send an e-mail to MarcFleury@Oracle.com and see what happens. And it will bounce. So there it is.
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So are you denying that you were in talks with Oracle?
I am just not talking about the rumors, very frankly. What I am saying is it is normal for a startup to be approached a lot. That said, Im not saying anything specific about one partner or another.
Overture to BEA
Well, BEA came out and said that they had talked to JBoss and that, in fact, your company had made an overture to them. Do you have any comment on that?
Yeah, that one Im willing to comment on. I was extremely surprised by Marge Breyas comments in the press. I thought they were completely unprofessional. I dont know her. I dont know who she is. I dont know what she does. And she seems to have a pretty strong opinion about my personality and my company. To claim that theyve done an audit is just a lie. It was done by some low-level employee of theirs and so maybe shes confused about things, because that was never the case.
But I want to say very clearly, because as soon as the rumors came out and they seemed to have panicked a little bit, they felt obliged to come with that lie. Apparently they stopped. But it doesnt make them look good.
I want to make it very clear that I would have never, ever sold to a company like BEA. And the reasons are simple. Whatever is in the future of JBoss, what I want you to know and trust is that Ill make a decision that maximizes our vision potential, which is to transform the way we develop, distribute and sell software. And BEA is a company that doesnt pass the sniff test. I would never, ever sell to them.
There was never an audit by BEA. Thats a company I would never go to. Going there would be the death of our development model, the death of our distribution model and our support structure. Its just too conflicted a company with its own agenda to even think about doing business there. I mean, think about it.
I resent the way IBM and BEA tried to characterize this, which proves the point to which they were panicked about this rumor. So theyre going around saying “Yeah, theyre trying to sell themselves.” Look at me, have I sold to anybody? No. Will I in the future? Maybe, if the thing makes sense. Its not about the money. There is money in every option we have. Its not about the VCs [venture capitalists]. In fact, the VCs back us up in every plan and were majority holders, employees and founders. And, in fact, the VC, David Skok, has been stellar in supporting us. Hes been the one to say we should walk away from previous discussions outside of these rumors. And so to have somebody I dont know like Marge Breya just come out and be proactive in spreading a lie makes me think they are very confused.
We complained to [BEA chief executive Alfred] Chuang and said: “What is this? Put a leash on your puppy.” And finally it stopped. But it was so unprofessional. They look desperate; they dont know what theyre saying. So I hope that puts an end to this BEA thing. I would have never sold and I will never sell unless theres a radical change of everything over there.
Reason to Merge
So what would be a reason for you to merge with a larger company?
Thats a good way to phrase it [laughter].
Well, what would you stand to gain? What would the company and the technology stand to gain?
Were a small entity fighting a big boys battle, and at some point the game becomes financial. And if you look at the public companies and you look at their valuation, were talking billions of dollars. For certain players thats peanuts. So in a consolidating market its impossible for anybody to make the claim that they can reject the financial game. In other words, Im the chairman of the company and I have to consider every guy onboard. So there are a couple things I look at. No. 1 is these folks have been here for a long time. And as we reach our goal of changing the way we develop, distribute and support, we need to achieve liquidity for a lot of folks. I have said many times that I want to create a new generation of open-source millionaires. And Im going to do that, whether its by IPO, whether its by merge at some time … Im not the one reading tea leaves and its the nature of every startup, specifically one that has so much impact in a market thats so rich and is consolidating at the same time. Its almost a triple whammy here.
Thats my duty as a chairman, to seek and choose options that maximize value for my shareholders. And the majority of my shareholders are founders and employees.
Outside of fiduciary duty, I will not sell the company, economic value or not, to somebody that would dismantle this operation. Thats really not knowing me to claim that I would have done that.
Take my two answers to the question you just asked and the one on whats in the future, and youll see how I would justify a merger if there was one: Which is, this is the best place for our community at large. And by community I dont mean some BS lovey-dovey stuff. I mean my employees. Is this a place where people in the morning believe they can still come and change the world in developing the software, distributing the software and supporting the software? And is this a place where our user community will benefit? Or is this something that is going to completely change the model for them and they are afraid and they dont want to go down that path? Because at the end of the day were successful because customers are thirsty for this model of subscription. Is that model something that is compatible with what a potential merge would be? Clearly that would eliminate BEA right there.
So fiduciary duty says maximize the value. Dont get me wrong, a lot of employees stand to make a lot of money. And I want these guys to have that. And that doesnt say merger or IPO. And No. 2 is I will pick a place thats completely compatible and where I maximize the well-being and the happiness of our community—customers, developers, co-developers and employees at large.
Im very conscious that we have built something thats quite unique. I have assembled a team that is the envy of the industry. These guys are the cream of the crop. These are superstar developers and they are friends. That is great. Thats why people want to come to work for JBoss. People dont realize what JBoss has become, they think its still a ragtag team of ragtag bad boys. Yeah, it is, but its also backed by a corporation now. But its a company thats quite unique. I want to preserve that. Thats what Im getting at. I owe it to the employees to preserve that spirit that is going on. And there are places that would kill that in a second.
So what insight can you offer to other open-source companies that might be in or approaching a similar position as JBoss?
Id like to talk about the licenses and the difference between free software and open source. I am really happy that a lot of young folks who are starting open-source companies look at JBoss and they want to emulate that. I am happy when I see that these kids have educated themselves about the licenses and go GPL [General Public License] or LGPL [Lesser GPL]. Because there has been so much confusion with people that embrace academic style licenses. Because as developers you dont realize youre giving away all your IP to your competitors, not to your end-user community. So they tend to strip-mine you for the good stuff. And that is what IBM is doing. The end result is IBM bashes Geronimo in public.
And the new startups are seeing through that and embracing LGPL and GPL. And Im very happy to see that because no business has been successful on BSD licenses. The competitors of those businesses have been successful.
I see a tendency in the open-source guys to bury themselves in consulting businesses. This is where my own experience is you need a little humility and realize you dont know what you dont know about business. And you should go out and get some people who know about business—be it in the form of investment capital, advisors and sales guys—surround yourself with talent. We have a tendency in the open-source community to get wrapped up in our own technical genius and success. But at the end of the day we need superstars in sales and operations to make a company work.
You were asked recently about your exit strategy and you said there was no exit strategy, but that there was just naked ambition. What did you mean by that? Has it been revised at all?
No, and it maps to what I have been talking to you about. I have told you our vision—to change the way software is developed, distributed and supported. Thats not an exit, thats a goal. People talk about an exit as if its the end of the adventure—play the game, make money, go lie on the beach. Thats not what were doing.
I need to make money for my guys. Thats my fiduciary duty and thats my ambition. But its a step; its not a goal, its not an exit. People say whats your exit? When are you leaving the stage? I am not leaving the stage. Yeah, were going to make a ton of money. Be sure of that. Because I can get this army to march on. So there was a starting strategy; there is no exit. Its naked ambition that makes us go on. There is no exit, there is a necessary step that we need to do to further our goal.
And I need a steppingstone somewhere, a financial one, a corporate one whos going to help us get to that next stage. Is it the public market thats going to help us? Thats one option. Is it a bigger company thats going to help us? What company is going to help us do that? It aint going to be BEA. IBM disqualifies I think by now. But I need finances to grow the company. I need access to investment capital to build out the plan and everything we need to do. And thats not an exit, thats just a step.
But is there a company? I mean to listen to how you speak today I dont see that theres anybody that will allow you to do everything you want to do—maintain tight control, keep the “community” intact, and so on.
You dont really think so? You may be right. I dont know.
The other issue is people say youre going to cash out if you sell the company and well never hear from you again.
That is crap. As you know I enjoy being the joker. I relish that. I am not going anywhere.
I almost wish we were born 30 years ago and open source was there 30 years ago when it was an open field and you could become a huge company overnight. Today youve got layers and layers and layers of companies that you have to go through, and each is financially more powerful than the other as you go through. And thats a tough game to play when you get into the numbers. And its a consolidating industry as opposed to an exploding industry. Had this been 1999 even, wed have been public almost three years ago.
But Im not complaining. We are the product of the nuclear winter in IT, post-1999. People embraced us because were the cheaper option and were having a blast.
For people to say were going to cash out is wrong. No, no, no, no, no; thats really not knowing us. What people dont understand is that some people at JBoss have already made money. Weve never really publicly talked about that, but Ive already made money. I already drive a fancy car and Ive already taken care of a lot of things financially. So have many folks in the company. And still I dont sleep at night when theres stupid stuff going on like all the rumors and stuff like that.
One journalist came to me and said we heard the Oracle deal fell apart because you were going to walk away. Well, that was rumors on top of rumors. But those who know me know Im not walking anywhere. In fact, I would mention this as the criteria of any potential merge, but divisional control is a big issue. That means Im not going anywhere, and if you want this to work you need me here. And I want to be here. So if somebodys going to offer me a platform to blow it out, Im interested.
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