The acquisition sees Raleigh, North Carolina-based Red Hat expand in to the middleware market and puts an end to speculation that Atlanta, Georgia-based JBoss was an acquisition target for database and enterprise applications giant Oracle Corp.
Red Hat is paying $350m upfront for JBoss, 40% in cash and 60% in shares, and will pay an additional $70m if the company meets unspecified performance targets. Red Hat’s chairman and chief executive Matthew Szulik said the acquisition was based on feedback from customers, partners, and developers that an integrated open source platform was the way forward.
Likewise, Marc Fleury, JBoss chief executive, said the deal made sense to strengthen JBoss while maintaining independence. We chose Red Hat because we see tremendous opportunities for large, independent open source providers and we want to be a part of that, he said.
While Fleury and Szulik declined to answer questions related to previous rumors linking Oracle with a $400m move for JBoss, Fleury added: It was very important for me to know I was taking this company and our employees into an environment that is conflict free. We do have different cultures, but we do pursue the same business model.
Our business models are very aligned, in fact, in many ways, Red Hat was always the big brother, added Fleury, while maintaining that he will have no problem working under Szulik despite recent published comments that he wanted to remain in charge of the company.
Look at the large companies that compete in several markets. We are going to be the super company for open source, he said, adding that JBoss will operate as an independent division of Red Hat. Personally I do report to Matthew.
While decisions on product branding and integration plans have not been made at this time, Szulik also maintained that it made sense for JBoss to maintain a level of independence. The representations JBoss has in the market gives me reason to believe that brand will continue, he said.
Szulik said it was premature to discuss Red Hat’s plans for its own Red Hat Application Server, which is based on ObjectWeb’s JOnAS project, but maintained that the company would continue to be involved with the ObjectWeb project. We have made a significant investment in the work of JONAS and I expect that to continue, he said.
Red Hat’s chief technology officer, Paul Cormier, is also an ObjectWeb board member, and ObjectWeb executive committee member, Francois Letellier, responded to news of the acquisition with a blog posting hoping that it could mean more cooperation between ObjectWeb and JBoss.
As well as bringing Red Hat into competition with ObjectWeb, the JBoss acquisition will also bring it into contention with partners including IBM Corp and Oracle. Szulik said that the company will continue to partner with those vendors in some areas and compete in others, while also playing down the significance of Linux rival Novell’s relationship with JBoss.
Waltham, Massachusetts-based Novell began offering support for JBoss Application Server in July 2004 before ditching its own exteNd Application Server in favor of JBoss AS in August of that year.
The deal was expanded on March of 2005 with Novell contributing code to the JBoss Enterprise Middleware Suite, including its Web Services for Remote Portlets (WSRP) portlet container and portlet library to help accelerate the delivery of JBoss Portal to market, while also using JEMS as part of its new Identity and Application Services Foundations.
Rumors, combined with that strong relationship, had suggested that it was Novell that would make a move to acquire JBoss. Having done so instead, Red Hat’s Szulik maintained: we look forward to having Novell as a productive partner.
As Novell’s involvement with the JEMS project indicates, JBoss had moved well beyond the application server space in recent years, having unveiled the JEMS package in December 2004 to better position itself against IBM’s WebSphere and BEA Systems Inc’s WebLogic.
In October 2005 the company added business rules and BPEL orchestration to its open source product mix, recruiting Drools project lead, Mark Proctor, while in December 2005 it acquired the rights to Java transaction server technology that was jointly owned by Hewlett-Packard and the Newcastle, UK company that invented it, Arjuna.
Its JEMS portfolio currently includes JBoss AS, Apache Tomcat, Hibernate, and the JBoss Portal, jBPM, Rules, Cache, Transactions, Messaging products, as well as a JBoss branded version of the open source Eclipse IDE.
Subscriptions to those products, along with consulting and services, had helped the company grow rapidly over recent years, but Fleury said the purchase by Red Hat would help it to expand. JBoss was looking at, and frankly struggling a little bit with, international expansion, he said, of attempts to expand into Asia Pac.
Red Hat’s CFO, Charlie Peters, said the companies expected the deal to close near the end of Red Hat’s current quarter, which ends May 31. He added that JBoss would contribute $60m in bookings and $40m in revenue in full year 2006, as well as bookings on $100m and revenue of $80m in full year 2007.
