Oracle Buys Sleepycat, Is JBoss Next?

Oracle has acquired Sleepycat Software and its open-source Berkeley DB embeddable database system, Oracle said Tuesday. Terms of the deal were not disclosed.

Oracle is adding the Sleepycat product to its line of embeddable databases which already includes its own Oracle Lite for mobile devices and Oracle TimesTen for in-memory database applications. IDC put the size of the embeddable database market at just over $2 billion last year and it's expected to grow to $3.2 billion by 2009.

Oracle has reportedly been holding acquisition talks with several open-source software vendors, including Sleepycat and JBoss Inc., the commercial company behind the JBoss open-source application server. JBoss has been shopping itself to prospective buyers for at least seven months and is reported to be currently trying to close a deal with Oracle.

Bill Roth, VP of BEA Systems Inc.'s Workshop tools unit said yesterday that BEA Systems and JBoss held talks on a possible acquisition of JBoss seven months ago.

"We had a discussion with them in mid-2005. I knew some of the people at JBoss," Roth said Monday. But the discussion didn't go far because "the valuation they expected was an outrageous multiple of their earnings. It was just ridiculous," he said.

JBoss CEO Marc Fleury and other spokesmen declined to comment on possible talks with Oracle or previous talks with BEA Systems. "We're not in a position to be commenting on any reports," said a spokeswoman for JBoss Inc.

Monday an Oracle spokeswoman wouldn't comment on any acquisition reports.

Roth said he heard that JBoss was seeking was $437 million, or a multiple of 145 times its annual earnings, estimated by Roth at $3 million on revenue between $25 and $30 million. JBoss is privately held and doesn't report revenue. A typical leading company on the Dow Jones Industrial Average is valued at 20 times its annual earnings.

JBoss, however, has attracted a huge following of developers because it gives away the source code of its Java application server, a product that competes with application servers that BEA Systems, IBM, and Oracle sell for thousands of dollars.

The company itself is organized around a mix of open source code and commercial company principles, and was cited by InformationWeek as an example of a second-generation open-source company, after Red Hat Inc. and the Apache Software Foundation. JBoss controls the source code by hiring the key contributors to the JBoss project, CEO Marc Fleury explained in a March 2004 InformationWeek story. In that sense, JBoss was not open to outside developers. If you became a key contributor of code, you became a JBoss employee or eventually left the project.

JBoss earns revenue by offering professional consulting and technical support around the JBoss server.

Oracle appears to be bidding for the broad customer base of JBoss users as part of a larger strategy to graft open-source followers onto its middleware, database, and applications customer lists. It might lose a sale of the Oracle Application Server to a customer that was already using JBoss. But it might gain database and application sales to that same customer by building ties between its products and JBoss. Oracle has not typically fared well in selling its middleware beyond its database customer base. Buying JBoss might prove a quick way to make Oracle the primary move-up candidate for JBoss users, instead of letting them slip into the IBM WebSphere or BEA Systems WebLogic camps.

BusinessWeek Online reported late last week that Oracle and JBoss were in negotiations and haggling over an acceptable price between $200 million and $400 million. If JBoss agreed to either figure, the JBoss community of users may recoil from the notion that what it thought was open source code was now in the hands of Oracle.

Fleury founded the JBoss project with the intent of becoming the CEO of his own company and pulled off that strategy in the face of skeptics and critics. While still a young project, two developers rebelled at Fleury's controls and went off to found the Geronimo application server project. That project eventually came under the umbrella of the Apache Software Foundation and was adopted by an open source code stack vendor, Gluecode. IBM acquired Gluecode last year. IBM practices a dual pronged strategy of encouraging customers to use open source code until they have grown to a point where they're ready for the guarantees provided by IBM products.

That purchase seems not to have been lost on Oracle, which decided it needed its own open source code strategy. Several sources reported that last week Oracle CEO Larry Ellison told a conference organized by Credit Suisse First Boston that rather than try to fight the open source trend, he thought it important that Oracle figure out ways to make it work to its advantage.

Zend Technologies, which produces Zend Core for Oracle, is another reported potential Oracle buyout target. Zend Core for Oracle provides PHP connectivity between the database system and other parts of a Web site. Andi Gutmans, CTO and a founder of Zend, said his firm "works well with Oracle and lots of other companies. We want to keep it that way. We see a whole lot of potential ahead of us" as an independent firm.

BEA's Roth said Fleury and the developers behind JBoss may have been convinced by their venture capital investors, Matrix Partners and Accel Partners, which put $10 million into JBoss a year ago, that there will never be a better time to cash in on their investments.