Mergers
And Acquisitions
IBM
Buys GlueCode And The Open Source Business Model
Nearly
a month ago, IBM surprised some customers and vendors by buying
Gluecode, a small Open Source company that offers a free J2EE web
application server, purchasing the tiny private company for an
undisclosed price. Then
they surprised them all over again by announcing that they would
follow the Open Source business model for their new acquisition.
That
means IBM will offer GlueCode as a free download (just as open
source code is often offered), at no charge to the user.
Users may purchase support from IBM.
(Providing code for free and charging for support is a common
Open Source business model.) IBM
believes this business model may be a requirement at the low end of
the market.
That’s
what got them interested in GlueCode in the first place.
They have an award winning, feature-loaded application server
in WebSphere and it comes in multiple versions, from WebSphere
Express on up, but it’s a steep step up for a small company just
getting started. IBM
believes GlueCode, with its lower cost Open Source business model
offers an on ramp to the WebSphere family.
Users (in the SMB market and departmental customers in
Enterprises) and developers can start with GlueCode and then, when
they’re ready, move on up to IBM’s licensed, fee-paid WebSphere
offerings.
IBM
has a continuing interest in supporting the Open Source community,
as expressed in its support for Apache and Apache Geronimo as well
as Eclipse and Derby. IBM
will extend this support through the Gluecode acquisition,
contributing a plug-in technology from Eclipse, which will let
developers develop for Gluecode, Apache, and Geronimo.
GlueCode
and its 18 employees will be joining IBM.
Support pricing won’t change; IBM will charge what GlueCode
has been charging except that they’ll go to a per processor charge
instead of a per application charge.
Of
course, GlueCode wasn’t just offering a web application server;
they were offering a whole (JOE) stack.
IBM hasn’t decided whether they intend to maintain all of
the components and bring them forward.
There are a number of LAMP (Open Source stack) vendors out
there now and we’d guess IBM might choose to partner with them
(just as they do with Linux distribution vendors), rather than to
compete. In any case,
that decision is in the future.
For
those of you who are wondering why they picked GlueCode instead of
the better known JBoss, they answer is they looked and decided they
liked the contributors to GlueCode and its team, as well as the
GlueCode IBM match better.
Sun Is On A Buying Spree
That $7+ Billion in Sun’s pocket must have been burning a hole, because
the company has been on a buying spree.
First, they purchased Procom, for both its NAS software and its NAS-savvy
engineers and sales staff, for $50 million.
Last year they had licensed Procom’s IP, so they look on
this as a continuation and extension of an existing deal. This is in line with other small technology deals Sun has
done in recent years. It’s
sometime hard to integrate such products into an existing portfolio
and to leverage the purchase price into attractive revenue and
profit numbers. However, Sun had an existing relationship with Procom, so
that may provide a shortcut here.
Next, Sun acquired Tarantella (you may want to think of this as what was
left of the old SCO – not the new one – after it sold off its
UNIX business to the new SCO).
Tarantella offers software that enables organizations to
access and manage information, data and applications across
virtually all platforms, networks and devices.
That allows the customer to avoid rewriting applications (or
having to do without them or replace them with costly alternatives).
The quintessential product in this sector is Citrix. Sun purchased
Tarantella for $25 million and the cost of some employee options.
If you can do the arithmetic, you’ll guess that $75 million worth of
acquisitions didn’t make much of a dent in Sun’s $7+ billion
stash – nor would it be likely to generate the billion plus in new
revenue that Sun needs to overcome its long lull in the marketplace.
So Sun was happy to surprise the marketplace last week by announcing its
plans to acquire StorageTek, an important data storage and
information life cycle management firm, for $4.1 billion (an
aggressive price at almost two times StorageTek’s $2.2 billion in
revenues). This will
create a firm with $13 billion in combined revenues.
That, of course, is a desired outcome.
We could provide you will a list of companies that combined
only to see their revenues not only fail to grow but actually fall
below their previous individual highs.
Sun obviously believes they have the synergy to overcome this
problem, since they have stated in the announcement they expect to
see their earnings rise in the first 12 months after the acquisition
closes.
Sun is banking on several things with this acquisition:
-
That customers will prefer to deal with a
single large vendor who can handle their entire data center needs.
(Vendors like IBM can already offer this service.)
-
That they will be able to gain substantial
additional revenue by increasing their attach rate in both
directions. That is,
they are hoping that they will be able to sell more storage to their
server customers and Sun servers to their new storage customers.
We believe success in this arena will be a key element of the
value to Sun of this acquisition.
Sun claims that this will not be the end of its acquisitions, but we
suspect that additional acquisitions are likely to be more modest,
now that the war chest has been substantially decreased.
CA Acquires Concord Communications
Computer
Associates is starting to remake itself under the aegis of new CEO
John Swainson (see our other article in this issue CA Reorganizes). As
part of that undertaking, it has acquired network service management
software provider Concord Communications for $330 million in cash
plus $20 million in debt.
Concord’s
eHealth technology provides proactive network performance management
and predictive capacity planning.
Concord’s service management offering also offers complete
management of such technologies as VoIP (Voice over IP) and wireless
mobile networks, placing it in the emerging network services market.
The
acquisition will extend CA’s enterprise systems management
offerings. It includes
some hidden further acquisitions as Concord has recently acquired
Aprisma Management Technologies, Inc. and its SPECTRUM Business
Service Intelligence software, which manages the availability of IT
infrastructures and the business services that rely on them,
including service modeling and patented technology in the areas of
root cause analysis, relationship mapping, impact analysis, topology
discovery, and condition correlation, which will be of significant
value to CA customers as part of the company’s Unicenter solutions
portfolio.
Concord
will be integrated into CA’s newly created Enterprise Systems
Management Business Unit, headed by Senior Vice President and
General Manager Alan Nugent (see below).
A white
paper on CA’s technology integration directions in network and
systems management is available at http://ca.com/concord/techpaths.pdf.
