Dennis Byron submits: Oracle (ORCL)-BEA (BEAS). Sun (JAVA)-MySQL. Now that the enthusiastic financial-analyst briefings and press conferences have been held (well at least the Sun-MySQL was enthusiastic), and now that we’ve had time to crunch the numbers, let’s look at the details. Who wins and who loses in terms of competitors, partners, investors and users.
I analyze the two deals in two separate blog posts in order to pick up some separate issues such as the depressing effect of the Sun-MySQL deal on open source software [OSS] pureplay valuation and the depressing effect of the Oracle-BEA deal on WebLogic and AquaLogic revenues for the rest of 2008 (and maybe forever).
Oracle-BEA is discussed below. But there is one major interconnecting theme in the two deals: For users and investors the independent middleware market as we know it is going away.
BEA pretty much launched the independent middleware market as a separate entity in 1995 by acquiring several Bell Labs/Novell TUXEDO-based distributors, IMC and ITI. To be completely accurate, investors still have a few choices. TIBCO (TIBX) is left because Reuters spit it out a few years ago. And Iona (IONA)–which predated BEA–and Cape Clear are still standing, presumably totally because of Irish hardheadedness. In addition, IBM (IBM) and Oracle have succeeded in changing the definition of middleware such that some might argue that Attunity (ATTU) and SAS Institute make middleware.
When I say middleware, I mean run-time code that’s really in the middle of something. And when I say independent I mean “pure play,” software suppliers not selling other types of information technology.
So what does this sea change mean for the users? In the 1990s, users did not buy from pure plays because they were pure but because they offered a choice other than–at the time–depending on the middleware built into application suites such as SAP (SAP) R/3, built into their relational database, or spit out as a by product of their mostly systems-supplier-centric development tools.
The bottom line for the user community now, as I have been modeling for years, is that because of the end of the independent middleware market, each enterprise has to choose whether to get in bed with an application suppliers’ middleware—SAP’s NetWeaver or Oracle’s Fusion—or an infrastruture suppliers’ middleware.
Larry Ellison explained in his conference-call script how Oracle fits in both camps because of his commitment to open standards, but that is not the same as open source. And therefore the Oracle approach does not really represent independent choice for the user.
Partners such as smaller ISVs that used BEA middleware in their products and even much larger companies than BEA that use BEA middleware in their services offerings, face the same more limited middleware choice as users.
For investors, the independent middleware market was a great leading indicator of the overall IT market. This acquisition makes the challenge easier or harder depending on your investment-research technique. Do you try to understand the upstream/downstream aspects of the market when you are investing in auto makers? If so, your life just got harder because there is no more equivalent of Behr, Dana [DCNAQ.PK], Delphi [DPHIQ.PK], Eaton (ETN), Honeywell/Bendix (HON), Magna (MGA), Modine (MOD), Tower [TWRAQ], ZF and so forth in the IT market. But if you just bet on an auto maker because you like the looks of the latest coupe, and an IT supplier because the user interface looks cool, you’re all set.
The most important short term investment aspect of the deal is that it will probably kill BEA license sales until the deal is signed, sealed and delivered in about 6 months. I think the two companies recognize this, accounting for the difference between the $21 asking price and the $19.375 final bid. And the two companies will probably make every effort to prevent it from happening (but I’m not sure of that given the coldness of the joint conference call).
As for competitors, well, as I said above, there are none left.