With the anticipated $350 million purchase of Java middleware maker JBoss, Inc. by Red Hat, Inc., it is seen by a number of analysts as the first move for major consolidation in the open source software arena. Some even believe that there is the potential there to confront major software behemoths like Microsoft(MSFT) and Sun Microsystems(SUNW).
The price tag for the deal is huge as Red Hat's offer of $350 million ($420 million if JBoss hits its target revenue figures) is far more than Red Hat's $278 million in revenue in its latest fiscal year ending on February 28.
They both say that it is the size of the possibilities of this combined business that is being considered in Red Hat's offer as they look to the future.
There is optimism by the participants that together they can challenge other companies in the middleware space such as BEA Systems (BEAS), IBM(IBM) and Oracle(ORCL).
Zipporah Koganowich comments that:
"Red Hat chairman and chief executive officer Matthew Szulik has said open source is not just Linux any more. He feels the combination of Red Hat's open source operating system with JBoss' Java middleware will attract cost-conscious companies doing service-oriented architecture (SOA) implementations.
"Both the companies are into consulting and support contracts, which are their main sources of revenue than mere software licenses. JBoss will indeed come in handy in Red Hat's efforts to go beyond the open source software as the former has high visibility in North American and European markets. Among JBoss' popular products is the JEMS middleware suite, which has been accepted well in the market. It is also coming out with a web server soon."
Things are heating up baby! Both companies believe that they can compete, but hint at they believe they can beat their competitors through their convergence. This should be an intersting story to watch unfold.
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