Red Hat buys company, Oracle goes crazy
Red Hat, the #1 supplier of Linux software consolidated its position by buying open-source application provider JBoss in a $420 million deal. Both companies are open-source providers, meaning that they supply software at next to no cost, allow users to modify the code, and make their money off support and tools. That's a big contrast to the way in which big proprietary software companies work. The low cost and adaptability have given companies a small but rapidly growing market share.
The deal is significant in that JBoss sells "infrastructure" or "enterprise" software, the kind of corporate management software sold by companies like IBM, Oracle, and Microsoft. And those companies charge big for their software.
The deal is a direct threat to the strategies of a company like Oracle, which indeed tried to acquire JBoss earlier this year. IBM in fact bought Gluecode, a company with products similar to those of JBoss.
The acquisition has started a war. Oracle CEO Larry Ellison, not the most diplomatic of industry figures, has threatened to break its relationship with Red Hat, with whom it has cooperate din the past. He vowed to "wipe Red Hat off the map." Red Hat CEO Matthew Szulik blasted back, accusing Oracle of being a relic and not interested in the welfare of its customers. Ellison said that he was interested in buying Novell, which is the other major commercial supplier of the Linux operating system. No surprise, as Oracle is a compulsive serial acquirer with a deep war chest.
Up until now, red Hat has been sued by Oracle and IBM as a way of fighting off Microsoft's move into their enterprise software territories. As an article in Computerworld Singapore ("Red Hat-JBoss deal creates open source super-company", 4/21/05) reports:
However, there is a general consensus that users will benefit from the Red Hat purchase. "Customers are already using JBoss to whack IBM and BEA over pricing," [said one analyst]. "If you're a Red Hat customer … you'll probably have a very interesting conversation with your sales reps over the next couple of months."
Oracle is ten times the size of Red Hat, and can make pretty tough for the idealistic company. Oracle has already spent billions in recent years to take over PeopleSoft, Siebel, and other companies in order to reduce competition. The question is whether it can use its market power to crush a rival that plays by different rules. Will Oracle become the Microsoft of Linux?
