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Red Hat Buys JBoss for $350 Million

Posted by iTech - 2006-04-14

Linux vendor Red Hat is poised to purchase middleware specialist JBoss in a move that will combine two of the top open-source technology brands and put Red Hat in a position to create a comprehensive enterprise software package.
JBoss sells standards-based middleware that serves as a building block for service-oriented applications. Once the acquisition is complete, the move will pair the JBoss technology with Red Hat's portfolio of enterprise software, with the goal of reducing software-development costs for business customers.

A Good Match

Both companies are strong proponents of open-source software, and both use a similar, subscription-based business model -- rather than selling software licenses -- so the match appears to be a good fit and should help drive the adoption of open-source tools in the enterprise.

"This is a good move for Red Hat in that it will accelerate the company's move into middleware, and it gives greater credibility to building an open-source architecture based on Linux," said Forrester Research analyst Michael Goulde.

But, Goulde noted, the proposed merger will require JBoss to take a different approach to its open-source middleware offerings. "They have had control over that community, and now their relationships will become secondary to Red Hat's strong performance with Linux."

Red Hat stands to gain a full set of middleware tools, an established customer base, and a popular brand in the open-source world, particularly among those using Java-based servers.

JBoss Evolves

JBoss has been the subject of recent buyout rumors, with Oracle being mentioned as a primary suitor.

Goulde said Red Hat is a much better fit, given the amount of common ground between the two companies and the fact that Red Hat and JBoss can more easily join their products and provide a single platform for an array of software and services.

Earlier this month, JBoss released a transaction-management platform that is based on technology the company acquired from Arjuna Technologies and HP in 2005. JBoss Transactions was touted as the first high-end transaction engine offered through an open-source license.

Red Hat will acquire JBoss for some $350 million, plus an additional $70 million depending on future financial performance.

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