Five Potential Java Industry M&As

by Steve Anglin

As the economy and stock market continue to struggle for strong support and positive direction, look for some major Java camp players to make significant moves. Most of which will establish the trend of hardware vendors acquiring the struggling or, at least, challenged middleware/software vendors. Therefore, here are five potential Java industry mergers or acquisitions to watch for in 2003 and 2004:



1. HP Acquiring BEA Systems



Hewlett-Packard is different from other enterprise server players like IBM and Sun. While IBM and Sun offer complete enterprise middleware/software solutions (Web app server, Java/XML/Web services IDE, DB) for its server customers, HP really does not, unless you count the now defunct Bluestone. Recently, HP partnered with BEA and Oracle to offer various middleware/software solutions with its servers. Some analysts and others have considered a Sun acquisition of BEA. That's not likely given Sun's poor finanical leverage in terms of cash and/or current market value in the equity market. Maybe, a merger is possible where Sun would stengthen its middleware offerings. However, HP will acquire BEA first if necessary before they would let Sun do anything.



2. IBM Acquiring Novell



IBM may acquire Novell. IBM's past ties to Novell in networking and as a recent distribution channel of WebSphere makes it the logical choice, especially as Novell augments its software offerings with new Java and Web services tools. Novell on its own will not make headway into the market, but it certainly offers potential ways to augment IBM's WebSphere solutions.



3. Dell Acquiring Sun



Looking at Dell's cash and strong equity market pricing per share versus Sun's lack of cash and relatively poor equity market pricing per share is an invitation to Dell to possibly acquire Sun Microsystems. In addition to Dell's financial leverage, Dell has been attempting to expand its market into the server-side arena. While Dell has made some in-roads into this arena, Sun already has established these ties with its current large business high capacity servers. Dell is also watching Sun's success in the small business arena with its Cobalt Linux servers. Such an acquisition would give Dell the tools and market share to succeed in the server-side business market. It would also eliminate competition as well. Then Dell would only have to worry about HP and IBM. In regards to the effects on Java, it would be interesting to see what Dell will do.



4. HP Acquiring/Merging with Oracle



If HP is not able to acquire BEA, they may find a way to acquire or at least merge with Oracle. Again, HP would like to own and control middleware and software solutions for its server hardware. While I believe that BEA is more likely to be acquired, Oracle does offer a database solution that BEA does not.



5. Sun Merging with BEA or Oracle



While there is merit for Sun to merge with either BEA or Oracle, politics, ego and the above make this the least likely to happen.



Others to Watch



Borland, Macromedia, and Adobe are other significant market players to watch: Look for Borland to merge/be acquired by either a hardware or a middleware vendor (i.e., BEA Systems, HP, and/or Oracle). Macromedia and Adobe could merge with Apple long-term as well. Time will tell.





Place your bets here.


6 Comments

anonymous2
2003-01-27 12:22:51
M&As will happen . . . but between who?
I can't really comment on the likelihood or the soundness of these mergers, but a fundamental shift in the technology industry has occurred, and it will force some consolidations. Technology and capital spending have gone down the drain, and customers are no longer willing to pay top dollar for software and hardware they don't need. In addition, customers are perfectly willing to pass on the "latest and greatest" software and hardware given that the old stuff works perfectly fine for what they do.


The most ominous shift for many tech companies, of course, is the emergence of open source software. Some companies like Sun are getting hammered. Others like IBM have embraced open source software, realizing that while software and hardware have (in some respects) become commodities, consulting services have not.

anonymous2
2003-01-29 14:43:09
Novell?
Why would anybody buy novell? The have failed to get any traction at all in any software they are trying to sell. They make neat stuff but really there is no need to buy something now when you can wait a year or so and buy it for next to nothing when they declare bankrupcy.


Borland may be a target and a merger between IBM and SUN kind of makes sense but Dell and SUN are like oil and water. Dell is a wintel shop, MS may buy Dell to get into the hardware business.

anonymous2
2003-01-30 09:36:40
Potential HP acquisitions
HP is King Midas in Reverse when it comes to software. Everything they touch turns to s--t. Their track record, including SoftBench, eSpeak, and Bluestone, speaks to this. Not only that, but H-P has had an incredible exodus of top-level software talent over the past 12 months, partly through their dismantling of their software assets, and partly voluntarily. They even killed off the Software Technology Lab in HP Labs.


Larry Ellison surely knows that an acquisition of Oracle by HP is tantamount to a death sentence for his 40,000 employees. BEA may need a partner more, but they would do better to be acquired by Kellogg's, GE, Sony, or some other company outside the computer business, and be left free to do their own thing without the certainly of being f---ed over by H-P's incompetence.


If the price of printer cartridges comes down, then all of HP's profits will evaporate, and it will be the company looking to be saved by an acquirer. It would serve them right to be acquired by a bottom feeder that would destroy them as quickly and effectively as they destroyed Bluestone.


In my opinion, the notion of Dell acquiring Sun is highly unlikely. I don't think that Sun has anything that Dell wants. My guess is that Sun ends up like Apple: a niche player marching to its own tune, making enough money to continue doing what they are doing and keeping their customers happy.

sanglin
2003-01-30 09:59:21
Potential HP acquisitions
HP has dismantled its own software teams and assets as it looks to acquire or merge with a company like BEA or Oracle. HP admitted at least to themselves that they couldn't get into the PC market successfully, so they looked outward to Compaq. Now, HP may be admitting that they cannot succeed in the software market on their own. So, again, they're looking outward to prospects like BEA and Oracle. Such a potential acquisition or merger is likely with BEA and Oracle. It's not if, but when.


In regards to Dell and Sun, Dell has some success in gaining market entry and share in the lower-end enterprise, but with high-end large enterprise, Dell is still the new kid on the block competing with the big 3 of IBM, HP, and Sun. By acquiring Sun, Dell will be in the big 3 in the large enterprise, and will improve its footing in the small to mid enterprise.

sanglin
2003-01-30 10:13:50
Novell?
Novell and IBM have ties on their executive boards and in their past. I think it will happen. It's not if, but when. Novell's stock price is already cheap.


Yes, Borland is a target. Look for Borland's development tools to be added to a middleware or hardware vendor's software stack. There was speculation that BEA and Borland were talking about a possible merger last year. Rumors around MS and Borland are out there as well, although this is not likely given the FTC could block this (MS as a Win tools developer/vendor acquiring the only other significant Windows tools developer/vendor in Borland).


Other than control of Java, an IBM acquisition of Sun doesn't make sense because of redundancy. The FTC would block this because they would view such an acquisition as anti-competitive. And I would agree. There are indications that Dell is moving away or at least looking to grow in areas outside wintel as far as its business plan in the enterprise arena. Most of the large enterprise players don't use wintel.


I don't see MS acquiring Dell or any other hardware player, at least in the forseeable future, although some say that one motivation behind the HP-Compaq merger (actually, HP acquisition of Compaq) was to block a possible MS acquisition of Compaq.

mentata
2003-01-31 08:53:43
a round-up
1) I think HP needs a rest from it's last acquisition. I think they want to build brand and focus on services rather than software. Carly seems to think so, too.


2) I'm sure somebody will eat Novell, and there's IBM with deep pockets and a nose for a good buy. The big liability is the reliance of most of Novell's products on NetWare, which I'm sure nobody wants to touch as it borders on a server-side OS/2 these days. Sam would want to find a way to integrate the products into IBM's vision of hosted services first, but I think they've already got most of what Novell would offer.


3) Dell wants to partner, not acquire. Sun wants to come back, not be absorbed. I think both will be successful if they stick to what they're respectively good at.


4) Larry Ellison is too driven and individualist to allow his company to be acquired. Besides, I think Oracle has a great vector and may win more than regatta's over the next year; it's more likely that Oracle will be buying up one or two of this years losers in 2004.


5) Sun is getting cozy with BEA, and they'll need allies if they want to compete with JBoss, but I think they'll just stay friends. As for Oracle.. Scott and Larry go way back, they both are feeling the Linux love, and Sun could always use a back-end solution, but I can more easily imagine them whipping each others asses with towels in the executive locker rooms than merging their disparate assets.


It's ironic. This seems like low-rent soap opera material from all these industry titans, who are now just trying to stay relevant and make a living in this tough economy. Mere mice before the all-powerful customer.


The little players are where the excitement's going to come from, I think. The ones with more intellectual power than property. It may be more constructive to ponder increased partnering and cooperation in the open source community, but that seems unlikely considering we'd have to reconcile all our big egos. You can't just acquire a free spirit.