Novell was recently rumored to be shopping itself around for a buyer. The new rumors? That it's doing some shopping of its own. In this, Novell isn't alone, with Dell also looking to pick up companies that can expand its product lines, as both look to grow despite CIOs' decreasing willingness to spend. Open source may factor into both companies' M&A strategies.
As reported in Daily News & Analysis, Novell CFO Dana Russell has said the company is "interested in making acquisition in the high-growth businesses like identity security and compliance management software, data centre tools and open source software." With over $1 billion in the bank, Novell is in a prime position to buy companies on the cheap.
However, Novell should avoid its SiteScape error, viz., buying into a trendy but not yet profitable market. Identity security and compliance management are probably safe, because they're precisely the sort of "boring" markets that CIOs will pay money for in a recession.
Open source is much the same, but it depends on which open-source products it picks up. A Zenoss, Reductive Labs (Puppet), or some other company in IT management/configuration might be a smart bet.
Novell isn't alone in its interest in acquisitions to spur growth. Dell has been widely reported to have a $10 billion war chest set aside for acquisitions and, according to The 451 Group, Dell may be looking to make some significant acquisitions in the storage market:
With existing partners such as Cisco and Oracle...now priming themselves to become players in the server hardware market, Dell clearly needs to build up its portfolio to do battle with these new entrants along with its traditional rivals Hewlett-Packard and IBM. One clear way to do this would be to expand its storage software and hardware lineups since these offerings are complementary to its core server and PC business.
One way to get into the market would be to buy EMC, a current partner, but as The 451 Group notes, Dell has rarely ventured into big acquisitions--its $1.4 billion acquisition of iSCSI storage systems vendor EqualLogic in November 2007 the exception to the rule. I'd expect Dell to buy midrange players along the lines of 3PAR, Exanet, and so on rather than NetApp or EMC. Buying big would be distracting to Dell and take too long to digest and commoditize, Dell-style.
It's possible that Dell might even delve into the open-source storage market. An Infoworld reports identifies the best of the bunch, with vendors/projects like Zmanda, FreeNAS, and StorageIM in the mix.
It's doubtful, however, that any of the vendors in the open-source storage space are big enough to move the revenue needle for Dell. So, while it's SMB strategy may involve a healthy dose of open source, I wouldn't expect its storage strategy to do so...at least, not yet.
Open source could be a boon for both Novell and Dell, but each would need to be pragmatic about what to expect from open source. Currently, the most revenue either can expect from an open-source buy would be in the $50 million range, with most open-source vendors offering much less than that.
However, the one thing that open source can offer both right now is a ready supply of leads, plus branding and relevance in markets where Novell and Dell may not yet have much of either.
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Google needs developers. Atlassian has them. Reading Oliver Marks' report on Atlassian's progress and embrace of OpenSocial makes me think Atlassian's developer tools could be a good fit for a Google acquisition.
Atlassian offers an array of developer-focused productivity infrastructure. The company has been exceptionally successful by focusing on customer service and customer-centric development. Jira, Confluence, FishEye, and other Atlassian products may not register with your grandfather, but they're often the collaborative tools of choice for developers.
Enter Google. Google's mission is to organize the world's information, but to do that well it increasingly caters to software developers, its I/O conference being just the most visible example of this.
Google launched Google Code to host open-source projects and now claims tens of thousands of denizens. Making each of those projects more productive with Atlassian's tools could provide powerful incentives for more of the software world to revolve around Google, incentives that may be necessary as SourceForge strives to enrich its own developer experience.
Microsoft CEO Steve Ballmer knows that Microsoft depends upon developers. Increasingly, Google will, too, as it fights Microsoft on multiple fronts with Android, Wave, and other open-source or open-access products.
Atlassian's developer products could help to feed Google's developer ambitions.
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Every year, spring brings gives us two things: another rendition of the Open Source Business Conference and rumors of Oracle buying Red Hat, plus various other activities related to open-source consolidation.
In years past, OSBC has taken flight with rumors of Zend (false!), JBoss (true!), MySQL (true!), etc. on the block, with Oracle often the proposed buyer.
This year is no different, as Barron's has obliged by printing yet another rumor that Oracle is planning to invade Raleigh, N.C., to take Red Hat captive.
The source of the rumor is Katherine Egbert, an analyst at Jefferies & Co. The substance for the rumor?
Well, there isn't any.
The only proffered clue is Oracle's "history of organically entering new markets and driving the perceived value of the incumbents before ultimately buying shares." There's just one problem: while Oracle did arguably try this with its Unbreakable Linux rip-off of Red Hat Enterprise Linux, the effort has failed to cram down Red Hat's market capitalization.
Indeed, Red Hat remains one of the few companies (along with Oracle) to outperform a suffering market. While a Red Hat acquisition right now wouldn't price Red Hat at its peak, Red Hat also isn't trading at a huge discount.
While there are difficulties inherent in an Oracle acquisition of Red Hat--it's doubtful that IBM would be very pleased with the move, for example--I personally believe the combination could make a lot of sense, and is almost inevitable as Oracle seeks to outflank its primary competitor, Microsoft.
But I've seen no signs that it's happening anytime soon. And again, for all the reasons Egbert points to as hints of Oracle's interest in buying Red Hat, those same signs suggest that Oracle would do better to wait until Red Hat trades at a more pronounced discount to historical highs.
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TechFlash is reporting that EMC has purchased SourceLabs for an undisclosed fee. The unanswered question in TechFlash's report is why EMC would buy SourceLabs, a provider of support tools for Linux and other open-source software.
It's not that SourceLabs isn't a good company. I have followed SourceLabs since its inception, meeting with founder and CEO Byron Sebastian back at OSCON (in 2003) before the company was founded in 2004, and spent some time in the SourceLabs office in 2004 getting a demo of its technology. It was cool back in 2004, and has improved since then.
In addition, SourceLabs has managed to pull in some big-name customers like Fidelity and Merrill Lynch, demonstrating that it offers real value to real customers. Unlike some competitors like Spikesource, SourceLabs focused early on big enterprise needs and arguably did a better job of tailoring its products to meet those needs than its competitors, notwithstanding its share of financial struggles, which TechFlash details.
No, my question is what EMC, largely a provider of storage solutions, gets from a relatively broad-based open-source support technology company. TechFlash points to Swik.net, SourceLabs' open-source news and information repository as a source of value for the company, but I'm guessing that EMC didn't buy SourceLabs for Swik.net, given that the company had been contacting potential buyers just a few weeks ago to gauge interest in buying Swik.net, likely because EMC wasn't interested in that part of SourceLabs' business.
No, I don't think EMC is interested in an open-source community site, but it's clearly interested in the core SourceLabs technology. I'm struggling to understand the fit. Is EMC hoping to tap into expertise in various open-source technologies? If so, to what end?
I've asked SourceLabs' executive team for comment but, in the interim, anyone care to venture a guess as to what EMC is hoping to get from SourceLabs?
Word on the street is that another open-source company is on the verge of being acquired. No, he/she wasn't talking about Projity, which was acquired by Serena.
I'm not going to name the company because I don't want to mess up the deal, if any. But it's good to hear that open-source M&A is coming back in style. After the acquisitions of Zimbra, XenSource, and others we've gone into a quiet period of open-source M&A. Nice to see M&A dollars discovering value again.
Update: I talked with sources close to the company in question and it turns out the tipster got the direction of the acquisition wrong. In other words, the company in question is likely to acquire another company soon, not be acquired. Stay tuned.
A person close to Vignette and OpenText management told me two interesting tidbits today:
- Vignette has been going through a round of layoffs recently, packaging itself up for sale, and
- OpenText just retained Goldman Sachs to help it with some M&A work.
Will we be seeing "OpenVignette" soon? I suspect the answer is "Yes." OpenText needs strength outside its core records management business, and Vignette needs someone to shepherd it back to health (Its last quarter was less-than-stellar). With a roughly $300 million market capitalization, Vignette is dirt cheap.
The problem isn't the market: Interwoven continues to deliver impressive results. It's also not the people. My own experience with Vignette people is that they are high integrity and super well-qualified. (At Alfresco we've hired quite a few.)
No, the problem seems to be in execution. Perhaps OpenText can remedy this.
In the meantime, for all you open-source applications vendors, Vignette is still full of high-quality people. If you need some Java-savvy developers, sales engineers, etc., now would be the time to go calling.
I've heard through the grapevine that Oracle and Red Hat are in the midst of...something. Some suggest acquisition. Others insist partnership. Still others speculate that absolutely nothing is going on at all.
Can anyone substantiate or repudiate the rumors? Ping me via email....
TechCrunch's Erick Schonfeld notes that Zend's recent layoff of 25 percent of its R&D team could be a prelude to an acquisition. Schonfeld suggests Oracle and Microsoft as potential suitors, but I think Sean Michael Kerner's speculation (IBM) rings true.
Regardless, Zend would be a great prize. I'm not privy to the company's financial information but don't need to be to believe that Zend's position vis-a-vis PHP (the primary "P" in the LAMP stack) makes it a prime target. It's surprising that no one has picked it up by now.
My sources tell me that Oracle was very close to purchasing Zend back in 2006, but that the two sides were far apart on valuation. With open-source software companies going for a premium these days, Zend's price will have only gone up since 2006.
Who do you think is most likely to buy Zend?
I posted a (substantiated) rumor last week about Red Hat getting first dibs on buying SUSE and ultimately passing on it. As it turns out, all sorts of people have come out of the woodwork to give me more information on Red Hat's near-miss on acquiring SUSE.
Here are a few gems, including a cameo role from Sun:
- Red Hat actually looked at buying SUSE twice. The first time was two years before Novell ultimately acquired SUSE, when SUSE was teetering on bankruptcy, and the second was during the negotiations with Novell.
- The first time, at least one senior SUSE executive took an urgent flight to the US to try to sell the company to Red Hat, but the efforts were shelved when additional venture and industry funding was found in time to prevent a bankruptcy; ... Read more
In an attempt to turn this blog into a gossip rag, I'm going to "start" posting unsubstantiated (Meaning, true or almost certainly true but with sources that I can't reveal) rumors. Fiction is always more fun. :-)
In this case, however, it's the truth. First in line to acquire SUSE back in the day was...Red Hat. Matthew Szulik decided to pass on the opportunity and, well, the rest is history. Ironic, isn't it? With whom would Microsoft have done its patent deal had Novell not been around? Would Ubuntu have started sooner to fill the competitive Linux void?
We'll never know....
