This is an expensive acquisition for VMware… even if the company is rich. Its GAAP net income for the full fiscal year 2008 was $290 million for revenues of $1.9 billion. You can compare this to the estimates of SpringSource revenues that are between $10 and $40 million. Basically, WMware is spending more than its full 2008 income to acquire a company at more than ten times its current revenues. The rational behind this is to create the ultimate “Java in the Cloud” infrastructure. In the SpringSource blog , the CEO of SpringSource Rod Johnson wrote “Combined with VMware’s vSphere and other cloud-enabling technologies, we can innovate in frameworks and infrastructure to deliver a joined up experience. SpringSource application frameworks, servers and management software can give the VMware platform eyes and ears throughout the stack, allowing it to apply its uniquely advanced ability to migrate workloads and manage VMs for maximum efficiency and minimal hardware resource cost. SpringSource rapid development frameworks and tooling can provide developers with the ability to move from code to cloud in minutes. All of this with the quality you can expect from both companies, and the ease of use you can depend on from Spring technologies.”

I view this acquisition as a risky bet on the future. The market of applications as services on the net is still in its infancy and it is difficult to have a good estimation of its potential…. except if you are an industry analyst wanting to sell an expensive report on how to profit from it ;o) This area is already crowded with a lot of competitions and some of the players (Amazon, Google or Microsoft) have also deep pockets and technology competencies. It could be also a problem for VMware as its software works on operating systems of other companies that could now see it more than a competitor.

In those that will benefit from the deal, I see primarily the SpringSource customers that should see their solution backed by a more financially strong company…. if the major brain resources will stay in the company (see how the core JBoss team exited the company after its acquisition by Red Hat) and keep some focus on existing products rather that being engaged only in creating the new cloud solutions. I think also that the Java community could be happy to have another major player that has interest in the evolution of the technology after Oracle acquired Sun. Finally, there are some happy venture capitalists like Benchmark Capital which invested $10 million in 2007 and participated to a $15 million financing in 2008.

In the camp of the losers, we can put competitors like Red Hat. Its JBoss division is now going to find a more important competitor if the SpringSource servers are backed by a larger competitor based on the same open source model.

MySQL was forecasted to set an IPO this year, but it seems that with the difficult conditions of the stock market its initial investors have chosen the easy solution to cash their money by letting Sun acquire the company.

For Sun, who recently changed its NASDAQ stock ticker from SUN to JAVA, it is a confirmation that the new strategic direction is in software and services. This move is therefore an important step to transform itself more in a service oriented company. With MySQL, Sun acquires a fast-growing company that has already a dual open source-commercial approach. Its estimated 2007 revenues were around $70 million. It is also a quick and good ticket to enter the database market already occupied by its competitors (Microsoft, Oracle and IBM). We suppose that Sun will not touch a lot to the existing MySQL organization. Being backed by a bigger company will bring an increased credibility and a better sales channel. Sun could also provide additional resources to improve its product so that it will become a more fierce competitor against Oracle.

The acquisition could also help Sun to propose its own alternative to the open source Linux/Apache/MySQL/PHP (LAMP) architecture. As it put its Solaris operating system in open source last year, it could propose a Solaris/Apache/MySQL/Java (SAMJ) pack that could be optimized. This could be a real alternative to the Windows ecosystem that is backed by a “old” company, thus allowing medium-size companies to have the impression to make a safer transition than with a pack of dispersed open source projects.

This move also changes the landscape for the other companies operating in the open source database area, like PostgreSQL and Ingres. However it is also a financial validation of the open source commercial model and some companies could end being the target of a bigger fish in the future. I will not be surprised if companies like Red Hat, HP… or Yahoo! will make some acquisitions in the sector in a near future.

What benefits could Oracle achieve with this deal? Technically, it will acquire Web server and transaction monitoring software expertise. Even if Oracle has already its own set of products competing with BEA Systems, its technical reputation is a little bit lower in this area. Combined market share put Oracle in the number one position in the middleware market. However, Oracle will have to play it tactfully to keep the core technical team behind BEA products. Financially, the acquisition could provide additional revenues, a strategy Oracle has followed these past years with PeopleSoft and other targets. In this area, Oracle seems to transform itself in a Computer Associates-like company, more driven by financial interests than technical capabilities.

In the winners side of this situation, we could certainly find IBM and Red Hat’s JBoss, as uncertainty about the future of a product is always a strong topic that buyers will consider when the look for their Web server. Also some companies do not like to have too much of their software infrastructure locked to a single supplier. Losers will be BEA Systems customers, because a change of ownership always rise questions on the future roadmap of the products and the availability of knowledgeable people to provide some support. This is mainly true for BEA’s Tuxedo transaction processing product, an old software that doesn’t seem to fit into Oracle product portfolio.