R. Fink | For app-server giant, a grim tale of changing times

The Packet Rat | Commentary: Without applications or a big professional services operation of its own, BEA is stuck in the apple business while everyone else is making sauce

Michael Bechetti

'Once upon a time there was a
family of bears that grew apples,'
the Rat recited to his youngest
child. 'And life was good for a
while; everyone liked their applesauce
a lot, and people would buy
it from them for lots of money.'

'Then a collective of bears down
the valley started planting
apple trees in people's
yards for free, with the
hope of getting consulting
work on how
to pick them ...'

'Daddy, can you
skip ahead to the
part where the oracle
named Larry offers
to buy the bears'
orchard?' the ratlette
asked. 'I want to have time to
check my portfolio before I go to
bed.'

Once again, the Rat had set the
bar too low for his 6-year-old audience.
The parable of the corporate
takeover attempt that is the done but-
hardly-over Oracle offer for
BEA Systems is one that has
played out many times in the technology
market. And it certainly
won't be the last time: When what
you make becomes de rigueur, it's
time to move business up the value
chain or get eaten.

'OK,' the whiskered one continued.
'So as application servers became
a commodity, open-source
software started to eat into BEA's
market share and license-sales
growth, and along came the big
bad Oracle with an offer to buy the
orchard for close to market value.
And the bears ' I mean, the board
' refused, ticking off their big investors
who wanted to take the
money and run. And the big bad
Carl Icahn, who had invested in
more of BEA's apple trees than
anyone else, huffed and puffed
at the board for not letting
the apple growers
decide. And he might
still blow the house
down.'

'So what happened
to BEA's
stock price?' the little
rat asked, twiddling
with her Black-
Berry to answer her own
question. 'Oh. That was bad.
The bears were dumb.'

BEA should know all too well what
the nature of the market is like.
After all, its founders cobbled the
company together through acquisitions
of application server companies.
But the company is the last of
the app server Mohicans, and almost
all other application servers
are now either open-source or bundled
with other wares.

And while there are plenty of
WebLogic servers out there lurking
beneath the covers of government
and private-sector applications, the
rise of JBoss ' and open-source
versions of IBM's WebSphere and
Sun Microsystems' Java System
Application Server ' has made
even the premium aspects of BEA's
software seem overpriced in a market
where everything else is free '
at least before you add support
and consulting.

Sure, BEA has grand plans with
something it's calling Project Genesis.
But that road map for service oriented
architectures, business
process management, social networking
and Web 2.0 architectures
that BEA is promising for December
right now is just a press release
full of buzzwords. 'Maybe they
should sell honey from all the bees
that they use to make the buzzwords,'
the Rat's daughter opined
sweetly.

Maybe the honey business would
be a better bet for BEA. Oracle saw
the writing on the wall in the database
business years ago when
databases became commodities,
and went after applications to help
sell its databases. IBM saw PCs become
commodities and sold off
that business, jumping into consulting
and high-margin products
that require consultants. But without
applications or a big professional
services operation of its
own, BEA is stuck in the apple
business while everyone else is
making sauce.

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