Who wants a licensing software company in decline?
Over at Bill Burnham’s blog he is suggesting that HP acquire BEA. Well I hope Carly has learned that buying a sinking commodity business in not a good idea. Yes, BEA is getting hurt by Microsoft and Oracle, but their real problem is JBoss and the LAMP platform (Linux, Apache, MySQL, Perl, Python, PHP).
If a developer wants to build an application he/she can ask the CFO for a $100k Oracle/BEA P.O. or they can download JBoss and/or LAMP for free. The developer’s downside is that the support is spotty for all applications and non-existent for the combined stack – developers can’t count on Sourcelabs & Spikesource being around in 10 years.
And therein presents a huge opportunity for HP. Of the solution vendors they alone lack an app server and a dbase. Now they turn this strategic gaff into an advantage by offering support for JBoss/LAMP. To their credit, HP has quietly become a force in Linux servers (Debian is run by an HP employee) and they have a nice relationship with JBoss. Cozy up to MySQL (or buy them) and you have:
1. $25k to $50k per server solution price advantage over IBM.
2. Recurring support revenue that would have gone to BEA/Oracle
3. Open source developers helping do your R&D
4. Commoditized your competitorâ€™s high margin products
5. An exciting vision for customers and employees.
As Christianson taught us, commoditization moves value to adjacent layers. In this case, to services and perhaps hardware – areas where HP is a leader. The downside – this is sure to annoy important business partners like Oracle and Microsoft – but no more so than buying BEA. And it is not in Oracle and Microsoft’s interest to push more business to Dell.
So now that I have cavalierly “fixed” the enterprise side of HP. Let me note that they should spin out the consumer PC and imaging divisions into a new company. Said newco should acquire Adobe, and perhaps Macromedia. By making these products work together (which they don’t today) HP would be far and away number 1 in imaging and web development from professional to consumer.
The result is two companies, that wall street can understand. In a year HP shareholders will have $40 a share combined, easy.