Red Hat to Acquire JBoss for $350m

Linux vendor Red Hat announced Monday it has entered into an agreement to acquire JBoss, maker of middleware, or software that connects disparate systems and applications to facilitate faster and cheaper development. Red Hat will pay $350 million in cash and stock for the company, with another $70 million payout based on performance.

With the acquisition, Red Hat says it will transition to service-oriented architectures (SOA) in order to enable running next-generation Web applications atop a low-cost open source platform. JBoss has a similar business model to Red Hat, offering service and support for its open source middleware applications.

"Red Hat and JBoss are fully aligned around the belief that the open source development model continues to change the economics of enterprise IT in favor of the customer, and we truly believe in the potential of software innovation, once freed from the fetters of proprietary development," said Red Hat CEO Matthew Szulik.

In its reasoning behind the purchase, Red Hat cited a report from research firm Gartner that states the Application Integration and Middleware and Portal (AIM) markets is expected to reach $6.5 billion in licensing revenue in 2006. The company is specifically targeting businesses seeking to lower their development and deployment costs.

"By joining forces with Red Hat, we expect to be able to provide enterprises the largest offering of open source solutions, a global services network staffed by technology experts, and a large and vibrant eco-system of certified products and services," commented JBoss CEO Marc Fleury.

"This is a winning combination that we believe will further expedite the proliferation of open source in the enterprise, which has been our mission since day one."