Oracle is in talks to buy three open source companies in a strategy that would potentially reinforce the company's middleware against low-priced competitors, according to a report in BusinessWeek.

The database and applications giant is talking to JBoss, Zend Technologies and Sleepycat Software about deals that could exceed $600m, the magazine reported. JBoss is seeking up to $400m and Zend could settle for $200m, while no figure was given for Sleepycat. Rumors of an Oracle and JBoss deal have circulated for awhile, but BusinessWeek is the first to claim all three companies are targets.

The companies could not be contacted at the time of going to press.

Any acquisitions would follow a 12-month buying spree that saw Oracle snap up $18bn worth of vendors of varying sizes, spanning enterprise applications, databases and single sign-on software. The deals were intended to deepen Oracle's technology footprint and expand its customer base.

One primary target in Oracle's 2005 acquisition spree was SAP, who Oracle whishes to unseat as the world's largest supplier of business applications.

By making the open source deals, Oracle would rip a page from IBM's strategy of surrounding its own middleware products with open source software that leads the way to the company's full suite of proprietary products. This strategy is designed to help ensure that license and service revenues from products go to IBM rather than competitors.

As such, IBM bought open source Java application server Gluecode to serve as a low-priced entry point for customers who were unable to afford, or unwilling to buy, IBM's full WebSphere Java 2 Enterprise Edition (J2EE) application server.

Until now, Oracle has tackled open source middleware by offering "free" versions of existing products. Last year, Oracle launched its 10g Express Edition, Oracle Database XE. This was in keeping with IBM's tactic of also offering a free version of its DB2 database, DB2 Universal Database Express-C, and Microsoft's free Express edition of SQL Server 2005.

With developers latching on to open source, though, it's questionable just how popular a free version of a closed-source product would become. In databases, for example, close to 44 per cent of developers are using the open source MySQL Server, according to analyst firm Evans Data Corp (EDC).

A JBoss deal would deliver to Oracle a middleware stack that is popular among developers for a relatively low price, while Zend would unlock the knowledge and technology involved in PHP. Zend last year completed optimization of PHP to Oracle's database potentially helping millions of developers using the open source scripting language to build web applications that require a database tier.

Sleepycat would give Oracle another popular developer community, this time around databases. Sleepycat claims more than 200m deployments and has some of the world's largest and best-known IT suppliers as customers.

The BusinessWeek story is here (http://www.businessweek.com/technology/content/feb2006/tc20060209_810527.htm). ®

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