Oracle Corp. is in discussions with Hewlett-Packard Co. to buy its middleware assets, a move that could provide a much-needed boost to Oracle’s application server business, industry sources said.
HP disclosed Tuesday during a meeting with financial analysts in Boston that it plans to “retire” its middleware assets as part of an effort to achieve profitability in its software group. HP officials declined to elaborate, saying the company will provide details about its software strategy at a customer event scheduled for later this month in Seattle, Washington.
HP’s middleware includes products it acquired from Bluestone Software Inc. in 2000, including a J2EE application server, transaction server, messaging server, and various XML tools, in a deal valued at the time at approximately $470 million. HP’s middleware also includes its eSpeak software for building network-based services and its Process Manager business modelling tool.
Oracle is in talks with HP over a potential acquisition of its entire middleware product line, according to a source at HP familiar with the company’s plans. In particular, “they really like the app server,” said the source, who asked not to be identified. Another industry source also said that HP is in talks with Oracle over a possible middleware acquisition.
HP declined to comment, saying its middleware strategy is still being finalized. Oracle officials also declined to comment. “Oracle does not comment on rumors,” a spokeswoman wrote in a written response to questions.
The HP source said that HP for the past month or so has been looking for a division within the company that wants to assume responsibility for developing all or part of its middleware line. No one has stepped forward so far, and in tandem with its internal efforts HP has been shopping the division around to other vendors.
Oracle’s legal department has contacted HP and the deal is “very near the end,” according to the HP source. However, an HP division could yet step forward and take on responsibility for the products, which would nix all or part of the deal with Oracle, the source said.
Faced with slowing database sales, Oracle, in Redwood Shores, California, has identified application servers, along with its suite of business applications, as a potential growth vehicle. Its share of the application server market remains in the single digits, however, far behind market leaders BEA Systems Inc. and IBM Corp., according to research from Dataquest Inc., a unit of Gartner Inc.
Analysts have said that application servers have become “commoditized,” meaning many features have become standard, and vendors are looking to add broader functionality such as messaging and integration capabilities to help differentiate their products.
One industry analyst who did not claim to be familiar with Oracle’s plans said it would make sense for Oracle to pick up HP’s application server. Bluestone’s software was quite highly regarded and Oracle could potentially use parts of it to enhance its own products, said the analyst, who asked not to be identified.
“I don’t think there’s anything in the Oracle app server that would stop working if you replaced it with an EJB (Enterprise Java Beans) container from another product,” the analyst said.
HP indicated earlier this week that if it does sell off its middleware it will depend on partnerships to meet its customers middleware needs. Analysts pointed to BEA, and Microsoft Corp. as likely close partners. For customers who favor Java, HP could offer BEA’s WebLogic application server, while for Microsoft customers it could offer an equivalent .Net product, these analysts said.
(Ashlee Vance in San Francisco contributed to this report.)