With its recent US$192 million acquisition of application server vendor WebLogic, BEA Systems took a big step toward marrying transaction processing systems to the World Wide Web.
This is the latest move by a company that intends to become the "Home Depot of middleware," says co-founder Ed Scott, referring to the one-stop-shopping philosophy of the nationwide home-improvement retailer.
"We've been a public company for six quarters, and we've been exceeding Wall Street analysts' expectations every quarter," says Scott, whose firm turned a profit in fiscal 1998 and more than doubled its revenue from the previous fiscal year.
Middleware, such as BEA's flagship Tuxedo offering, is the unsung and invisible software plumbing that lets applications on a network share information.
For many companies, middleware has been so strategically important that they've invested millions of dollars to build and maintain a middleware framework that knits their key systems together.
"BEA has clearly tapped the value of middleware," says Ted Schadler, an analyst with Forrester Research, a Cambridge, Massachusetts, consulting firm. "It has a $1.7 billion market capitalization, all based on middleware. It's kind of shocking, really."
The WebLogic buy is just the latest in a series of BEA acquisitions, which has included the purchase of Tuxedo development and distribution rights from Novell and the buyout of NCR's Top End product line.
The grow-through-acquisition strategy has enabled BEA to rise to the top of the market for distributed transaction processing middleware.
The company held a 31 percent share of the market last year, according to International Data Corp., a Framingham, Massachusetts, market research firm.
Analysts say BEA's challenges include integrating each newly acquired product line with the company's existing offerings, as well as putting forth a consistent marketing message to potential customers.
In addition, the company will have to stay ahead of formidable rivals, such as IBM and Microsoft. IBM offers a well-rounded collection of software, including mainframe and Unix versions of CICS and the Unix-based Encina transaction processing system from IBM's Transarc subsidiary.
Microsoft, meanwhile, is integrating its Microsoft Transaction Server and Component Object Model technologies with Windows NT to make it easier for developers to build applications that can tap into Microsoft's transaction processing technologies.
BEA's primary weapon in fighting off such rivals is a new product dubbed M3, an object-based transaction broker introduced in June that will serve as Tuxedo's successor.
"About 40 or 50 customers are working with M3 now," Scott says.
"It will be a slow but steady transition from Tuxedo to M3, which gives users all the robustness and reliability of Tuxedo, plus the distributed object capability," he says.
The Tengah product line, obtained via BEA's WebLogic acquisition, adds support for reusable Java software components to BEA's product portfolio. Tengah also adds technology for providing Web access to server-based data, transactions and applications.
"With the combination of M3 and Tengah, BEA is in a good position to lead in the application server market," says Michael Gilpin, vice president for middleware services at Giga Information Group, a technology research firm in Norwell, Massachusetts.
"BEA needs the Tuxedo revenue to fund development for this expensive market of enterprise application servers," he says.