By the end of the month, JBoss, the open-source application company that made Wall Street sit up and take notice, will be nestled in the arms of Red Hat ( RHAT). JBoss CEO Marc Fleury, who will play a key role in the combined operation, has been known as something of a hard-charging, enfant terrible. But as befits someone who'll be the No. 2 executive of a $5 billion software company (and a man on the verge of becoming a father for the fourth time), Fleury has been striking a more statesmanlike pose recently, with good words for even once-bitter enemies, including Microsoft ( MSFT). But he has yet to rein in his ambition, and he makes little effort to hide his disdain for Oracle ( ORCL) CEO Larry Ellison, who made an unsuccessful bid for JBoss. Fleury's next goal: Make Red Hat the first pure-play open source provider to hit the $1 billion mark in annual revenue. In an interview this week, Fleury talked about Oracle's open source ambitions, Red Hat's strategic direction and why he ditched plans for an IPO. Here are some excerpts: TheStreet.com: When the merger was announced, there was a lot of talk that Red Hat and JBoss would lose the support of former allies -- particularly IBM (IBM) -- who are now worried that the combined company will become too powerful -- the Microsoft of the open source world. Is this a concern? Marc Fleury: Obviously, that was something we worried about even prior to the announcement. None of the big vendors wanted to see another big vendor on the scene. But it's IBM's silence that is the most worrisome. The only communication we've heard is from IBM's
hardware group , saying this is not changing the relationship, whatsoever. What about the software folks at Big Blue, not to mention your current partners, like Novell (NOVL)? Nothing. We heard that when Steve Mills IBM's software czar got the news he sat silent for a full two minutes and then said, "Well, that comes as a surprise." We've heard that the words flying around inside IBM are "Microsoft and 1985." They are very paranoid. But open source is a very different thing; it's not a monopoly.
Other relationships are good. We're talking with Novell ( NOVL)
a rival Linux vendor about continuing their work with JBoss. We're saying to them, "We have 20 joint customers. Let's continue." Why would I want to upset that arrangement? But the ones who have gotten the whole cooperation/completion thing down to a "T" is Microsoft. They've abandoned their original position, which was based on religion and gotten very cool with the Linux situation. They realize it is cannibalizing Solaris Sun Microsystems' ( SUNW) operating system. They are communicating with us, saying we have customers in common. Let's work together and make a viable platform. You and I have talked a number of times in the last few years, and you were never shy about your desire to take JBoss public. What happened? Part of it was Sarbanes-Oxley. The cost of compliance is massive. For a company of our size that's going to be measured on cash flow, a $2 million hit on a $20 million revenue base is not insignificant. On the personal level the issue was liquidity for everyone in the company. Many had been here for five years, and the idea of waiting another 18 months and then being locked up not allowed to sell wasn't right. Second, as the chairman of the board it was my duty to maximize present value. We'd go public at around $700 million in market cap and that was a wash with the Red Hat deal. But as a public company I've got to show cash flow, I've got to show margin expansion, I've got to show everything Red Hat has been showing. I wouldn't have been able to invest back into the business for two years. But I don't want to invest in two years, I want to invest now. Where? I want to go to telecom, to management, to collaboration. I want to be that large Web 2.0 infrastructure platform. Geographically, Asia-Pacific wasn't an area we planned to expand to. Now, it is. Larry Ellison has talked about building his own version of Linux? Do you take that notion seriously? I take it very seriously. Larry is infatuated with open source and I believe he wants to do it. But I believe he needs open source like he needs a hole in the head. Open source is going to be a very hard cultural lesson for Oracle because they are used to milking an installed base that has no place to go. Open source isn't like that. You'd better keep your customers happy because they are not forced by a license to pay. He's in for a rude awakening. The $350 million deal with Red Hat closes on May 31. What's your role going to be in the combined company? You have the reputation of being a tough-minded guy with a real ego. How are you going to make the transition from being the boss of a startup to subordinate in a much larger company? I'm officially senior VP of Red Hat and general manager of the JBoss division. Since we have earnout targets (up to $70 million depending on performance) we need to be independent. The team at Red Hat and I are very compatible. Matthew and Charlie Red Hat CEO Matthew Szulik and CFO Charles Peters came down to North Carolina to close the deal. Did Larry Ellison do that? No, I came to his house. The fish (in his pond) cost more than my car. It was obscene. The reason we chose Red Hat was to go to a place where there were no conflicts, where the future of the product and the business model were clearly understood. And I'll tell you, the feedback from our customer base has been one of relief.
Ballmer on the Skids?Last time we looked, Steve Ballmer was still CEO of Microsoft. That's only worth mentioning if on Thursday you were tuned into the Wall Street rumor mill, which churned out a story that Chairman Bill Gates' best friend was about to be ousted from the company he helped found. Some sources even claimed that Ballmer would be replaced by Jeff Raikes, who heads the company's business division. What really happened, according to sources close the matter, was this: Ballmer called an all-hands meeting to discuss performance reviews and compensation Thursday afternoon. As is often the case with Microsoft, part of the truth leaked out, and that was enough to get the wheels spinning. Could there be some management changes in the offing? Sure, there are a number of vacancies in the organizational chart. But given the friendly board of directors, not to mention Ballmer's huge stake in the company and his friendship with Gates, a change at the very top seems highly unlikely.
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