December 08, 2000, 1:44 PM — NEWS ANALYSIS -- Hewlett-Packard's purchase of J2EE and XML specialist Bluestone
Software may mark a turning point, both for the computer systems giant and for the
application server industry that Bluestone helped spawn. HP bought Bluestone last week
for over $450 million in stock, at about the same time Bluestone announced that it had
lost $9.7 million on revenues of $11.6 million for the quarter ended Sept 30.
The purchase is notable. With one quick move, HP steps off the sidelines and joins
the J2EE battle now led by Sun and IBM. This too is the first major software
acquisition for a company that some say has truly entered the "Carly Age," named for
Carly Fiorina, a CEO who is still new to a lot of people.
Last week's deal comes about two years after Sun Microsystems' purchases of
NetDynamics and the Netscape Kiva server business (the latter bought by Sun in concert
with AOL). In today's app server business, only a handful of application server makers
are still independent, and these are increasingly focusing on services, not servers.
The HP-Bluestone deal is in some ways an admission that the application server
decision is crucial, and that many IT managers will buy in to the application server
only as part of a larger hardware systems purchase. Of course, database leaders
Microsoft and Oracle have somewhat different takes on this issue.
All of this is not to say that the merits of Bluestone's software portfolio lie
solely in an application server context. The company expanded on its initial Java
application server (itself an expansion upon advanced software tools rooted in the long-
past 4GL milieu) to embrace XML, wireless, and e-commerce features, all of which are
quite needed today. But it is worth noting that the need to constantly develop
software that has a place on the latest software must-have checklist (and, let's not
forget, Bluestone also embraced Enterprise Java Beans before many others), in fact, is
just one of many reasons why Bluestone's business was so expensive, and perhaps
untenable in the end. Nevertheless, all these technology gems should be welcome
additions in an HP software arsenal that has in many way been eclipsed in the recent
years by Java-wielding Sun Microsystems.
For Hewlett-Packard, home of OpenView, HP-UX, and not much else in the way of
notable software these days, Bluestone is an important new tool. HP's little known but
highly innovative Change Engine workflow dispatcher, in fact, is built upon Bluestone
technology. Customers have been looking to HP for more, admits Bill Russell, HP's vice
president, who discussed the infant deal with ITworld.com at InternetWorld in NYC
shortly after its announcement.
"Software is the place we need to be. This is our first acquisition in software, and
we are not finished yet," said Russell.