Sun to buy integration outfit SeeBeyond

Technology giant will dole out $387 million in cash to get Java-based integration software for server suite.

Sun Microsystems plans to bolster its software lineup with the acquisition of integration specialist SeeBeyond for $387 million in cash.

The server and software giant on Tuesday said it will pay a 29.6 percent premium above SeeBeyond's closing stock price of $3.28 on Monday. The transaction is expected to close in the fall.

Executives said that SeeBeyond's software will fill a gap in Sun's Java Enterprise System product line.

"Software is the leading edge of large-scale revenue opportunities going forward," Jonathan Schwartz, Sun's chief operating officer, said during a conference call Tuesday morning.

In particular, corporate customers need software to link their disparate systems and to secure network access, Schwartz said. "As soon as we get those resolved, it yields a significant wave of infrastructure deployment," he said.

SeeBeyond's Java-based integration software and tools will become the sixth offering out of Sun's Java Enterprise System server software suite. SeeBeyond, based in Southern California, has during the past two years converted its proprietary application integration software to run on standard Java application servers. The company was founded in 1989.

The acquisition gives Sun a significant integration product in its Java server suite, after lacking strong products in that category for years. Additionally, the company on Monday announced that it intends to open-source its upcoming Sun Java Enterprise Service Bus, a Java server designed around a new standard called Java Business Integration.

With SeeBeyond and Enterprise Service Bus, Sun will have a more complete infrastructure server portfolio to compete against middleware market leaders IBM, BEA Systems and Microsoft. But Mike Gilpin, an analyst at Forrester Research, said the addition of SeeBeyond will not likely give a significant boost in market share.

"Sun doesn't make the short list of vendors when people buy these platform suites nearly as often as they would like," Gilpin said. "Certainly this will make some impact, but it will be marginal around the edges."

SeeBeyond last year made $163 million in revenue and a slight profit after losing money the two previous years.

Also last year, Sun and SeeBeyond signed a partnership related to radio frequency identification technology.

The planned purchase of SeeBeyond follows Sun's announcement earlier this month that it would buy StorageTek. Sun CEO Scott McNealy said during Tuesday's conference call that the technology giant intends to continue buying other companies.

"We're certainly quite flush in cash right now, and I think we have significant capacity to do interesting strategic acquisitions," McNealy said.

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