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What do open-source mergers and acquisitions mean?

What do open source's acquisitions tell us about the value open source brings to a company?

Royal Pingdom has compiled a list of the seven largest acquisitions in open source's history. Sun's acquisition of MySQL is the biggest ($1 billion), but it's not nearly the outsized acquisition that it originally appeared to be considering thatRed Hat paid $674 million for Cygnus Solutions back in 1999.

Indeed, that acquisition offers an interesting commentary on the value derived from open-source acquisitions. Here's why Red Hat bought Cygnus:

Today's acquisition [of Cygnus] gives Red Hat an entree into "embedded" devices, machines whose inner workings such as operating systems and hardware usually are hidden from the person using it, Young said here in a keynote address. Until now, Red Hat has been focused chiefly on the server market. Now Red Hat will be able to take advantage of Cygnus' strong relationships with embedded systems programmers, with the companies such as Sony and Fujitsu that build embedded devices and with chip manufacturers such as Intel that build chips for those devices....

Anyone ever seen Red Hat's market share in the embedded market? Not so great. The purported reason for the acquisition (or one of them) was a bust.

But was the acquisition a bust? I don't think so. Red Hat acquired significant development expertise and, frankly, Michael Tiemann. In an open-source company or community, people matter most. Remember Novell's acquisition of Ximian? Mostly a waste of money in regard to the technology acquired. (Not much Evolution or Mono being sold by Novell.) But the people like Miguel de Icaza, Nat Friedman, etc.? That DNA was worth the money.

Sun's acquisition of MySQL will be judged on the product revenue that comes from MySQL, just as Red Hat has been judged on JBoss' revenue post-acquisition. But it's not so clear cut in an open-source company. I don't mean that open-source companies shouldn't be judged by financial metrics - of course they should.

I do mean, however, that it would be hard to single out Cygnus' product revenue from the revenue-related and other contributions that the Cygnus team brought to Red Hat. Ditto for MySQL within Sun. MySQL database revenue will be one metric, but what Marten and team do to the overall culture and product revenue of Sun is something else entirely, and hard to measure in advance.

Incidentally, this is why there is some cause for concern in Red Hat's acquisition of JBoss. It doesn't appear that Red Hat has done a good job of driving ancillary value from the JBoss team, many of whom have left for other opportunities. Red Hat may well end up making JBoss pay (in terms of revenue), but if it doesn't get the JBoss personnel benefit then it has overpaid.

But this is another topic, one that I will address shortly in a separate post.