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Monday, April 10, 2006

RHAT: Red Hat Buys JBoss

Linux distributor Red Hat said on Monday that it signed an agreement to buy open-source company JBoss for at least $350 million, a move that expands Red Hat's product line and adds to its growth potential.

The transaction is 40 percent cash and 60 percent Red Hat stock, with an additional $70 million owed, subject to financial performance. Red Hat said the deal, which is expected to close next month, will add to the company's earnings next year.

In a statement, Red Hat CEO Matthew Szulik said the two companies' business models and beliefs are "fully aligned." Both Red Hat and JBoss charge customers a subsciption fee for products and ongoing support, rather than an up-front license fee.

Red Hat's move ends months of speculation over a possible acquirer for JBoss, which has seen rapid growth in the past two years and had become a likely takeover candidate.

Two weeks ago, JBoss founder and CEO Marc Fleury said that given the company's strong finances, the next step for the company "will probably be equity for an IPO or the right M&A."

For a growing number of open-source start-ups and their investors, the $350 million acquisition number is a validation of the open-source business model and an attractive payout. JBoss was largely self-funded and took in $10 million in venture investment in 2004.

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