Spring in San Francisco

Okay, so I get on a couple of planes, watch five episodes of The Wire (finished Season 4) and land in San Francisco only to hit the VMWare/SpringSource news blizzard. As I assume my three readers know, yesterday VMware acquired SpringSource for around US$420 million – a nice chunk of change and one of the top five largest open source acquisitions of all time by my count (including MySQL, JBoss and XenSource in that mix).

I don’t understand it.

Don’t get me wrong – I’m not saying that SpringSource wasn’t worth the price. Heck, we use Spring technologies throughout OpenNMS and love it. We had Ben Hale out to our Dev-Jam conference way back in 2006 (when they were called Interface21) so Matt recognized the potential even then, but it just goes to show you how much I don’t know about this whole investment thing.

Let’s examine this deal. Matt Asay reports that the annual revenue at Spring Source was US$20 million. That means that VMWare paid a multiplier of 21 for the company (I believe 6-8 is much more common). That is amazing.

Second, Matt also reports that most of that revenue was in services. Huh? I’ve been told for 7 years now that services companies aren’t worth anything. In fact, I was told that by Benchmark, the people that just made a bunch of money on this sale. Tricksy, no?

One thing I do understand now is the acquisition of Hyperic. Not only did it benefit the VCs (the investors in Hyperic were pretty much the same as those for SpringSource) it brought extra revenue and products to the table. I am certain that Hyperic was responsible for a good portion of that multiplier.

Which makes me happy for the Hyperic team. While they were my favorite whipping boy for their unique use of the term “open source,” I know a few of the founders and they are genuinely nice people. It’s good to see them do well, and to Javier, Doug and Charles – next time, drinks are on you. I’ll eat a little crow as long as it is served with a nice Scotch.

Since I obviously don’t understand the world of mergers and acquisitions, I’ll stick with what I do know – enterprise management, helping customers and having fun doing it. OpenNMS is not only an application but a framework on which management applications can be built, and that seems to be pretty hot right now. Business is booming, but while I don’t see any US$500 million acquisition in the near future, check back in a couple of years.

We might just surprise ya.