Sun Buys MySQL, an Open Source Company
For those following tech M&A, and the opensource movement in particular, today's announcement by Sun regarding their acquisition of MySQL is quite importatant. What does it mean? Quite simple, it gives yet another bit of credence to the open source movement. Pundits continually question the revenue model of open source companies - afterall, if you give away your software, how to you generate revenue?

 

In many cases companies seek to monetize their product through support packages and "official" versions of the software, thus locking in bigger customers to a stable revenue producing contract. In the case of MySQL- which is a key part of the "stack" that underpins the vast majority of Web 2.0 applications- the extremely high valuation paid by Sun shows that there is more here than just monetizing software. Sun sees this as a great strategic integration play - hence their willingness to pay a high valuation.

 

There is certainly a takeaway here: operating system companies (example: Novell) need to move up the value chain and get into the middleware and application market to see continued growth and diversify away from commoditzed products (who needs another flavor or Linux?). Beyond that- we see here a path for the opensources to exit their businesses. Perhaps the product line is not fully monetized yet, but by showing long term strategic value to a buyer we can certainly see the exit lights.