Oracle is reportedly in talks to acquire three open-source companies in order to expand its customer base, and deals could be announced as early as Monday.

is reportedly in talks to acquire three open-source companies in order to expand its customer base, and deals could be announced as early as Monday.

The software giant, fresh from its $5.85-billion acquisition of Siebel Systems and still trying to swallow PeopleSoft following last year’s takeover, is expected to buy JBoss, Zend, and Sleepycat Software in deals that could total $600 million, according to a report in BusinessWeek. Oracle officials declined to comment.

Siebel SystemsBusinessWeek

For the last 18 months, Oracle has been on a yearlong spending spree, buying more than a dozen companies in deals worth $19 billion.

BEA Systems, a competitor to Oracle and JBoss and provider of application servers, was in on-and-off talks for about a year to acquire JBoss. “[JBoss] couldn’t pass the sniff test from a valuation standpoint and the business model,” Marge Breya, chief marketing officer at BEA Systems, told RedHerring.com on Friday.

, a competitor to Oracle and JBoss and provider of application servers, was in on-and-off talks for about a year to acquire JBoss. “[JBoss] couldn’t pass the sniff test from a valuation standpoint and the business model,” Marge Breya, chief marketing officer at BEA Systems, told RedHerring.com on Friday.

Ms. Breya said the deal price was too steep at that point to justify acquiring the company. She said the currently speculated price of $400 million on JBoss is “pretty extravagant and steep.” When BEA was considering the buyout it was “nowhere near $400 million,” she said.

Open source is a movement in which a software code is freely available to use, modify, and customize, in contrast with proprietary software that requires a license. Open-source companies typically earn revenue from maintenance and services.

By buying open-source companies, Oracle can fend off competition, acquire more customers who could eventually switch to Oracle’s licensed software, and adopt technology that will boost its products.

Redwood Shores, California-based Oracle’s interest in open source was triggered when the company bought Finland-based Innobase, a developer of open-source database technology (see Oracle Acquires Innobase). Innobase is most known for InnoDB, a transactional database technology distributed as part of the MySQL database.

Oracle Acquires Innobase

The reports on the possible acquisitions were bolstered by CEO Larry Ellison’s claims and comments at an analyst conference in Santa Monica, California, on Wednesday. Mr. Ellison said Oracle wanted to become No. 1 in all segments, including business intelligence and middleware, and would consider making acquisitions in those two areas.

“We are moving aggressively into open source. We are embracing it. We think if we’re clever, we can make it work to our advantage,” he said.

Oracle stock was unchanged at $12.69 on Friday, and rose $0.03 to $12.72 in after-hours trading.

Software Stitching

Atlanta-based JBoss is a provider of an open-source application server—an important component of the middleware business. Middleware is the layer of software that stitches together the operating system and the applications in a business’ IT environment.

JBoss has been a prominent player in the application server market, eating away at Oracle’s and other dominant players’ revenues, such as IBM and BEA Systems.

IBM

Another open-source threat for Oracle is the database business pioneered by companies like MySQL, Postgres, and the recently spun-out Ingres (see Database Software Goes Cheap).

Database Software Goes Cheap

The next target, Cupertino, California-based Zend’s PHP programming language, is used heavily by developers around the world to develop applications and web content. Oracle could use Zend’s PHP assets to develop its Fusion platform—an integrated suite of all the acquisitions it has made in the past year, said Trip Chowdhry, analyst with FTN Midwest Research (see Oracle Integration on Track).

Oracle Integration on Track

The third and smallest target for Oracle is Emeryville, California-based Sleepycat, which makes Berkeley DB, a technology used in open-source databases.

‘Incredibly Smart’

Analysts are positively reacting to the news of a possible JBoss acquisition. “The strategy around Oracle embracing open source is incredibly smart,” said Jason Maynard, analyst with Credit Suisse First Boston. “I think open source is going to get a lot of traction.”

Credit Suisse

Open source reduces barriers to entry for using software for businesses because of its cheaper cost. And companies like Oracle typically make most of their profits from maintenance revenues—which is also the source of income for most open-source companies.

“[Oracle is] better off letting customers use the software for free and collecting a maintenance fee,” Mr. Maynard said.

On the other hand, BEA’s Ms. Breya said the JBoss acquisition would not make sense for Oracle.

“They have [too many] distractions with the integration of applications and the databases, all the way to the middleware space,” she said. “Oracle is basically spending for the least-open open-source player in the market.”

Although an open source company, JBoss does not allow representatives of other companies to sit on its board like other companies such as Apache and Eclipse, decreasing its popularity in the community.

Apache