Challenging The LeaderChallenging The Leader

Throughout 2001 BEA Systems Inc. remained the market leader among Java application server vendors, staying ahead of far bigger competitors looking to take control of the emerging platform for doing business over the Internet. However, there are signs that the intense pressure from rivals is having an effect on the company.

While few dispute BEA's leading market share, a Hurwitz Group survey of 150 IT decision-makers in North America found more companies had Oracle's application server, 37%; followed by IBM WebSphere, 27%; and BEA WebLogic, 17%. However, companies often have multiple application servers, and BEA is still the leader in the number of actual deployments. IBM WebSphere is second. "Oracle will pop up in more shops, but that doesn't mean they're using Oracle for everything," Hurwitz analyst Tyler McDaniel says. "More people have Oracle available to them, but they seem to be doing more work on BEA at this point in time."

But having Oracle, the overall leader in the database market, in-house increases the likelihood that companies will at least look at the product, which until the latest release, Oracle9i Application Server, was seen as technologically inferior to BEA. "They've certainly improved the product and have made it much more credible," McDaniel says. In addition, Oracle has begun discounting its software. Nevertheless, Oracle is not BEA's more immediate threat.

"The company they're under the most pressure from is IBM," says analyst Evan Quinn, author of the Hurwitz report. "Clearly, they're the closest competitor in terms of revenue." According to Giga Information Group, IBM in 2001 increased its market share to 34% from 31% in 2000, while BEA remained at 36%. The pressure has also affected revenue. For the third fiscal quarter ending Oct. 31, BEA's revenue was $219.6 million, down $4 million from a year ago, while pro forma income was $24.2 million, dropping $7 million from 2000.

But as the Enron debacle shows, numbers don't always tell the whole story and the future may have some surprises. Says Quinn, "The basic idea of my report is, don't put a period on this market."