BEA Systems Leads Linux Server MarketBEA Systems Leads Linux Server Market

Despite IBM's big push in the Linux server market, rival application-server vendor BEA Systems is the leader in deployments on the open-source operating system in North America, according to new research by IDC.

BEA held 25.2 percent of North American Linux market share in 2003 vs. IBM's 11.5 percent, according to a July 2004 report by IDC analyst Dennis Byron. Oracle came in a close third with 10.3 percent market share on Linux servers in North America. The report measures market share by software license and maintenance revenue.

BEA also leads the entire Unix-based server market in North America, according to the IDC findings. BEA held 40.1 percent market share of Unix server deployments in North America vs. IBM's 18.8 percent market share in this space, according to the report. Again, Oracle was hard on IBM's heels with 16.7 market share, and Sun Microsystems was fourth-largest with 8.6 percent share.

BEA traditionally has been strong in the Unix market, having gotten its start as Sun's leading software partner for deployments on the Solaris operating system. There are signs that BEA's history in the proprietary Unix market is bolstering its Linux deployments. Between 2002 and 2003, the San Jose, Calif.-based vendor's revenue from Linux deployments grew 166.2 percent, from $15.7 million to $41.8 million, according to the IDC report.

The report also shows that BEA has a slight lead over IBM in general North American market share, with 30.6 percent to IBM's 27.6 percent. Oracle holds 17.4 percent of the North American market, with Sun holding only 4.9 percent.

Despite BEA's strong North American results, IBM remains the clear worldwide leader in what IDC calls the "application deployment software market." This market includes application servers, integration servers, message-oriented middleware and other components. IBM has 35.6 percent of the worldwide market in this space; BEA is second with 11.5 percent and Oracle is third with 5.9 percent. All three vendors gained market share when these numbers were compared to 2002 numbers, according to IDC.

Though its market-share numbers remain strong, BEA is not immune to pressures from Wall Street. A report from investment research and management firm Sanford C. Bernstein & Co. issued Friday downgraded BEA's stock from "outperform" to "market-perform," citing concern for "the near-term outlook for the company" and the strong possibility of acquisition in the "imminent future."

One of Bernstein's concerns is that a large percentage of BEA's revenue comes from deals valued at more than $1 million. Companies with revenue based on these types of deals "are more exposed to the risk of downside revenue surprises, and as such deserve a discount valuation," according to the report. "While in the past [BEA] focused on generating a large volume of small deals, the company's exposure to large deals has increased substantially in recent quarters as [BEA] looks to push beyond the application server into platform sales."

The Bernstein report stated that a merger between Oracle and BEA "makes strategic sense," but surmised that Oracle's continued litigation to acquire PeopleSoft might preclude such a deal from happening in the near future.