Zeev's Turnips Patch-No Politics (ZEEV)

[Alexander]

Explaining why I like Bea would take me pages and pages:
First you need to make a distinction between infra software and app software. SAP is an application company that is now trying to enter the infra business with Netweaver. SAP will have a tough time Introducing its Netweaver approach into accounts characterized by a heterogeous environment (apps/db/hardware from diffrent vendors, which constitute at least 90% of the current environment.

-Bea's huge benefit is its neutrality. wall street sees that as Bea's weak point and hence believes Bea will lose out against IBM, ORCL, SAP… . BEA doesn't have a DB, OS, services, app, or hardware agenda. I fact, With Bea's platform customers can leverage all their legacy investments.

-Bea's strategy (simplifying the whole product) is very diffrent from IBM's (maintaining complexity so that customers constantly need the help of IBM global services). IBM's focus is on services, not on simplifying the whole product. But for mass-adoption, you need a SIMPLIFIED whole product.

IBM, MSFT, SAP and ORCL are IMO facing the innovator's dilemma…succeeding in the APS market is not their first objective (unlike for Bea), first of all they want to protect their existing businesses that are being disrupted…they are not fully embracing the discontinuous innovation…Bea is totally focused on APS…"Focus leads to success"

In other words, Bea is commoditizing ORCL's, SAP's, IBM's, MSFT's and Sun's business model. (When attractive profits disappear at one stage in the value chain because a product becomes modular and commoditized, the opportunity to earn attractive profits with proprietary products will usually emerge at an adjacent stage = Christensen's law of conservation of attractive profits). Bea's Service Infrastructure strategy is designed to help enable the secure flow of processes, information and services across and between heterogeneous business environments, while helping to elevate business logic above proprietary applications.

Also, Customers don't want to rely on just 1 dominant vendor for the whole infrastructure stack (customers don't want to give 1 vendor so much clout)… MSFT, ORCL, SAP, IBM are already too dominant for many customers.


-Here is an analogy. Please keep in my mind that I heavily use G. Moore investment framework:
MSFT or oRCL won in OS and Databasse, not because they had the best product, but primarily because they had the best "whole product". In fact MSFT definitely didn't have the best product.
It helps that Bea has clearly the best product, but in fact it doesn't matter. What matters is the whole product and that IMO is strongly in Bea's favor.

Now, since SOA is getting increased momentum and Bea is at the core of this trend, we should see strong results any time soon. It's very hard to time this major shift from clientt/server to SOA...but if Bea doesn't break above $10 soon, I will have to revisit my whole opinion.

The expectations reflected in the stock are very low (Less than 5% growt over the next years with the same margins)


Here some more info (read some white papers on SOA at Bea's website:
http://biz.yahoo.com/prnews/050505/sfth108.html?.v=3