BEA faces revenue growth challenges

SANTA CLARA, Calif. -- Although stuck at approximately $1 billion in annual revenues for several years, BEA Systems Chairman and CEO Alfred Chuang believes the middleware company is on a path for growth. An analyst, however, said the commoditizing of some of its main products could be a roadblock.

BEA's focus is on offering a suite of middleware for SOAs as well as continuing to sell its legacy Tuxedo transactional software. The company also is focusing on software for telecommunications usage. But products such as the company's WebLogic Server application server face intense competition from a number of competitors, including free, open source offerings such as JBoss.

The company recently introduced an ESB (enterprise service bus), called AquaLogic Service Bus. The development of open source offerings is also having an impact on the ESB space. But Chuang remains confident.

"We're doing everything we can to grow license revenue," which has grown somewhat over the past two years, he said during a press conference at the BEAWorld conference on Tuesday. Growth has not been as dramatic as it was between 1999 and 2001, but that is the case for everyone.

BEA is experiencing growth with its SOA products, Chuang said, adding that its telecommunications offerings also have been successful.

Tuxedo, meanwhile, is a player in the mainframe application software market, Chuang said.

The company is pursuing the RFID space with a project called Rip Curl.

"I think we're doing all the stuff that you would imagine" to spur growth, Chuang said. The company also is pursuing acquisitions, noted Marge Breya, chief marketing officer at BEA.

But an analyst noted that BEA still relies on its mainframe-based Tuxedo offering as a key revenue generator.

"Interestingly, they point [out that] their oldest product, which is largely used in mainframe applications, continues to be a [large] source of revenue," said Dana Gardner, principal analyst at Interarbor Solutions.

The company's SOA product platform, AquaLogic, will take time to ramp up as far as sales for BEA, Gardner said. Companies he's talked to are mostly only in the pilot stage of an SOA as opposed to being in full-fledged deployment, he added.

"In the meantime, there's a tendency toward commoditization in some of [BEA's] products, and the timing around when some of these new products can start providing revenue is a question mark," Gardner said. "They're in a bit of a time crunch."

Gardner said the application server, portal, and integration product spaces are areas where BEA faces commoditization.

One strategy that BEA is likely to use to boost revenues is subscription-based pricing for some of its software. "I think it's inevitable," Chuang said. He cited the company's communications server technology as something he anticipates moving to a subscription pricing format.

Noting its recent acquisition of portal software provider Plumtree Software, BEA expects that BEA's pre-existing portal software will complement the Plumtree offerings. While BEA has been strong in transactional portals, Plumtree has had an advantage in support portals such as employee portals, said Mark Carges, chief technology officer for BEA.