Shares of BEA Systems briefly dropped nearly 10 percent last week, as word spread on Wall Street of recent gains by the open source application server Jboss.

According to industry sources, GE's supply division is replacing BEA's WebLogic application server with Jboss. Other divisions within GE are reported to be watching the deployment with interest.

Citing a non-disclosure agreement with GE, Marc Fleury, president of the Jboss Group, which is based in Atlanta, Georgia, declined to comment, as did GE itself.

Other corporations, including MCI WorldCom and Electronic Arts are also reported to be turning to Jboss for mission critical applications.

"People are waking up to the fact that Jboss is a viable replacement for BEA WebLogic," says Fleury.

Jboss is already widely accepted as a development platform for Java-based applications. Because it is fully J2EE-compliant, applications developed on it can be easily deployed on other application servers.

Jboss is available as a free download from the Web. That by itself does not give Jboss an advantage as a development platform, however, since the major commercial application server vendors generally offer development licenses for free or at low cost as well.

According to programmers who work with it, the overall cost of developing an application using Jboss can be far less than using commercial application servers. That's because Jboss, which runs well on low cost Intel-based hardware, doesn't require expensive RISC-based servers.

The real threat to BEA, however, comes as companies begin considering using Jboss to deploy applications.

According to analysts at Boston, Mass.-based brokerage firm Fector, Detwiler, "the Jboss Group has been increasingly successful in its efforts to shake development seats loose from the grasps of other competing application server vendors."

Now, says Fector, Detwiler, a lot of clients which "had initially used BEA Systems for development are... using Jboss in production as well."

Possibly to counter Jboss' advance, BEA last week cut the price on WebLogic Express, a version of its application server targeted at the low-end.

BEA is under pressure not only from Jboss, but from low-cost application servers such as Pramati, as well as from IBM's WebSphere, Sun's Sun One, and Oracle's 9iAS. IBM, Sun and Oracle, which can make money selling hardware or other software products, have all been reported to be tossing their application servers into sales deals for free.