EC Objects To Oracle Sun Deal

It wasn’t much of a surprise to people following the progress of the Oracle’s acquisition of Sun Microsystems that a formal objection to the $7.4 billion (£4.4bn) deal was handed down 9 Nov from the European Commission.

The EC informed both Oracle and Sun about the decision because the deal includes the freely available and popular MySQL Web database. The regulators see a major conflict of interest in the world’s largest commercial database company owning its largest open source competitor.

The EC’s action doesn’t slam the door on the proposed acquisition, but it does serve to delay the process. Oracle and Sun announced the transaction way back on April 20; the U.S. Department of Justice, the federal watchdog over antitrust issues, sanctioned the deal four months later.

Oracle and Sun are expected to appeal the objection immediately. It is the EC’s policy to not make statements to the press on such matters.

Oracle issued a statement late on 9 Nov. Here is the statement in its entirety.

In part, the statement reads:

“The database market is intensely competitive with at least eight strong players, including IBM, Microsoft, Sybase and three distinct open source vendors. Oracle and MySQL are very different database products. There is no basis in European law for objecting to a merger of two among eight firms selling differentiated products. Mergers like this occur regularly and have not been prohibited by United States or European regulators in decades.”

The EC holds a great deal of influence in this case. Oracle does business in just about every EU nation and stands to lose a huge amount of business if the EC does not bless the deal.

EC Competition Commissioner Neelie Kroes has said several times she needs to see proof that under Oracle’s ownership, that MySQL can continue to develop and be innovative. Oracle, in her words, has yet to do that.

“It’s not too much of a surprise that the EC took this action, saying that the only objection to the merger is MySQL,” Roger Burkhardt, CEO of Ingres, the world’s second-largest enterprise open source database company, told eWEEK. “If they [the EC] had added something [to the protest] about the Java world, for example, or something else, then it might have been more newsworthy.

“I do think — and I haven’t said this in a long time — that I agree with Oracle in that the EU does not appear to know about the realm of competition in the database market, and they don’t appear to know how open source software works. Any company can build a business around it [MySQL].”

‘Real market forces’ are outside Oracle’s world

Burkhardt agrees with former MySQL CEO Marten Mickos in that the real market forces lie in the open source world outside the realm of Oracle’s proprietary businesses.

“I do have some sympathy for their [the EC’s] position,” Burkhardt said, “because there is a lack of competition in the enterprise database market. That Oracle has claimed that this is a competitive market is, in fact, untrue. Look at the level of price increases that have been sustained in the markets — and more broadly, in the infrastructure middleware and application markets — that Oracle sells into.

“It’s [databases] one of the few areas of the market that has raised prices in the middle of what has been the worst economic slowdown in the last 50 to 70 years.”

Burkhardt said Oracle could just “start a separate MySQL Foundation or something like it, put some some luminaries on the board, and spin it off — but what difference would that make?” he asked rhetorically. “It’s still, and always will be, an open source business.”

Open source activist and former MySQL business adviser Florian Mueller told eWEEK that “Oracle wants it all, Sun stands to lose it all and the European Commission apparently had no other choice but to issue this Statement of Objections because Oracle just doesn’t want to understand.

“Those who claim that MySQL’s open source nature all by itself ensures competition ignore the fact that open source is just a distribution vehicle while MySQL depends on a company using the related intellectual property rights to generate revenues and fund further development.

“Why would Sun have paid $1 billion for something that can be forked? Why doesn’t Oracle just close the Sun deal quickly without MySQL and fork it — if it’s all that easy to do and it doesn’t matter who owns the assets?” Mueller said.

Oracle CEO and founder Larry Ellison said at the recent Oracle OpenWorld conference in San Francisco, “MySQL in no way competes with our databases. It has its own market and following. The main competitor is Microsoft [SQL Server], and that’s OK by us.”

MySQL was bought by Sun in January 2008 for $1 billion. The acquisition of Sun would immediately transform Oracle from an enterprise database and middleware company into one of the world’s top 10 IT systems providers. Meanwhile, Ellison claims Sun is losing $100 million and thousands of jobs a month as Sun customers put new purchases on hold until they find out the fate of the company.