Thursday, 3 September 2009

Oracle must wait – perhaps until 2010 – for approval to buy Sun

By Philip Carnelley, 3 Sep 09 17.00) The European Commission promised that it would announce today what it thought of Oracle’s intention to buy Sun Microsystems – already approved by the US authorities. It did - sort of. What it actually said was “we’d like to think about it some more” and began an in-depth investigation. The EC says it now has until 19 January 2010 to make a final decision (90 working days).

The issue is not Oracle’s potential ownership of Java, which many thought would be the sticking point, but concerns over reduced competition in the database market, with Sun’s MySQL as the leading open source database and Oracle as market leader in proprietary database. Sun’s revenues from MySQL, at $313m last year, were a pretty small fraction of Oracle’s $13bn from database and middleware. The MySQL business did however grow 51% last year.

It’s not clear that Oracle’s marketing might would be any more successful than Sun’s in building mySQL’s market position – and if so, whether that makes the market more or less competitive. The EC’s view is that MySQL competes with Oracle, which is a debatable assertion, but explains its thinking. Oracle could spin off the product, merge it with something else, let it languish or attempt to kill it off – which would indeed reduce competition. That said, Ingres, EnterpriseDB, SAP and others are waiting in the wings with open-source alternatives – while IBM and Microsoft, the other ‘big 3’ proprietary database vendors, will also be keen to profit from any weakness in MySQL's position.

The EC has showed with anti-trust judgements on Microsoft, Intel and others that it is not afraid to go a different way to the US. Its final decision is anyone’s guess at this point. What is sure is that this delay will cause considerable dismay at Oracle, as Sun’s hardware and services businesses have tanked since the impending takeover was announced due to the uncertainty. Sun, meanwhile, seems unwilling to make any big moves – such as trimming its costs in line with its reduced revenue stream, contributing to its increasing losses (see A downbeat end for Sun Microsystems). The best thing that Oracle can do to shore up Sun’s business is to tell a really good story on its intentions for Sun. It is expected to say more about its intentions at its OpenWorld event to be held on October 14, pre-announcing that it would reveal market-leading benchmarks for Oracle on Sun hardware. We guess Oracle was expecting by then that the deal would be pretty much done and dusted, but no longer. Larry Ellison had better make one of his best-ever speeches that day.

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