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After the European Commission filed a formal objection to Oracle’s planned acquisition of Sun Microsystems, both Oracle and the U.S. Department of Justice defended the competitive aspects of the deal.
The EC’s ‘statement of objections’ isn’t really surprising since its antitrust arm had raised concerns in September about how an Oracle-Sun marriage would harm competition in the database market through Oracle’s potential ownership of the MySQL open source database.
In a statement released by Oracle, company officials strongly disagree with the EC’s ruling, arguing that the commission’s statement of objections ‘reveals a profound misunderstanding of both database competition and open source dynamics.’ Oracle goes on to claim that the global database market has ‘at least eight strong players’ including IBM, Microsoft, Sybase and three distinct open source providers. Oracle adds that its database products and MySQL ‘are very different.’
Since the war of words between the EC and Oracle escalated earlier this week, some bloggers and analysts have raised the notion that Oracle may decide to walk away from the deal. One blogger, Erik Sherman at BNET, suggests that maybe Oracle wanted the EC to “spike” the deal all along under a scenario where Sun would wither, Oracle could purchase MySQL in the U.S. for a fraction of what Sun would have cost if Sun’s assets are sold off and then end up burying MySQL and eliminate a market threat.
It’s a thought-provoking analysis that's worth considering. But I don’t think that Oracle is going to walk away from the Sun deal as others have suggested and I don't think that Oracle wants the Sun deal to die.
The first reason is Larry Ellison’s pride. Ellison isn’t a man who’s accustomed to losing. My sense is that he’s going to fight the EC if it eventually rules against the deal. This is purely speculation, but the EC may ultimately allow Oracle to buy Sun so long as it sells off Sun's MySQL business. Ellison could decide to throw in the towel on MySQL in order to save the Sun deal. But I don’t see him giving up on MySQL without a fight.
This is also speculation but let’s say the EC blocks the Sun deal and Oracle decides to walk away. IBM could potentially step in and make an offer for Sun at a considerable markdown from Oracle’s $9.50 a share bid for Sun. Shares of Sun were trading at $8.16 on Nov. 12. Even though Sun has lost hundreds of millions of dollars in revenues since the EC began investigating the Oracle-Sun deal, according to Ellison, it’s unlikely that he would be willing to surrender even a weakened Sun to one of Oracle’s biggest competitors.
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