Global CIO: Oracle CEO Larry Ellison's Goodbye Letter To European Customers - InformationWeek

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05:44 PM
Bob Evans
Bob Evans

Global CIO: Oracle CEO Larry Ellison's Goodbye Letter To European Customers

If Larry Ellison were to bid ciao and adieu to the wonks of the EU, here's what his goodbye letter to Oracle customers might say.

What if Oracle gets truly fed up with the European Commission's abuse and decides that the simplest way to complete its acquisition of Sun is by pulling its business out of Europe and thereby sidestepping the do-nothing ditherers of the EC? Well if Larry Ellison were to bid ciao and adieu to the wonks of the EU, here's what his goodbye letter to Oracle customers might say.

First, let me quickly frame the issue. As we wrote a few months ago in analyzing Oracle's global revenue breakout versus its global deployment of employees in Oracle, Protectionism, And The Myth Of 'Our Jobs,' in its fiscal 2009 financial results Oracle reported annual revenue from Europe, Middle East, and Africa at $7.948 billion, which was just about flat from the year-earlier EMEA figure of $7.945 billion.

We can only estimate what portion of that $7.948 billion came from Europe, and what part came from Africa and Middle East. But let's say the European slice was $6 billion, or just about 75%. With Oracle having total fiscal 2009 revenue of $23.252 billion, that means Europe accounted for about 26% of Oracle's total revenue.

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That's not an overwhelming percentage but neither is it by any measure a trifling portion. But to maintain it, Oracle needs to be able to continue to do business in Europe. And to do business in Europe, Oracle has to go through the European Commission. And to go through the European Commission, Oracle has to pick one of an increasingly ugly set of alternatives:

1) Cave in to the demands of EC big-shot Neelie Kroes and sell off MySQL, which Larry Ellison has sworn he will not do. Kroes' demands are obtuse at best and dishonest at worst, and Oracle has stated that the EC's findings to date represent a "profound misunderstanding" of both the database market and of open-source dynamics.

2) Drop the attempt to acquire Sun, which would require Oracle to pay Sun a fee of $260 million. This would end the regulatory farce the EC has orchestrated, but it would also end Ellison's fervent desire to compete head-to-head with IBM, an undertaking for which he says the Sun deal is uniquely well suited. From Ellison's public statements about his vision for what a combined Oracle/Sun could achieve, I think this scenario is highly unlikely, as I wrote about recently in Global CIO: Why Oracle's Larry Ellison Will Tell The EU To Pound Sand.

3) Continue the process of trying to divine just what tune Neelie Kroes And The Brussels Backbeats will dance to, in the hope that eventually they will realize that the cost of their groundless intransigence has been thousands of lost jobs at Sun and hundreds of millions in incremental financial losses as well for Sun. This is possible but, given the EC's recent behavior, surely not probable.

4) Exit the European market. Oracle would lose about $6 billion in revenue, but it would also gain the immediate ability to fuse itself with Sun and pursue the grand plans Ellison has articulated. And I think it's reasonable to assume that many of Oracle's European customers would mount an immediate, animated, and angry protest campaign aimed at the EC geniuses who triggered this nightmare scenario for Oracle's soon-to-be former customers.

So how likely is Scenario #1, where Larry Ellison caves in the to EC's demands? I've got a pretty good imagination but this is one image I just can't conjure up—it just doesn't seem to be in either Larry Ellison's ultra-competitive nature or in Oracle's best interests.

As for Scenario #2, in dropping the whole deal Ellison would dash his hopes of pursuing what seems to be the next big challenge he's set for himself: head-to-head competition with IBM. He's spoken of that matchup fervently and I'm betting that rather than drop the Sun acquisition plan altogether, he'll find some fairly dramatic and unexpected way out.

The likelihood of Scenario #3 seems least of all because it calls for the EC to act rationally and eventually drop its absurd objections to the merger, objections that are proving to have little to do with technology and/or customer "protection" but everything to do with politics, as outlined in our recent column Global CIO: Oracle Trapped By EU Politics As Sun Employees Suffer.

And that's why, given those first three alternatives, I think it's not unreasonable to think that Ellison might go with Scenario #4, which would mean that one day very soon Ellison's customers in Europe might get farewell letters saying something like this:

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