Oracle Sun Deal Faces EU Investigation

The European Commission Thursday said it will conduct an in-depth investigation into Oracle's acquisition of Sun Microsystems. It said it will inquire into the possibility that such a deal may reduce competition in the database market.

"The Commission has to examine very carefully the effects on competition in Europe when the world's leading proprietary database company proposes to take over the world's leading open source database company," said Neelie Kroes, a commissioner specializing in competitive issues. The commission is the administrative unit of the European Union.

The commission's task "is to ensure that customers would not face reduced choice or higher prices as a result of this takeover," she said.

The move will delay Oracle's ability to close the deal by up to five months and put further pressure on Sun to continue selling its UltraSparc hardware and Java software in the face of uncertainty over its future.

Oracle immediately acknowledged that "a Phase Two inquiry" by the commission was underway and that the Commission had decided "to seek more information." Oracle spokesmen pointed out that the U.S. Justice Department has approved the the acquisition without conditions and terminated the waiting period required by the Hart-Scott-Rodino Act on Aug. 20. Sun's stockholders approved the acquisition on July 16.

Oracle had hoped to complete the acquisition by the end of August. Completion will now have to await the outcome of the Phase Two inquiry, it said. The commission set a Jan. 19, 2010, deadline for the inquiry to be finished.

Sun acquired the popular, open source database company, MySQL AB, in 2008 for $1 billion. The commission's announcement said MySQL had the potential to become a more direct competitor with Oracle, if it continued to develop its relational functionality. The Oracle/Sun deal had the potential to constrain that competition, the announcement said.

Reuters reported today that Sun generates about $300 million a year in revenue from MySQL, a figure higher than previous estimates of MySQL revenue. Oracle, IBM and Microsoft are the main commercial competitors in the $19 billion relational database market. Oracle is the leading supplier with $9.2 billion in sales last year, according to Gartner.

Both Sun and Oracle shares fell on news of the investigation. Sun shares were down 19 cents at $9.13 at midmorning, while Oracle's shares were down 32 cents at $21.45. IBM shares rose a penny to $116.10.

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