EC Delays Sun Oracle Ruling Over MySQL Concerns

Open SourceRegulationSoftware

The European Commission, concerned about the impact of an Oracle-Sun merger on the database market, is opening an in-depth investigation into the proposed £4.5 billion deal

Oracle will have to wait through an in-depth investigation by the European Commission before it is able to close its $7.4 billion (£4.5bn) acquisition of Sun Microsystems.

The EC, the antitrust investigative arm of the European Union, announced 2 Sept. that it planned to look deeper into the merger because of concerns around what it would mean to the database market in the region.

In particular, EC officials are concerned about the world’s top proprietary database company—Oracle—buying a leading open-source database company. Sun bought open-source database vendor MySQL in January 2008 for about $1 billion (£611m).

“In particular, the Commission has an obligation to ensure that customers would not face reduced choice or higher prices as a result of this takeover,” Neelie Kroes, a competition commissioner for the EC, said in a statement. “In the current economic context, all companies are looking for cost-effective IT solutions, and systems based on open-source software are increasingly emerging as viable alternatives to proprietary solutions. The Commission has to ensure that such alternatives would continue to be available.”

A key concern is how highly consolidated the database market is, with three vendors—Oracle, IBM and Microsoft—controlling about 85 percent of the revenue in the space, according to the EC.

The EC conducted a preliminary investigation soon after Oracle announced the deal in April, and found that Oracle’s database products compete directly with Sun’s MySQL offerings in a number of areas. Given that MySQL promises to continue to be a key competitor to Oracle’s offerings, one of the key points in the more in-depth investigation will be around Oracle’s incentives to continuing to develop MySQL as an open-source database, the EC said.

IDC Matt Eastwood said he understands the EC’s concerns, but doesn’t believe they’re valid.

“MySQL was started in Europe, where the open-source movement remains strong ,and I suspect that this is a large contributor to the EU’s concern,” Eastwood said in an e-mail. “MySQL is heavily tied to the open-source community, with the database quite heavily aligned with Linux and Web workloads, while Oracle’s business is heavily aligned with Unix and commercial data centre workloads.

However, regulators still need to find out Oracle’s plans for MySQL, he said.

There also was a discrepancy in the amount of server sales the two databases fueled. According to IDC, database software was directly attributable to $16.6 billion in server hardware spending last year, about 29 percent of all server spending, Eastwood said. Oracle database software was the lion’s share, at $6.8 billion, or 41 percent. MySQL drove about $560 million in database hardware spending, or about 3 percent of all spending on database hardware, he said.

The U.S. Department of Justice already has cleared the acquisition. The DOJ on 20 Aug. ruled that the merger would not violate antitrust laws in the United States.

The decision came after the DOJ investigators extended its investigation two months after the deal was announced. The key concerns for U.S. investigators reportedly revolved around the licensing of Java, Sun’s networking software. The deal would give Oracle control over much of the world’s Web-based networking software.

That control runs deep. All of Oracle’s middleware runs on Java, more than 90 percent of cell phones and other portable devices use Java to connect to Web-based networks, and a growing number of smart cards use embedded Java chips.

Sun shareholders approved the deal in July.

Sun saw its business grow in the 1990s in the early years of the Internet, but has struggled over the past decade. Those struggles are continuing. Sun officials announced in August that the company lost $147 million in its fiscal fourth quarter.

Competitors are looking to take advantage of the uncertainty surrounding the Oracle acquisition. For example, on the same day that Sun’s stockholders met to vote on the deal, Hewlett-Packard announced its Sun Complete Care program, a package of services, support plans and financial incentives designed to entice Sun customers to migrate to HP technology.

IBM, which earlier this year considered buying Sun, also is looking to lure away Sun customers.

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