EC Gives Blessing To Oracle Takeover Of Sun

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It was good news for Larry Ellison after Oracle finally gained approval from the European Commission over its acquisition of Sun Microsystems

Oracle has got the ‘all clear’ from the European Commission antitrust regulators to proceed with its $7.4 billion (£4.6 billion) acquisition of Sun Microsystems.

The world’s second-largest software maker now can do business combined with Sun in the 27-country European Union. Oracle sells more than 20 percent of its software in the European sector, so the commission’s approval was urgently needed in order for the deal to be completed.

It took more than five months for the EC to execute due diligence before deciding that Oracle’s ownership of a key Sun asset, the popular open source MySQL database, would not be a detriment to free trade and continued development.

There was no immediate reaction from Sun or Oracle. However, the Redwood City, California-based database and middleware provider was confident enough about the sanction that on 20 January it called a news conference for 27 January to unveil its “Oracle+Sun” strategy for 2010 and beyond.

Oracle is still awaiting similar sanctions from Russian and Chinese regulators. Both jurisdictions have said they would wait until the EC’s decision before making their own determinations. Oracle has said it also expects to obtain approvals in those countries.

The EC said in a statement to the press that “after an in-depth examination, launched in September 2009, the Commission concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.”

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The main sticking point for months has been MySQL, an open-source database that Sun bought for $1 billion (£617 million) two years ago. The EC has been withholding approval of the acquisition since August 2009, seeking some kind of assurance that MySQL, which originated in Finland and Sweden, will be allowed to innovate and compete fairly in the IT marketplace.

That Oracle’s own proprietary database potentially can compete with MySQL in some markets is seen by many industry people as a conflict of interest. Oracle CEO Larry Ellison contends that MySQL does not compete directly with his company’s high-margin databases, but a large number of people working in relevant fields disagree.

EC ‘Satisfied That Competition Will Be Preserved’

“I am now satisfied that competition and innovation will be preserved on all the markets concerned. Oracle’s acquisition of Sun has the potential to revitalise important assets and create new and innovative products,” EC Competition Commissioner Neelie Kroes said in the 21 January statement.

The EC said that “although Sun’s share of the database market in terms of revenue is low, as users of MySQL can download and use the database for free, given its open source nature, the Commission’s investigation confirmed MySQL’s position as the leading open source database. The Commission’s investigation therefore focused on the nature and extent of the competitive constraint that MySQL currently exerts on Oracle and whether this would be affected by the proposed transaction.

“The Commission’s in-depth investigation showed that although MySQL and Oracle compete in certain parts of the database market, they are not close competitors in others, such as the high-end segment,” the EC said.

The EC also pointed to the open-source PostgreSQL database as a “credible alternative to MySQL, which could be expected to replace to some extent the competitive force currently exerted by MySQL on the database market. In addition, the Commission found that ‘forks’ [branches of the MySQL code base], which are legally possible given MySQL’s open source nature, might also develop in future to exercise a competitive constraint on Oracle in a sufficient and timely manner.”

The open-source community, which mounted a brisk email protest campaign to the EC last month, nonetheless was generally resigned to accepting the fact that Oracle was going to succeed.