Oracle faces EU competition inquiry into $7.4bn Sun deal

Shock as takeover faces months of delay thanks to anti-trust investigation

The EU's Competition Commission dealt a blow to Oracle's proposed $7.4bn takeover of Sun Microsystems yesterday, opening a 90-day investigation into whether Oracle is committed to developing Sun's rival open-source database software, MySQL.

European officials said they wanted to ensure the future of MySQL, an increasing popular product among web-based companies, fearing that Oracle would favour its own market-leading products over Sun's system.

The European competition commissioner, Neelie Kroes, said the investigation had been launched to ensure that customers had the widest range of choice. "Databases are a key element of company IT systems. 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 alternative to proprietary solutions," she said. "The Commission has to ensure that such alternatives would continue to be available."

Oracle, the market leader in the proprietary database market, will now have to wait until January for EU officials to decide whether or not to block the deal. The EU could ask the company to change the terms of the deal, which could involve selling off parts of the business.

The group issued a statement yesterday pointing out that the US authorities have already ratified the transaction. "The US Department of Justice approved Oracle's proposed acquisition of Sun Microsystems without conditions ... on August 20 [and] Sun's stockholders approved the transaction on July 16."

The decision to investigate the deal rankled with a number of industry observers who argued that despite the competition commission's intervention, the deal would go ahead regardless.

"It is not very often that a decision like this gets us so hot under the collar. I am completely aghast at this decision because while we expected some chest-beating from the EU, to investigate the deal over MySQL is ludicrous," said Andy Butler, an analyst and vice-president at Gartner.

He added that most analysts had expected any intervention to focus on the licensing conditions surrounding Java, the programme language software run by Sun. US anti-trust officials delayed their decision to approve the takeover after they decided to look at the impact of the deal on Java.

"This will now cause four or five months of delay to this deal and at the root of it is a fundamental misunderstanding of open source. It is now getting in the way of commercial reality – MySQL makes up less than 0.5 per cent of the commercial database market. It is difficult to see just how that is anti-competitive," Mr Butler added.

Others in the industry also criticised the investigation. Steve Shine, an executive at open source database group Ingres, a rival to MySQL, said he expected the deal to be approved. "It is a complex issue but there are plenty of other open source alternatives on the market. I really don't think the deal is anti-competitive. The EU will eventually come to that conclusion."

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