Oracle’s Sun deal snagged in Brussels

Oracle’s $7.4bn acquisition of Sun Microsystems hit an unexpected and potentially damaging obstacle in Brussels on Thursday as European antitrust officials opted to break with Washington in order to scrutinise the deal more closely.

The more stringent stance in Brussels breaks with recent efforts by competition authorities on either side of the Atlantic to align their investigations, and is particularly notable since the deal has already been given the green light by a new US administration that has taken a tougher line on competition issues, particularly in the tech industry.

The longer European review, which could extend into early next year, will greatly add to the uncertainty surrounding the struggling Sun and further undermine confidence among its customers, analysts warned.

“It’s going to be very damaging to Sun and its whole market,” said Andy Butler, an analyst at Gartner, a tech research firm. “It’s slowly hemorraging their business viability. The only winners today are companies like Microsoft, IBM and Hewlett-Packard.”

The controversy surrounding the regulatory delay was heightened on Thursday by the nature of the potential European concerns, which touch on an area of the technology world that only accounts for a very small fraction of Sun’s business.

Neelie Kroes, EU competition commissioner, said that Brussels wanted to look more closely at the impact on the database software business of Oracle, one of the leaders in that market, acquiring control of MySQL, an open source database product that was acquired by Sun last year.

While it has found a market among large-scale web services companies such as Facebook, MySQL has made little headway in the mainstream corporate database market dominated by Oracle, IBM and Microsoft. According to one person familiar with its business, MySQL generated revenues of only €17m ($24m) in Europe last year, and its roughtly $70m of annual sales make it only the fourteenth-largest database software maker.

Despite that, Brussels’ interest echoes claims from some Oracle rivals that the software maker would have little incentive to continue developing a product that could one day prove disruptive to its core business.

“Companies are looking for cost-effective IT solutions and systems based on open-source software are increasingly emerging as viable alternatives to proprietary solutions,” said Ms Kroes. “The Commission has to ensure that such alternatives would continue to be available.”

Since it is an open-source product, Sun has little control over MySQL, owning only the trademark and employing some of the developers who lead a wider group of volunteer programmers. If Oracle were to stop development, it would have no power to prevent others from taking the MySQL code and continuing the project, Mr Butler and other analysts said.