Last updated: September 17, 2009 8:41 pm

Oracle / Sun Microsystems

Larry Ellison is no stranger to drawn-out deals – it took the Oracle chief 18 months and a court fight with US trust-busters to complete his hostile $10bn takeover of Peoplesoft. Still, the head of the world’s biggest business software company must be kicking himself for not seeking earlier European Union approval for Oracle’s acquisition of Sun Microsystems. Sun’s already faded star has dimmed steadily since Oracle pipped IBM with a $7.4bn all-cash offer for the stricken computer maker in April. The longer Oracle’s hold-up in Brussels drags on, though, the harder it will be for Mr Ellison to deliver the deal’s hoped-for benefits.

As each day passes, rivals IBM and Hewlett-Packard poach more Sun customers. Fourth-quarter results showed that Sun’s sales fell 31 per cent year-on-year, worse than analysts had feared. As performance continues to slide, Oracle’s aim that Sun would contribute $1.5bn of operating profit in the first year of the deal – a target reiterated in Oracle’s quarterly conference call on Wednesday – looks increasingly tenuous. Oracle’s own sales are suffering, as companies scale back spending. As for Sun, Bernstein now expects it barely to break even next year – down from a forecast of about $900m in operating profit when analysts modelled the deal in April.

Even so, Oracle is unlikely to walk away – although it could, and without suffering a break fee. After all, Mr Ellison does not want Sun’s software products, such as Java or Solaris, to fall into the hands of rivals. Furthermore, this week the two companies launched an Oracle-powered server designed to compete directly with hardware made by IBM and HP. Oracle’s best hope is that Brussels takes less than the maximum four months to pass the Sun deal. Until that happens, both companies will count the cost.

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