Sun deal dims as Brussels focuses on Oracle

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Oracle and Microsoft might be sworn enemies in the software world, but they appear to have at least one thing in common: an ability to antagonise regulators in Brussels.

In Microsoft’s case, European antitrust enforcers felt that their valid concerns about the company’s use of its market dominance were being given short shrift, leading to years of bad relations between the two sides before a recent provisional agreement to settle their dispute. Oracle, for its part, is only just learning what can come of failing to pay due attention to regulators across the Atlantic – to its cost.

The European Commission’s decision two months ago to delay Oracle’s $7.1bn purchase of Sun Microsystems caught the US software maker off guard. Having won US approval for the agreed deal, it expected a rubber stamp from Europe. Unexpectedly, though, Brussels raised a potential objection to the fact that Oracle would assume control of the popular open-source database software made by Sun’s MySQL, which has emerged as a potential long-term competitor to its own core database business.

As time has gone on, relations have failed to improve. Safra Catz, Oracle’s co-president, was rebuffed at a meeting with Neelie Kroes, the competition commissioner, this week, highlighting the fact that the two sides are as far apart from an agreement as ever. On the same day, Sun announced plans to lay off 3,000 workers, attributing that to the delay in Brussels hurting its business.

Commission officials appear to have become increasingly frustrated by a corporate attitude which they perceive as unhelpful and uncompromising. Mrs Kroes’s spokesman said this week that Oracle had failed to produce hard evidence that there were no competition problems raised by the MySQL issue, in spite of repeated requests. Equally, there had been no remedy proposals put forward.

Many observers in Brussels, however, suspect that Oracle, headed by Larry Ellison, will have to agree to some form of remedy to avoid a longer fight. If so, the issue may be whether “behavioural” conditions – over investment levels or licensing, say – will be sufficient to satisfy Brussels, or whether a harder “structural” remedy, such as divestment by Sun of MySQL, might be required.

An unusual alliance between Microsoft and some of the world’s most prominent open source software developers – normally a group strongly opposed to Microsoft – has been pushing hard for the latter idea.

This week Richard Stallman, one of the founding fathers of open source, co-signed a letter urging Ms Kroes to block an Oracle acquisition of MySQL. Similar agitation has come from Monty Widenius, the founder of the freely distributed database software which has become one of the most successful open source projects.

“MySQL needs a different home than Oracle, a home where there will be no conflicts of interest concerning how, or if, MySQL should be developed further,” Mr Widenius blogged this week.

According to Florian Mueller, an EU lobbyist assisting Mr Widenius, the MySQL founder had phone conversations with the Department of Justice over the same issue, but the deal was cleared soon afterwards without conditions in the US. Things have taken a different course in Brussels, Mr Mueller suggests, because open-source issues have greater resonance in Europe – and elsewhere outside the US.

In Brussels, lawyers watching the case are now divided over whether the commission will issue a formal statement of objections against Oracle, and say much is likely to depend on how the company handles the next few weeks.

“I think it’s finely balanced,” says one person who is closely involved.

Those opposing an unconditional clearance say questionnaires sent out by the commission – and the way issues have been aired – would seem to pave the way for a statement of objections should officials want to take this path. But they also admit there have been no firm signals this is what the commission intends.

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