Update: EU chides Oracle over lack of cooperation in probe of Sun deal

Europe's competition commissioner says Oracle has failed to help address its concerns

Europe's head of competition has criticized Oracle for what she characterized as a lack of cooperation over the investigation of Oracle's planned acquisition of Sun Microsystems, a spokesman for the European Commission said.

In a meeting with Oracle President Safra Catz in Brussels on Wednesday, Competition Commissioner Neelie Kroes "expressed her disappointment that Oracle had failed to produce, despite repeated requests, either hard evidence that there were no competition problems or, alternatively, proposals for a remedy to the competition problems identified by the Commission," a Commission spokesman said.

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Kroes said the Commission was willing to move quickly toward a final decision but "underlined that a solution lies in the hands of Oracle," according to the spokesman.

An Oracle spokeswoman said the company declined to comment.

Oracle's proposed $7.4 billion Sun acquisition was approved by U.S. regulators in August, but two weeks later the Commission announced it would launch an investigation of the deal, citing "serious concerns" about its effects on competition in the database market.

The Commission said it was concerned about Oracle, the world's top seller of database software, taking ownership of MySQL, the leading open-source database, which Sun acquired last year.

Oracle had hoped to complete its acquisition of Sun by now, but the Commission's probe, which could last up to 90 days, has held up the deal and may not be completed until January.

Meanwhile Sun's sales have been declining as rivals IBM and Hewlett-Packard take advantage of the uncertainty around Sun's business with aggressive migration plans. Oracle CEO Larry Ellison said last month that Sun is losing $100 million a month while it waits for the deal to close.

Sun announced a big round of layoffs yesterday, citing the additional time it is taking to close the deal with Oracle. The company said it will lay off 3,000 workers around the world over the next 12 months. Oracle is widely expected to make deeper job cuts if the deal closes.

"My first reaction was, this is not a good sign for the Oracle-Sun deal closing soon," Gartner analyst George Weiss said about Kroes' comments Wednesday. Oracle has insisted the deal would not be anticompetitive, and until the two sides can reach an agreement the deliberations will continue.

The continued delay has caused "a paralysis of the whole Sun ecosystem," said Gartner analyst Andrew Butler. Sun's employees, partners and customers all are suffering as they wait for the deal to close, so that Oracle can issue a product road map that will "provide renewed confidence in at least some of Sun's portfolio," he said.

Oracle is in a difficult position, Weiss said. It will be hard for the company to provide "hard evidence" that the deal would not harm competition. One option is for Oracle to present an analysis of the database market, showing there are other open-source options besides MySQL, such as PostgreSQL and Ingres.

Since Oracle has said it doesn't want to spin off MySQL, another option would be to assign MySQL to its own division within the company and try to convince the Commission that Oracle won't interfere with MySQL's development or the community around it, Weiss said.

"There could be any number of possibilities here, but it appears the Commission does not want to see MySQL as an integral business unit within Oracle," he said.

Meanwhile, Oracle must resist firing back at the regulators. "This isn't the time for Larry to hurl invectives at the Commission; that would only alienate them even more," Weiss said.

The Commission's public response Wednesday is a sign that it will not be pressured. "They're saying, 'Look, Oracle, it's in your hands to speed this decision along, and we'll move as fast as you're willing to provide us with the necessary information,'" he said.

Ellison has insisted that Oracle does not compete with MySQL. Analysts say that's only partly true. While Oracle competes primarily at the higher end of the market, against IBM DB2 and Microsoft SQL server, it will "have to work on positioning statements that make the lines of demarcation more clear," Butler said.

Others say the deal would harm the open-source database. "If Oracle is allowed to acquire MySQL, it will predictably limit the development of the functionality and performance of the MySQL software platform, leading to profound harm to those who use MySQL software to power applications," open-source advocate Richard Stallman wrote in a letter to the Commission this week.

Gartner does not see the deal as anticompetitive. Besides there being other open-source databases on the market, there are other distributions of MySQL that will continue to be available no matter what Oracle does, Weiss said.

Oracle is likely to position MySQL as an option for the low end of the market, complementary to its own, he said. "They have plenty of market opportunities up-scale for their database, as they have been demonstrating with Exadata," Weiss said, referring to the high-end transaction server Oracle developed, first with HP and then with Sun.

"I think they should take a restful day or two to think this over and not react impetuously," he said. "This calls for some cool thought and a very intelligent response."

This story was updated on October 22, 2009.

Copyright © 2009 IDG Communications, Inc.

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