News

Oracle gains the EC’s approval to acquire Sun

Ed Scannell, Senior Executive Editor

After over three months of investigation the European Commission (EC) has officially approved Oracle’s $7.4 billion acquisition of Sun Microsystems which could see the combined company significantly change the competitive

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landscape of the IT industry.

"I am now satisfied that competition and innovation will be preserved on all the markets concerned. Oracle's acquisition of Sun has the potential to revitalize important assets and create new and innovative products," said Neelie Kroes, the European antitrust commissioner, said in a prepared statement.

Oracle’s proposed acquisition of Sun took almost nine months to the day to gain approval by both the U.S. Department of Justice and the EC, with the latter’s investigation dragging on for over three months.

The focus of the EC’s investigation was Oracle’s gaining possession of Sun’s MySQL open source database, which holds a commanding share in that market. Combined with Oracle’s marketing leading proprietary database, EC officials feared Oracle would purposely not support MySQL, essentially killing the product in favor of its much more expensive flagship database.

Explaining the reasoning behind its approval, the EC made reference to the open source based Postgres database, which it felt would offer European buyers a ”legitimate” alternative to MySQL which would prevent Oracle from limiting users choice.

Oracle officials had no comment on the EC’s approval only saying they plan to close the deal shortly.  They said they expect both the Chinese and Russian antitrust agencies to approve the proposed acquisition now that the EC has given the deal its blessing.

Oracle plans to host an all-day live event at its headquarters in Redwood Shores, Calif. On Jan. 27 for customers and business partners where it is expected company officials will lay out some of its short and long-terms plans for the raft of products and technologies it now controls.

The Sun acquisition throws open wide the doors to new market for Oracle. With its new arsenal of server hardware, chips and a variety open source software from databases to Web serving software, the company can now compete worldwide on an equal footing with archrival IBM for both standalone and stack computing solutions.

The deal also figures to improve Oracle’s position going forward in the cloud computing arena, a decided advantage in the Java vs. .Net development wars, a competitor in the desktop application space with the Openoffice.org suite of applications, a respected operating system in Solaris and more influence in determining the direction of open source development.

How aggressively Oracle will pursue opportunities at the lower-end of market with products like Openoffice.org and Sun’s Intel-based servers remain to be seen. Over the past month or two Oracle chairman Larry Ellison has indicated in public comments that his focus will be on the higher end of Sun’s hardware and software product lines, such as the Exadata server, that will bring higher margins.

Something of an unknown element that could give Oracle technical advantages long into the future is what Sun has cooking in its research and development centers. Specifically, what the company is concocting in the way of chip architectures that could be the fuel to more effectively drive cloud computing and virtualization products.

But how much damage the protracted investigation by the EU has done to Sun’s fortunes, particularly its server hardware business, remains to be seen. The company was fourth in server hardware behind IBM, Hewlett Packard and Dell even before Oracle first proposed the acquisition. Since then, a goodly number of corporate customers either froze their purchasing decisions on Sun hardware, or were lured away by server rivals IBM and HP which announced aggressive pricing programs making it financially attractive for Sun users to switch.

Oracle chairman Larry Ellison last fall announced that Sun was losing about $100 million a month in revenues, due largely to the EC’s investigation and uncertainty among customers as to what the company’s fate was going to be.

 


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