Oracle and Sun’s MySQL

The European Commission said the combination of Sun’s MySQL open source database and Oracle’s corporate database raises competition concerns.

Oracle rejected competition claims, saying the EC’s objections reveal a "profound misunderstanding of both database competition and open source dynamics".

"The products don’t reduce competition in the slightest," Oracle said in a statement.

The US Justice Department, which approved the deal in August, also issued a statement in support of Oracle, according to Bloomberg.

Consumer harm is unlikely because customers would continue to have choices from a variety of well-established and widely accepted database products, the statement said.

The world’s biggest database software maker, was told by European Union regulators that its $7.4 billion purchase of Sun Microsystems Inc. may break antitrust rules even though the U.S. approved the deal.

The European Commission issued a so-called statement of objections yesterday, saying the combination of Sun’s MySQL and Oracle’s corporate database software raises concerns that the deal may hinder competition. Oracle will have an oral hearing with the EU on Nov. 25, according to a person familiar with the matter.

“The commission’s statement of objections reveals a profound misunderstanding of both database competition and open- source dynamics,” Redwood City, California-based Oracle said yesterday. The products don’t “reduce competition in the slightest.”

The U.S. Justice Department, which approved Oracle’s purchase of Sun in August, also issued a statement that sided with Oracle. When conducting its review, the antitrust division considered previous probes, talked to industry participants and reviewed internal documents before concluding that the merger is unlikely to be anticompetitive, the department said.

Losing Money

Sun is losing $100 million a month while it waits for the takeover to close, Oracle Chief Executive Officer Larry Ellison told an industry gathering in September. With no approval imminent, Sun announced plans last month to cut 10 percent of its workforce. The company has reported losses the past five quarters as customers defect to rivals.

Zoe Lofgren, who represents Silicon Valley in the U.S. House of Representatives, said she wasn’t happy about the EU objecting to the deal.

“This unwarranted delay is causing damage to Sun and damage to my constituents, who might lose their jobs,” she said in an interview. “I understand that when employees found out that Oracle was going to acquire Sun, they broke out into spontaneous cheers. It’s the opportunity for Sun to continue.”

Sun’s MySQL database is the world’s most popular open- source database program — downloaded more than 60,000 times a day, according to Sun’s Web site. MySQL, which is based on freely distributed code, is frequently used to run Web sites. Oracle’s database software runs corporate applications.

Open-Source Software

“Code for an open-source database can be licensed to anyone,” said Roger Burkhardt, chief executive officer of Ingres Corp., which distributes an open-source product that competes directly against Oracle’s software. “Because it’s open-source, a company can’t deny access to the code or prevent someone else from making a business around it.”

Oracle said in its statement that it’s well understood that MySQL “cannot be controlled by anyone.”

Oracle’s criticisms of the EU’s analysis are “facile and superficial,” Jonathan Todd, a commission spokesman, told journalists today at a regular briefing in Brussels.

The commission is concerned that Oracle’s purchase of MySQL will eliminate availability of the software, which is “a particularly important competitive force,” Todd said.

“Despite the fact that MySQL is open-source, Oracle would be the exclusive holder of the copyright and the trademark for MySQL code,” Todd said. “It could be very difficult for a competitor using MySQL code to sufficiently replace the competitive constraint currently exerted by MySQL in a timely manner.”

Web Sites

Sun, based in Santa Clara, California, is the fourth- largest maker of servers — computers used to run Web sites and corporate networks. It also owns the Java programming language, Solaris operating system, and Sparc computer chip, which is used in some of its servers.

While the statement of objections puts pressure on Oracle to offer concessions to the EU, it doesn’t guarantee the regulator will block the deal. TomTom NV, Europe’s largest maker of car-navigation devices, won approval for its acquisition of digital-mapping company Tele Atlas NV after receiving a statement of objections.

Oracle said it plans to “vigorously oppose” the EU’s complaint.

In the Justice Department’s statement, Deputy Assistant Attorney General Molly Boast said “consumer harm is unlikely because customers would continue to have choices from a variety of well established and widely accepted database products.”

Speedy Resolution

Boast also said the department remains hopeful that the parties and the EU “will reach a speedy resolution that benefits consumers in the commission’s jurisdiction.”

Deborah Hellinger, a spokeswoman for Oracle, didn’t respond to an e-mail seeking comment. Sun declined to comment beyond the statement, said Karen Kahn, a company spokeswoman.

Oracle said there are at least eight competitors in the database market, including International Business Machines Corp. and Microsoft Corp. Given the number of rivals and the fact that Oracle’s database program and MySQL are “differentiated products,” there is no basis in European law for the EU’s objection, Oracle said.

“I happen to agree with Oracle,” said Heather Bellini, an analyst at ISI Group in New York. She rates Oracle’s shares “buy” and doesn’t own any. “I don’t see how, at the end of the day, they could be considered competitors.”

Lobbying by Competitors

Oracle captured almost 43 percent of revenue in the database market in 2008, according to Gartner Inc., a research firm based in Stamford, Connecticut. Sun’s share, including MySQL, was less than 0.5 percent, Gartner said in June.

The commission began an in-depth review of the takeover in September and is scheduled to rule by Jan. 19. The probe followed lobbying by Oracle competitors, including SAP AG and Microsoft.

After receiving the statement, Oracle can request a hearing to convince the commission that there aren’t competition problems. Oracle also can appeal an EU veto at EU courts.

In the U.S., the Justice Department scrutinized the transaction’s effect on the licensing of the Java programming language. The EU said in September that it didn’t have issues with Java licensing.

Oracle said that the deal is “essential for competition in the high-end server market” and for helping to boost demand for Sun’s other software, including Java. Competitors in the high- end server market include IBM and Hewlett-Packard Co. Sun’s customers “do not benefit from the continued uncertainty and delay,” Oracle said.

“Given the lack of any credible theory or evidence of competitive harm, we are confident we will ultimately obtain unconditional clearance of the transaction,” Oracle said.

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