Final approval of Oracle's $7.4 billion takeover of Sun Microsystems has just hit a snag, courtesy of European regulators.
The European Commission announced Thursday that it has launched an in-depth investigation into the proposed merger between Oracle and Sun. The agency said its preliminary probe raised concerns that the deal could threaten competition in the database market in the European Economic Area (EEA), an association composed of 30 different European countries.
That initial investigation showed that Oracle's proprietary databases and Sun's open-source MySQL compete directly in many areas of the market, so the Commission wants to address a number of issues, including Oracle's incentive to further develop MySQL as an open-source database.
Competition Commissioner Neelie Kroes said in a statement: "The Commission has to examine very carefully the effects on competition in Europe when the world's leading proprietary database company proposes to take over the world's leading open source database company. In particular, the Commission has an obligation to ensure that customers would not face reduced choice or higher prices as a result of this takeover."
Pointing out the importance of databases to corporate IT systems, the Commission said that in light of the current economy, companies need cost-effective solutions. "And systems based on open-source software are increasingly emerging as viable alternatives to proprietary solutions," said Kroes. "The Commission has to ensure that such alternatives would continue to be available."
The Commission, which is the executive arm of the European Union, now has 90 working days, until January 19, 2010, to make a final decision on the merger.
Oracle had little comment except to say in a statement that the Commission had decided to "seek out more information regarding the merger by launching a Phase Two inquiry," which indicates a more in-depth follow-up to the initial probe.
The merger has already been approved by Sun stockholders and by the U.S. Justice Department.
The European Commission could delay its decision on the Sun-Oracle deal beyond Thursday's deadline to further investigate antitrust issues, reported Reuters, citing sources familiar with the situation.
Apprehensive about Oracle gaining control of Sun's widely used MySQL database, the Commission's antitrust regulators are currently debating whether to OK the deal by Thursday, the report said. If the Commission launches a full review, it could take as long as four months before a decision is reached, according to Commission rules.
The U.S. Department of Justice recently cleared the merger. But the Justice Department's concerns centered more on licensing issues with Sun's Java software than MySQL.
The companies announced in April a deal in which Oracle would acquire Sun common stock for $9.50 per share in cash, putting the value of the transaction at about $7.4 billion.
The competition has already taken advantage of the uncertainty over the Sun-Oracle deal. Key players like IBM and Hewlett-Packard have offered discounts and other incentives to lure Sun customers. They've also floated the idea that Oracle may have a tough time trying to manage a hardware manufacturer like Sun.
Sun's worldwide server sales have already been hurt, with the company capturing only 10 percent of the overall server market on sales of just $981 million for the second quarter, a drop of more than 37 percent from the year-ago quarter.
Apple, Google, and Yahoo are among the tech giants being investigated by the Justice Department for possible antitrust violations related to negotiations over the recruiting and hiring of one another's employees, according to a Washington Post report.
The review is said to be "industrywide" and in preliminary stages, according to the report, which cited two unnamed sources. Companies that agree not to hire away talent could be stifling competition, the report noted.
Representatives for Apple, Google, Yahoo, and the Department of Justice did not immediately respond to requests for comment.
Tech companies, known for their exhaustive recruiting efforts, have waged fierce battles to maintain top talent. In one closely watched case, Google was sued by Microsoft in 2005 over Google's decision to hire Kai-Fu Lee away from Microsoft to run Google's research operation in China. The two parties eventually settled out of court.
IBM has proved particularly territorial about departing executives. Last month, the company filed a lawsuit in federal court to prevent its former head of mergers and acquisitions, David Johnson, from joining Dell, saying it would be a violation of his contract.
Last year, IBM sued Mark Papermaster to keep him from joining Apple. The lawsuit's claims were nearly identical, with IBM charging that Papermaster's joining Apple would cause him to divulge trade secrets and was a violation of the noncompete clause to which he agreed. IBM and Papermaster settled after three months, and Papermaster finally started working at Apple three months later.
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