Business Tech

The chill between Oracle and the European Commission may finally be thawing.

European antitrust regulators have been playing a wary bouncer to Oracle's planned takeover of Sun Microsystems, and they've been especially attentive to the software maker's intentions regarding Sun's MySQL operations. In November, their concerns about the future of the open-source MySQL database software led to a formal thumbs-down to the acquisition.

But recent discussions between Oracle and the EC have apparently been fruitful, as Oracle on Monday pledged 10 "commitments to customers, developers and users of MySQL."

Among other things, the company pledged to spend more cash than Sun did on MySQL development and to set up advisory boards to include MySQL customers. Oracle also said it would not require paid support to get a commercial MySQL license and that it would offer flexible support contracts to customers.

in addition, it addressed licensing and copyright issues relevant to third-party developers of MySQL storage engines, promising to maintain the openness and flexibility of MySQL's Pluggable Storage Engine Architecture and not require commercial licenses to use the storage engine APIs.

In response, the European Commission on Monday issued a statement suggesting that it's warming up to the idea of a Sun-Oracle combination.

"Today's announcement by Oracle of a series of undertakings to customers, developers and users of MySQL is an important new element to be taken into account in the ongoing proceedings," said the EC in its statement. "In particular, Oracle's binding contractual undertakings to storage engine vendors regarding copyright non-assertion and the extension over a period of up to 5 years of the terms and conditions of existing commercial licenses are significant new facts."

EC Competition Commissioner Neelie Kroes expressed optimism for a satisfactory outcome, one that won't hurt the competition in the European database market.

But according to the Reuters news agency, critics of Oracle aren't impressed with Oracle's latest promises.

"This is purely cosmetic, totally ineffectual. Neither storage engine vendors nor 'forkers'--developers of derived versions--nor enterprise users would have a basis on which to invest in MySQL-related innovation," said Florian Mueller, a spokesman for MySQL co-founder Michael "Monty" Widenius, who has been one of the loudest voices in opposition to the deal.

Fearing that Oracle will try to weaken MySQL to strengthen its own database products, Widenius has been intent on drumming up support among the faithful, asking them to urge the EC to stop the merger for good.

The battle for Sun began in April when Oracle's $7.4 billion bid won over Sun's board. Subsequent approval by shareholders and the U.S. Justice Department seemed to solidify the deal.

Summarized below, Oracle's 10 commitments outline how the company intends to keep MySQL alive as a competitive database product.

1. Continued Availability of Storage Engine APIs. Oracle promises to maintain and enhance MySQL's Pluggable Storage Engine Architecture, which gives users the ability to select from a variety of different storage engines that can plug into a MySQL database server.
2. Non-assertion. As copyright holder, Oracle will change Sun's current policy and will not assert against anyone that a third-party vendor's implementations of a storage engine must be released under the GPL (GNU General Public License) because they used the APIs that are part of the Pluggable Storage Engine Architecture. Further, Oracle will not require a commercial license from third-party storage engine vendors to implement the Pluggable Storage Engine Architecture's APIs.
3. License commitment. When current MySQL OEM agreements with storage vendors end, Oracle will offer an extension up to December 10, 2014, with the same terms and conditions.
4. Commitment to enhance MySQL in the future under the GPL. Oracle promises to enhance MySQL, including version 6, under the GPL. Oracle won't update MySQL Enterprise Edition without also updating MySQL Community Edition and will make the source code of Community Edition available to the public at no charge.
5. Support not mandatory. Customers won't be required to buy support services from Oracle to get a commercial license for MySQL.
6. Increase spending on MySQL research and development. Oracle promises to spend more money than Sun did to continue to further develop MySQL, both the commercial and GPL editions.
7. MySQL Customer Advisory Board. No later than six months after the anniversary of the closing, Oracle will create a customer advisory board to offer guidance and feedback on MySQL development. The board will include end users and embedded customers.
8. MySQL Storage Engine Vendor Advisory Board. No later than six months after the anniversary of the closing, Oracle will create and fund a storage engine vendor advisory board for guidance on issues important to MySQL storage engine vendors.
9. MySQL Reference Manual. Oracle will continue to update and provide a free download to a MySQL Reference Manual similar to the one currently available from Sun.
10. Preserve Customer Choice for Support. Oracle will make sure that end-user and embedded customers paying for MySQL support can renew that support each year or every few years, depending on the customer's preference.

Third-quarter sales of servers across the globe showed a 17.3 percent decline from the same quarter in 2008, sagging to $10.4 billion, according to IDC's Worldwide Quarterly Server Tracker.

But server shipments improved, falling only 17.9 percent for the quarter, compared with 30.1 percent in the second quarter, noted the IDC report released Wednesday. Even more promising, shipments grew at a healthy 12.4 percent over the second quarter, the market's largest sequential quarterly gain since 2005.

All three server segments tracked by IDC--volume, midrange enterprise, and high-end enterprise--saw lower third-quarter sales compared with the same quarter last year. Revenue for midrange enterprise servers fell 23.4 percent, while sales of high-end enterprise servers dropped 19.3 percent.

But revenue for volume servers, the lower end of the market, improved over the second quarter and experienced their lowest drop since the third quarter of 2008.

"The worldwide server market exceeded expectations in the third quarter with improving x86 server demand leading the way, which was driven in part by the infrastructure refresh momentum that is building in many geographies," said Matt Eastwood, IDC's group vice president of Enterprise Platforms, in a statement. "In fact, x86 server revenues experienced their largest sequential quarterly revenue increase in nearly five years."

(Credit: IDC)

Among the major players in the server industry, IBM and Hewlett-Packard vied for first place in both sales and market share with a statistical tie. Big Blue took a 31.8 percent slice of the market, with a 12.9 percent drop in third-quarter sales to $3.3 billion. HP grabbed a 30.9 market share as its revenues fell 16.8 percent to $3.2 billion.

Third-place Dell saw its sales decline only 6.8 percent to $1.4 billion, helping it capture a 13.5 percent share of the market.

With its future cloudy, pending regulatory approval of its takeover by Oracle, Sun Microsystems suffered a 35 percent drop in third-quarter sales to $778 million. Reports have surfaced that IBM and HP, among others, have taken advantage of the uncertainty surrounding Sun to lure over several of its customers.

Bringing up the rear of the top five was Fujitsu, which saw an 8.2 percent drop in sales to $594 million, carving out a 5.7 percent slice of the market, an improvement over its position from last year's third quarter.

Though optimistic that the market will continue to improve in the fourth quarter and beyond, IDC is still waiting to see how the recovery plays out.

"IDC believes that platform migration is once again gaining steam in the market and the post-recession server deployment patterns will establish the technology agenda in the datacenter for the next business cycle," said Eastwood. "For server vendors, after five quarters of market contraction, the next few quarters will be critical to determining the technology platform winners and losers in the years ahead."

All top five server vendors globally saw declines in revenue and shipment in the third quarter of 2009, with Sun Microsystems registering the biggest fall, according to the latest figures from Gartner.

In a report released Monday, the research firm noted that Sun saw its server revenue drop 32 percent and unit shipments dip 38 percent in the third quarter, compared to the same period last year.

IBM experienced a 12 percent decline in revenue growth, though it clocked the highest revenue in the market for the quarter at $3.4 billion. Hewlett-Packard and Fujitsu saw their revenue decline 15 percent and nearly 11 percent, respectively. Dell was the only vendor with a single-digit revenue decline (5 percent) among the top 5 vendors, Gartner said.

Read more of "Sun sets lowest in server market at ZDNet Asia.

Come early December, Oracle will meet with European Commission regulators to urge their approval of its merger with Sun Microsystems. "Two people with knowledge of the matter" tell Reuters that "Oracle has asked for a hearing which has been fixed for December 10."

Should make for an interesting meeting given Oracle's refusal to take the EC's concerns about the future of Sun's MySQL database seriously. Certainly, it's difficult to imagine Oracle caving to the Commission's demands when it has criticized the group's findings as a "profound misunderstanding" of the database market and open source.

And if not that, then what? Would Oracle abandon the deal instead? That too seems unlikely because it would mean delaying CEO Larry Ellison's plan to transform Oracle into the next IBM. As Ellison said in October, "T. J. Watson's IBM was the greatest company in the history of enterprise in America because its combination of hardware and software was running most of the enterprises on the planet. We think with the combination of Sun technology and Oracle technology we can succeed and beat IBM. That's our goal."

Given the EC's concerns about the Sun acquisition and Oracle's refusal to address them, what other option is there?

Story Copyright (c) 2009 AllThingsD. All rights reserved.

The European Commission on Monday formally dug in its heels over Oracle's planned acquisition of Sun Microsystems, but Oracle accused the regulatory body of "profound misunderstanding" in a rebuttal that declared its intention to fight the opinion.

The regulatory body issued a statement of objections about the merger, according to a Securities and Exchange Commission filing from Sun Microsystems. The open-source MySQL database software is the sole issue of concern in the matter, Sun said in the filing.

"The Statement of Objections sets out the Commission's preliminary assessment regarding, and is limited to, the combination of Sun's open source MySQL database product with Oracle's enterprise database products and its potential negative effects on competition in the market for database products," Sun said in the filing.

Oracle, though, fired back immediately, saying the objection "reveals a profound misunderstanding of both database competition and open-source dynamics." And indicating that other technologies are in limbo during the European deliberations, Oracle said, "Oracle's acquisition of Sun is essential for competition in the high-end server market, for revitalizing Sparc, and Solaris and for strengthening the Java development platform."

Meanwhile, the U.S. Justice Department reiterated its stance that the acquisition isn't anticompetitive. But given the gulf between Oracle and EC perspectives and Oracle's unwillingness to spin the MySQL software group off, it appears the matter won't be resolved soon.

MySQL is open-source software, meaning anyone may see, modify, and distribute the human-readable source code that underlies the software package computers actually run. Oracle's core database product is proprietary, meaning they don't grant those freedoms. MySQL is used widely at Facebook and Google among other companies, and competes to some extent with Oracle's existing products, arguably indirectly by expanding into newer markets to which Oracle's software isn't as well-suited.

Oracle castigated the commission in its statement:

It is well understood by those knowledgeable about open source software that because MySQL is open source, it cannot be controlled by anyone. That is the whole point of open source.

The database market is intensely competitive with at least eight strong players, including IBM, Microsoft, Sybase and three distinct open-source vendors. Oracle and MySQL are very different database products. There is no basis in European law for objecting to a merger of two among eight firms selling differentiated products. Mergers like this occur regularly and have not been prohibited by United States or European regulators in decades...

Sun's customers universally support this merger and do not benefit from the continued uncertainty and delay. Oracle plans to vigorously oppose the Commission's Statement of Objections as the evidence against the Commission's position is overwhelming. Given the lack of any credible theory or evidence of competitive harm, we are confident we will ultimately obtain unconditional clearance of the transaction.

The Justice Department, which is in Oracle's camp, detailed its reasoning in a statement from Deputy Assistant Attorney General Molly Boast of the Justice Department's Antitrust Division.

And though Boast pointed to the department's "strong and positive relationship on competition policy matters" with the EC, she also said, "At this point in its process, it appears that the EC holds a different view. We remain hopeful that the parties and the EC will reach a speedy resolution that benefits consumers in the commission's jurisdiction."

The Justice Department reasoned that there are other database packages available and that open-source projects can be forked by those who disagree with corporate sponsors' handling of the software.

"Several factors led the (Justice Department's antitrust) division to conclude that the proposed transaction is unlikely to be anticompetitive. There are many open-source and proprietary database competitors. The division concluded, based on the specific facts at issue in the transaction, that consumer harm is unlikely because customers would continue to have choices from a variety of well established and widely accepted database products," Boast said. "The department also concluded that there is a large community of developers and users of Sun's open source database with significant expertise in maintaining and improving the software, and who could support a derivative version of it."

Oracle is taking a hard line in dealing with European Union objections to its planned acquisition of Sun Microsystems, according to a Financial Times report Tuesday.

EU antitrust regulators are concerned that Oracle, which has a large business in proprietary software, won't be a good home for Sun's open-source MySQL database business. According to the report, Oracle is unyielding, offering no concessions to deal with the EU's concerns.

That stance could lead the regulators to issue a formal complaint objecting to the deal, and that move could occur within days, according unnamed sources in the story. Neither the EU or Oracle commented for the story.

MySQL's former chief executive, Marten Mickos, has urged the EU to approve the acquisition, but cofounder Monty Widenius has objected. Sun shareholders and the U.S. Justice Department have approved the deal.

For years, open-source advocates have been praying for someone to free us from Microsoft's proprietary grasp. We've prayed in vain as Linux, OpenOffice, and other open-source software programs have failed to dent Microsoft's dominance.

Until now.

Google, not Red Hat or Sun, appears to be the long-awaited redeemer of both personal computers and servers, and has even staked a credible claim in the mobile world, as well. Google achieves this, in part, by writing copious lines of open-source code, but pays for this "generosity" with insanely profitable proprietary services, services that have long appealed to consumers but increasingly appeal to enterprises, too.

Google, in other words, is arguably not the open-source savior we were expecting, but it's probably the one we deserve.

(Credit: Matt Asay)

Despite more than a decade of trying to make "pure" open-source software businesses work, it's telling that only one company--Red Hat--has managed to pull together more than $100 million per year in revenues for its troubles. For its part, Red Hat is quick to downplay the relevance of its revenue model for just about any other business.

Hardly a rallying cry to the still-growing open-source ecosystem.

Yes, MySQL got to $94 million before Sun gobbled it up, and yes, other start-ups (my own, included) are getting closer to the mark, but none, including MySQL, is wholly dependent on selling open-source software subscriptions to achieve this goal.

We also include proprietary add-on value. Like Google.

So we're left with Google, which is, perhaps, the world's largest open-source company, contributing more open-source software and resources than any other, in my estimation. (Sun likely wins on sheer volume of code, but being an "open-source company" involves more than simply code.)

How does Google do it? Well, for one thing, it learned long ago that monetizing open-source software directly is tough. So it simply uses open source to shepherd prospective customers to its other services, like Search or Google Apps.

Indeed, it is the success of these proprietary products that enables it to be such a generous open-source benefactor, much like IBM, Intel, or, for that matter, Sun (which sells a lot of proprietary hardware). Take away these companies proprietary product lines, and overnight we'd see dramatic decreases in their investments in Linux, Apache Software projects, etc.

And we'd all be the poorer for that.

In an ideal world, open-source software companies would thrive by simply giving away lots of code, and having enterprises and government organizations serve their long-term interests by paying for support.

We don't live in that world. Some organizations do buy support for open-source software, of course, though many others do not, and some only pay long enough to become self-sufficient whereupon they dump their support contracts, as former CTO of NBC iVillage Jon Williams once declared.

Until we cross the border into Utopia, we're going to continue to see the biggest investments in open-source innovation come from Google and its peers: companies with wallets fat with proprietary profits.

As I said, this may not be the open-source world for which we've hoped, but it's the one we deserve, because it's reflective of what we value and, hence, what we pay for.

See also Mark Hinkle's response to this post.

MySQL co-founder Michael "Monty" Widenius is leading a chorus of voices expressing growing apprehension over the proposed Oracle-Sun merger.

In a statement posted on his blog on Monday, Widenius said the European Commission is "absolutely right to be concerned" about the $7.4 billion takeover of Sun by Oracle, and he urged Oracle to sell MySQL to clear up any antitrust issues.

Although the deal received the thumbs-up from the U.S. Department of Justice in August, the Commission opened a probe in early September, citing fear that Oracle's ownership of MySQL could pose a competitive threat.

In his blog, Widenius asked Oracle "to be constructive and commit to sell MySQL to a suitable third party, enabling an instant solution instead of letting Sun suffer much longer." The famed MySQL developer, who departed Sun earlier this year, said that he wishes Sun "all the best, but 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."

Another voice uneasy about the Oracle-Sun venture is Florian Mueller, an EU policy expert who is a former MySQL shareholder and adviser. Mueller had helped Widenius' new company, Monty Program, urge the EU to investigate the anticompetitive effects of a MySQL owned by Oracle.

"Letting Oracle have MySQL is worse than putting the fox in charge of the henhouse, because the hens are no threat to the fox, while MySQL makes Oracle lose customers and forces it to grant discounts to customers threatening to defect," Mueller said in a statement.

Monty Widenius

(Credit: MySQL/Sun Microsystems)

"Every day that passes without Oracle excluding MySQL from the deal is further evidence that Oracle just wants to get rid of its open-source challenger, and that the EU's investigation is needed to safeguard innovation and customer choice," Mueller added. "This is highly critical because the entire knowledge-based economy is built on databases."

Though several analysts have questioned the EC's motivation for probing the deal, Mueller firmly backs the commission.

"It's inappropriately arrogant for some interested parties to suggest that the EC has yet to understand the case," he said. "The EC is really doing a great job under huge time pressure." In August, Mueller helped write a position paper (PDF) on MySQL that Widenius' Monty Program gave to the EC.

And in yet another condemnation, Richard Stallman, founder of the free-software movement, wrote an open letter to the EU on Monday opposing an Oracle-owned MySQL as a threat that would hinder its further development in the open-source community.

Other prominent names, though, disagree. Earlier this month, MySQL ex-CEO Marten Mickos urged the EU to OK the deal, arguing that by delaying the merger, the EU is hurting the very competitive atmosphere that it claims to want to protect.

Major database players, including HP and IBM, have already reportedly taken advantage of the delay to win over customers from Sun.

In the meantime, Sun continues its downward spiral. Late Tuesday, the company confirmed that it would lay off another 3,000 employees, about 10 percent of its total workforce, over the next year. This latest round is in addition to 6,000 jobs cuts announced almost a year ago as part of the company's restructuring plan.

On Oracle's part, CEO Larry Ellison said last month that despite the EU's probe, Oracle has no intention of spinning off MySQL.

Clarification at 9:35 a.m. PDT: Widenius is a co-founder of MySQL, the company.

Sun Microsystems plans to cut as many as 3,000 jobs, or about 10 percent of its global workforce, during the next year as it prepares for Oracle's takeover of the company.

The cuts, revealed on Tuesday in a filing with the U.S. Securities and Exchange Commission, represent the second major round of layoffs in a year for the server maker. Sun announced restructuring plans last November to cut up to 6,000 jobs this year, or 18 percent of its global workforce.

Those cuts were disclosed before Oracle announced its $7.4 billion bid for Sun in April, following Sun's rejection of overtures from IBM. IBM was still interested in Sun and somewhat blindsided by Oracle's move, a source told CNET News at the time.

The U.S. Justice Department approved the takeover in August, but the merger still requires approval by the European Commission, which is concerned that the deal could threaten competition in the database market in the European Economic Area (EEA), an association composed of 30 European countries. The Commission has until January 19 to make a final decision on the merger.

Meanwhile, the delay is causing financial turmoil for Sun's business. Oracle CEO Larry Ellison said at an industry gathering in Silicon Valley last month, "Sun is losing $100 million a month; we'd like to get this thing done."

The acquisition is part of a change in thinking for Oracle, which, at one time, eschewed mergers but has gone on a buying spree in recent years, gobbling up PeopleSoft and many other software companies. Ellison at one time specifically rejected the notion of buying Sun.

Sun said in the filing that it expects to take $75 million to $125 million in restructuring charges over the next several quarters.

An Oracle representative did not immediately respond to requests for comment.