Politics and Law

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.

Former MySQL leader Mårten Mickos on Thursday urged European Union regulators to approve Oracle's acquisition of Sun Microsystems and its MySQL database group, arguing that further waiting undermines the very competitiveness the EU is trying to protect.

In a letter to Neelie Kroes, the European Commission's commissioner for competition, Mickos said the regulators were correct to question whether Oracle buying Sun and its open-source database software would harm the market. But Mickos, who ran MySQL from 2001 until 2009, believes that the Oracle acquisition won't hurt competition--and that holding the acquisition up will:

"Every new day of uncertainty is potentially very harmful to the various businesses of Sun, reducing competition in the market. A delay in the closing of this transaction is therefore only going to work against the respectable goal that you set out to achieve when launching the probe into this acquisition," Mickos wrote in the letter. (See this separate post with the full text of Mickos' letter to the EU.)

Mårten Mickos, surrounded by inflatable MySQL dolphin mascots.

(Credit: Benchmark Capital)

It's not clear what effect Mickos' letter will have on the regulators, but Mickos knows MySQL's business well, and Oracle can use any help it can get in dealing with the acquisition. The U.S. Department of Justice approved the Sun acquisition in August.

Mickos, now entrepreneur in residence at Benchmark Capital, said in an interview that he no longer has anything financially to gain from the transaction. Instead, he's motivated now by trying to help the employees still at Sun--and moreover, its MySQL unit--urging rational discussion about the matter.

"I couldn't live with the fact that I'm not taking action," Mickos said.

Mickos declined Oracle's advances when MySQL was independent, but he agreed to Sun's acquisition in 2008.

In September, the European Commission said MySQL was at the heart of its investigation of the Sun acquisition:

The Commission's preliminary market investigation has shown that the Oracle databases and Sun's MySQL compete directly in many sectors of the database market and that MySQL is widely expected to represent a greater competitive constraint, as it becomes increasingly functional.

The Commission's investigation has also shown that the open-source nature of Sun's MySQL might not eliminate fully the potential for anticompetitive effects. In its in-depth investigation, the Commission will therefore address a number of issues, including Oracle's incentive to further develop MySQL as an open-source database.

Oracle Chief Executive Larry Ellison said MySQL competes in a different part of the database market than Oracle's existing products and that Oracle has no plans to spin MySQL off into a separate company.

Mickos summarized his argument this way:

1. Oracle has as many compelling business reasons to continue the ramp-up of the MySQL business as Sun Microsystems and MySQL previously did, or even more.

2. Even if Oracle, for whatever reason, would have malicious or ignorant intent regarding MySQL (not that I think so), the positive and massive influence MySQL has on the DBMS market cannot be controlled by a single entity--not even by the owner of the MySQL assets. The users of MySQL exert a more powerful influence in the market than the owner does.

MySQL is used to power large-scale Web sites with many servers, a role for which Oracle's back-end database software isn't suited, he argued. It's therefore in Oracle's interest to boost the MySQL business, Mickos said.

As evidence for his case, Mickos pointed to Oracle's 2005 acquisition of InnoDB, whose database engine software is used within MySQL. "Oracle increased their investment in InnoDB since that time, making MySQL a stronger player in the market," he said.

And perhaps reflecting his new role at a venture capital firm, Mickos concluded with a note about the broader effect of the EU's actions:

"If...it becomes difficult or impossible for large companies to acquire open-source assets, then venture investments in open-source companies will slow down, harming the evolution of and innovation in open source, which would result in decreased competition," he said.

MySQL is in safe hands with Oracle, at least according to CEO Larry Ellison.

At an industry gathering in Silicon Valley Monday, the Oracle chief spoke about the legal clouds hovering over the Sun-Oracle deal. Although Sun is losing $100 million a month due to the delay in consummating the merger, he insisted that Oracle will not spin off MySQL just to win approval from the EU.

Interviewed at a Churchill Club event by former Sun and Motorola chief Ed Zander, Ellison maintained that despite EU concerns, Oracle's database does not compete with MySQL.

"MySQL and Oracle do not compete at all," said Ellison. "If you look at where we compete it's with DB2, Microsoft's SQL Server, Sybase, and a long list of others. We never compete against mySQL, it addresses very different markets."

Ellison pointed out that the U.S. Justice Department has already okayed the merger as pro-competition and that once the EU does its job, it will come to the same conclusion. He expressed the need to complete the deal quickly to keep Sun going and to save as many jobs as possible. "The longer this takes, the more money Sun is going to lose," said the CEO.

Ellison also addressed concerns that Oracle might jettison Sun's hardware business.

"We are keeping everything," said Ellison. "We're keeping tape. We're keeping storage. We're keeping x86 technology and SPARC technology--and we're going to increase the investment in it. Sun has fantastic technology. We think it's got great microprocessor technology--it needs a little more investment, but we think it can be extremely competitive."

The Oracle chief laid out his plans for the future of a combined Sun-Oracle. He sees the new entity as not a hardware or software vendor, but as a systems company. As a leading example to follow, he cited the old IBM.

"I would like us to be the successor to IBM," he said. "Not Gerstner's IBM. Not Palmisano's IBM. But when IBM was the dominant software company in the world and translated that to being the dominant systems company."

Now Ellison believes he can successfully compete with IBM. "We think with the combination of Sun technology and Oracle technology we can succeed and beat IBM," he said, "That's our goal."

Ellison also countered the claim that HP and IBM have taken advantage of the regulatory confusion to steal customers from Sun.

"IBM said it's got 250 customers from Sun," Ellison said. "What does that mean? I don't think there's a single example of any customer who replaced all their Sun machines with IBM. Solaris is way better than AIX, and Sun machines are faster than IBM's and they cost less."

How much longer will Ellison extend his 32-year career at the helm of the company he co-founded? "I'll go for five more years and see how it's going," he said.

The $7.4 billion Sun-Oracle merger has been in a holding pattern since the EU opened an in-depth investigation earlier this month. The EU has given itself a deadline of mid-January to render a final decision, potentially putting the deal months behind its original closing date of mid August.