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You are here: Home / Business Briefing / EU Probe Costs Sun $100M a Month
EU Probe Costs Sun $100 Million a Month, Ellison Says
EU Probe Costs Sun $100 Million a Month, Ellison Says
By Mark Long / CRM Daily Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
PUBLISHED:
SEPTEMBER
22
2009
Oracle CEO Larry Ellison told a Silicon Valley audience Monday that Sun Microsystems is losing about $100 million a month because of delays in Oracle's acquisition of the company. "The longer this takes, the more money Sun is going to lose, and that's not good for anybody," Ellison said, according to the Financial Times.

Oracle's $7.4 billion deal for Sun, which was originally announced in April, was approved by U.S. antitrust authorities in August. However, the European Commission's recent decision to open an in-depth investigation into the acquisition means that Oracle cannot expect to close the deal anytime soon.

"The U.S. took their time and deliberations and cleared it," saying the acquisition "was overwhelmingly a pro-competitive deal," Ellison told an event sponsored by the nonprofit Churchill Club in San Jose, Calif. "I think once the [Europeans] do their job, they'll come to the same conclusion."

A Database Snafu

The bad news for Oracle is that the EC's investigation could take until the middle of next January to complete. According to EC Competition Commissioner Neelie Kroes, European antitrust authorities have an obligation to ensure that customers looking to buy database products will not face reduced choice or higher prices as a result of this takeover.

"Databases are a key element of company IT systems," Kroes said. "The commission has to ensure that [open-source] alternatives would continue to be available."

If Oracle is forced to divest Sun's open-source MySQL database to receive the EC's blessing, Piper Jaffray analyst Mark Murphy thinks it would have a "small effect" on Sun's estimated contribution to Oracle's bottom line.

"My sense is that MySQL is growing extremely rapidly but is not wildly profitable yet, and is still probably inconsequential against the backdrop of Sun's total server and software business, in terms of how much operating profit it produces," Murphy wrote in an e-mail. "To be clear, I think Oracle is better off if it is able to retain MySQL, but Oracle would also likely receive a nice payment if it is forced to sell MySQL."

Upbeat Partners

Meanwhile, most of Oracle's partners are maintaining a sunny outlook on Oracle's plans for Sun -- at least so far. According to a recent Piper Jaffray survey, a solid majority of Oracle's partners continue to expect a positive outcome.

"While the ongoing EU delay of the proposed Sun acquisition is placing pressure on Sun's results currently -- and creating additional uncertainty for investors -- most Oracle partners carry a constructive longer-term opinion," Murphy told investors in a research note. "Of the 43 Oracle partners we surveyed, 74 percent expect a positive outcome, 12 percent expect a neutral outcome, and 14 percent expect a negative outcome from the Sun acquisition."

Though Sun's server shipments are being delayed due to the EC's investigation and confusion within the ranks of Sun, Murphy noted that partners are viewing the deal from a longer-term perspective as a potentially "lethal combination" that provides "more reason to work" within the Oracle footprint.

"Partners also indicate 'the growing importance of Java alone makes the acquisition extremely valuable,'" Murphy wrote. Oracle partners also believe that Sun "has a lot to offer in terms of IP, software and hardware," and that it will succeed in "protecting their significant database market share on the Sun platform from IBM's DB2 product."

Image credit: Photo courtesy of Hartmann Studios [Oracle via Flickr].

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