Push Coming to Shove in Oracle-EC Standoff

As Oracle and the European Commission continue to square off over the former’s pending $7.4-billion acquisition of Sun Microsystems, the eventual outcome remains in doubt even as the respective positions of the principals become unambiguous.

With the Financial Times reporting yesterday that Oracle is braced for a formal objection from Brussels to its planned Sun acquisition, we know that positions have hardened.

The EC is demanding that Oracle prove that its ownership of MySQL, which currently belongs to Sun, will not compromise competition and customer choice in the database market. Alternatively, presuming Oracle cannot satisfy EC concerns regarding competitive harm that would result from its ownership of MySQL, European antitrust regulators would like Oracle to agree to the concession of divesting MySQL.

All indications suggest that Oracle has no interest in parting with MySQL. For Oracle, that open-source bauble represents a critically valuable piece of Sun’s corporate domain. There is no way Oracle would be inclined to leave it behind.

Similarly, one can reasonably conclude that Oracle obviously has not been successful in persuading the EC that, from a competitive perspective, it would represent a responsible, trustworthy custodian of MySQL. I am not privy to the case Oracle has made at the EC nor to the expectations or the negotiating position the EC has assumed. Still, given what we do know, it’s clear no headway is being made.

If the EC invokes a formal objection, Oracle’s acquisition of Sun will not be dealt a lethal blow. What’s more, a possibility exists, as the article in the Financial Times says, that “one side or the other will back down, according to observers in Brussels.”

But it’s getting late in the game, and Oracle has noted that Sun, which is shedding employees and cutting costs during this extended period of regulatory purgatory, is losing approximately $100 million monthly. Meanwhile, Sun’s data-center rivals — IBM and HP — feast on the uncertainty surrounding the company’s eventual fate.

Make no mistake, there is uncertainty surrounding Sun’s fate. It isn’t as if IBM and HP have to resort to exaggeration or fabrication to frighten Sun customers into their welcoming embrace.

At some point, though we haven’t reached it yet, Oracle might decide to walk away from this deal, to pursue its data-center aspirations along some other avenue.

Watch the Sun (JAVA) stock price. It will reveal a lot about which way the pendulum is swinging. On April 20, just after the deal was announced, Sun’s shares traded at $9.15. As of noon today (November 3), Sun stock exchanged hands at $8.28 per share, down approximately 9.5 percent from when news of the acquisition broke.

For those keeping score, Oracle’s takeover bid for Sun was pegged at $9.50 per share. Sun’s share price today is down nearly 13 percent from that benchmark.