BRUSSELS (Reuters) - European Union antitrust regulators launched an in-depth probe on Thursday into Oracle Corp's $7 billion takeover of Sun Microsystems Inc on concerns the deal could dent competition in the database market.
The delay could hurt Sun, the No. 4 maker of computer servers, by allowing its rivals more time to poach customers before Sun became part of Oracle, the world's No. 3 software maker, and thus became able to take advantage of its sales resources, analysts said.
Sun last week reported a loss of $147 million in its most-recent quarter as revenue tumbled.
Rivals Hewlett-Packard Co and IBM have already been offering discounts and other incentives to woo Sun customers since Oracle agreed to buy Sun in April.
Sun shares fell 1.8 percent while Oracle shares fell 1 percent on Thursday.
"The (European) Commission has an obligation to ensure that customers would not face reduced choice or higher prices as a result of this takeover," Competition Commissioner Neelie Kroes said in a statement.
Legal experts and analysts following the review said they expect European regulators will ultimately approve the acquisition, clearing the last hurdle for the deal to close.
But they said Oracle may need to make concessions, including the divestiture of Sun's MySQL software business, and that it is unclear how long European approval would take.
The process is unlikely to extend beyond January 19, the deadline set by the Commission, the competition watchdog of the 27-country European Union. That would put Oracle months behind its original plan for closing the deal.
Oracle has already received the green light from the U.S. Department of Justice for its takeover of Sun, developer of Java software, which is among the world's most widely used computer languages.
Christopher Thomas, a Brussels-based antitrust lawyer at law firm Lovells, said the Commission's in-depth probe showed it was more cautious than its U.S. counterparts but did not necessarily mean the deal would be derailed.
MySQL is used to run popular websites operated by companies include Google Inc, Facebook and Amazon.com. Its main customer base is small and mid-sized businesses. Its primary competitor is Microsoft Corp's SQL Server.
Oracle's database, which is the top-selling product in the market, is far more robust, allowing companies to quickly access larger quantities of data.
Most companies that use MySQL do not pay for the software, which is available under a free, open-source license. Sun also offers a paid version that comes with support services.
Eben Moglen, chairman of the Software Freedom Law Center, said he believed the European Commission is concerned that Oracle will prevent developers from adding features to make MySQL more powerful, which would make it more competitive with Oracle's database.
"This is a reasonable concern from a legal point of view. From a business concern, it is pretty obvious," Moglen said.
The Commission said it was concerned that the open source nature of MySQL might not eliminate fully the potential for anti-competitive effects.
With Oracle's databases and MySQL competing directly in many sectors of the database market, MySQL is widely expected to represent a greater competitive constraint as it becomes increasingly functional, the EU executive said.
Oracle, IBM and Microsoft are the main players in the proprietary database market.
Analysts have expressed doubts on whether Oracle's acquisition of MySQL would stifle competition in the $19 billion a year database market. Sun generates about $300 million in revenue from MySQL.
Oracle brought in about $9.2 billion in database sales last year, according to market researcher Gartner.