October 26, 2009 / 10:57 AM / in 9 years

SCENARIOS-Oracle's Sun acquisition faces Brussels hurdle

* EU can still approve the deal as it is

* Seen most likely approving the deal with concessions

* Unlikely to block whole deal

* MySQL database seen as key problem

BRUSSELS/HELSINKI, Oct 26 (Reuters) - EU Competition Commissioner Neelie Kroes is expected to approve Oracle Corp’s ORCL.O acquisition of Sun Microsystems Inc JAVA.O but only when concerns over competition have eased.

Kroes told Oracle last week it has failed to diminish worries that the purchase would hurt competition [ID:nLL257046] and Oracle could be forced to divest Sun’s MySQL database, something it has said it does not plan to do. Following are the key scenarios for the EU competition review, which is due Jan. 19, 2010.

“YES”

The European Commission could clear the deal without conditions but this seems unlikely after Kroes said she was disappointed that Oracle did not see any competition issues or propose remedies for them.

Donald Feinberg, an analyst at Gartner, said it was right to investigate the deal but in the end the European Commission should approve it because it will not hurt rivals.

Roger Burkhardt, chief executive of open source database company Ingres, told Reuters he sees no difference in competing against Oracle with or without rival MySQL.

“YES, ONLY IF...”

Unless Oracle submits remedies to appease Kroes, it could during coming weeks get a so-called statement of objections from the Commission which sets out its competition concerns.

Oracle would then need to address the concerns. Concessions could either be structural, which would be asset sales, or behavioural which would be changes to its business practices.

The commission has said it is concerned about the impact of the Oracle-Sun deal on the database market, where Oracle competes with Sun’s MySQL database.

MySQL database, which Sun bought for $1 bln just last year, is used to run popular websites operated by companies including Google Inc (GOOG.O), Facebook and Amazon.com (AMZN.O). Its main customer base is small and mid-sized businesses.

Oracle’s database — the top-selling product in the market — is far more robust, allowing companies to quickly access larger quantities of data.

The creator of MySQL, Michael Widenius, and many software activists last week asked the EU to demand Oracle sell MySQL to a rival or give it to a non-profit foundation. [ID:nLJ715578] [ID:nLK368407] [ID:nLN388378]

Steven Nathasingh, managing director of U.S. research firm Vaxa Inc, said one strategic option for Oracle would be to spin off MySQL into a separate firm, but selling it to rivals like Microsoft (MSFT.O) or IBM (IBM.N) would be harder to swallow.

“Sun booked about $200 million in 2008 revenues for MySQL, therefore, any new company will immediately have a running start. Oracle can then strike a preferred alliance agreement with the new company,” Nathasingh said.

“NO”

The deal could fall apart if Oracle is not willing to make concessions demanded by the commission but Kroes has to date only prohibited two mergers.

In June 2007, the Commission blocked an attempt by Irish carrier Ryanair to acquire rival Irish airline Aer Lingus. Kroes also barred the merger of two Portuguese electricity and natural gas companies in 2004.

TIMING

Oracle wants a quick resolution because it says that Sun, the fourth-biggest maker of computer servers, is losing $100 million a month as rivals like Hewlett-Packard (HPQ.N) and IBM poach customers amid uncertainty about the closing of the deal.

Kroes’ term and that of the entire team as well end on Oct. 31, but a caretaker Commission made up of the same people will take over until the end of the year or early next year. Competition decisions will not be affected during this interim period. Kroes will still have the legal powers over competition issues.

Reporting by Foo Yun Chee, David Lawsky, Tarmo Virki; Editing by David Cowell

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