EU warms to Oracle's $7 billion purchase of Sun

BRUSSELS (Reuters) - EU regulators signaled they could clear Oracle Corp’s $7 billion takeover of Sun Microsystems Inc, after the U.S. software company promised measures to ease competition concerns.

Oracle President Charles Phillips speaks during a news conference in Mumbai January 10, 2006. REUTERS/Punit Paranjpe

The European Union’s executive European Commission said it was optimistic a “satisfactory outcome” was possible. It had previously objected to the deal, citing possible competition constraints on Sun’s MySQL database after the takeover.

Sun shares surged more than 9 percent to $9.13 on hopes the development means Oracle will soon close the deal, ending months of delay. Oracle, whose shares rose 2 percent, had agreed to pay $9.50 per share for Sun.

“We’ve gone back to where we were before all these concerns started,” said Jefferies & Co analyst Ross Macmillan. “The stock tells you the market expects it to close with a fairly small spread of risk.”

Clearance of the deal was thrown into question in September when European regulators unexpectedly launched an in-depth probe into the acquisition, two weeks after the deal won U.S. approval without restrictions.

The acquisition will reshape the high-tech landscape by bringing No. 3 software maker Oracle into the hardware business. Sun is the top player in the $17 billion a year market for high-end servers, competing against IBM and Hewlett-Packard Co.

The Commission has until January 27 to clear or block the deal. Its approval would avert a rift with the U.S. Department of Justice.

Oracle promised on Monday to keep the market open for others to make storage engine software for the MySQL database, said that it would be more open than MySQL’s previous owners, and would not ask for commercial licenses from makers of MySQL storage engines for application programing interfaces.

Oracle also said it would invest more in MySQL research and development over the next three years than Sun has, and said it would set up a separate customer advisory board of MySQL users.

The Commission said in a statement that Oracle’s binding contractual undertakings were “significant new facts.”

“Competition Commissioner Neelie Kroes ... is optimistic that the case will have a satisfactory outcome, while ensuring that the transaction will not have an adverse impact on effective competition in the European database market,” it said.

The U.S. Department of Justice said last month the takeover was unlikely to be anticompetitive, after Kroes objected to the deal.

MySQL has been a rare major newcomer to the global database market, dominated by technology heavyweights Oracle, IBM and Microsoft Corp..


Oracle, the world’s biggest database software maker, had to submit final proposals to address the Commission’s concerns by the end of Monday.

A critic of the deal said Oracle’s proposals would not resolve competition concerns.

“This is purely cosmetic, totally ineffectual. Neither storage engine vendors nor ‘forkers’ -- developers of derived versions -- nor enterprise users would have a basis on which to invest in MySQL-related innovation,” said Florian Mueller, a spokesman for MySQL founder Michael Widenius.

Widenius, one of the most respected developers of open-source software, launched an Internet campaign over the weekend to try to line up MySQL users to stop the deal.

He was responding to Oracle mobilizing its big customers to tell the Commission at a hearing last week that the takeover was not anti-competitive.

Oracle also said it would create and fund a customer advisory board “no later than six months after the anniversary of the closing” to provide feedback on MySQL development priorities.

It said it was committed to making appropriate funding available for MySQL’s continued development.

“During each of the next three years Oracle will spend more on research and development for the MySQL Global Business Unit than Sun spent in its most recent fiscal year ($24 million) preceding the closing of the transaction,” Oracle said.

Additional reporting by Jim Finkle in Boston, A. Ananthalakshmi in Bangalore and Tarmo Virki in Helsinki; Editing by Rupert Winchester, Dave Zimmerman