How Oracle Disarmed EU Criticsby
Oracle edged closer on Dec. 14 to winning approval from the European Union for its long-anticipated acquisition of Sun Microsystems by pledging to take steps to minimize the anticompetitive repercussions of the deal. Oracle (ORCL) made 10 specific "commitments" to support the open-source database software MySQL, which is owned by Sun (JAVA) and competes with Oracle's own database product. After the announcement, EU Competition Commissioner Neelie Kroes said she is "optimistic" that Oracle's Sun acquisition can be completed while protecting competition in the database market. The most influential provision in assuaging regulators' concerns about the proposed acquisition may be one of the least noticed. Amid Oracle's commitments was a pledge to let other technology vendors continue licensing MySQL for use in their products for another five years. Such agreements account for only about $25 million of MySQL's roughly $150 million in annual sales, according to an industry executive familiar with MySQL and with Oracle's negotiations with European regulators. Still, the contracts, which involve a version of MySQL that is not distributed under an open-source licensing agreement, became the focus of EU antitrust scrutiny, the executive says. The scrutiny intensified after discussions with Oracle rivals SAP (SAP) and Microsoft (MSFT), and with Monty Widenius, a founder of MySQL who has been marketing an alternative to the program. The question of whether Oracle would continue making MySQL available for use in other technology companies' software was a stumbling block to the deal as late as Dec. 11, the executive says. "That was the most fundamental concern the EU had," he says. Now, "Oracle has absolutely addressed the concern as stated by the EU." MySQL Developer Opposes TakeoverSAP has said that it has spoken with EU regulators about Oracle's ownership of MySQL and the Java programming language. Microsoft spokesman Jack Evans says the company has "responded to inquiries from regulators in Europe" about the Oracle-Sun deal. Oracle declined to comment for this story, apart from issuing a press release detailing its commitments to the EU. Widenius has written on his personal Web site about his opposition to Oracle's acquisition of Sun. He is also an adviser to the CodePlex Foundation, a group funded by Microsoft to increase collaboration between software vendors and open-source developer communities, according to the group's Web site. MySQL, a Swedish company that Sun bought for $1 billion in 2008, is used by companies that include Google (GOOG), Yahoo! (YHOO), Facebook, and Twitter to help run their Web sites. Oracle is the No. 1 supplier of database software in the world and its products are used by businesses and government agencies to underpin complex computer systems. EU regulators were concerned that Oracle could squelch competition in the database market by owning the top business database software and the most widely used database among Internet companies. By issuing assurances that it would continue to develop and support MySQL, Oracle appears to have put to rest EU regulators' opposition to the deal, issued on Nov. 9. The European Commission released a statement on Dec. 14 saying it is "engaged in constructive discussions with Oracle" about MySQL. The EU has until Jan. 27 to approve the deal, which has already passed regulatory muster in the U.S. "pretty good concessions"Many analysts and industry executives focused on Oracle's pledge to spend at least $72 million in the next three years to develop MySQL and on the company's commitment to continue releasing open-source versions of the software with the latest technical enhancements. "Those are pretty good concessions," says Larry Augustin, CEO of software company SugarCRM, a MySQL customer. Jay Lyman, an analyst at industry consultant the 451 Group, says "Oracle is going a bit further than Sun in giving timelines for continued support of MySQL," Jim Zemlin, executive director of the Linux Foundation, says Oracle is "making commitments that [technology vendors] normally wouldn't have to make" when buying another company. Some open-source software developers had said they feared Oracle could curtail investments in MySQL after buying Sun and thereby eliminating a free or low-priced alternative to commercial database software from Oracle, Microsoft, and IBM (IBM). Most of the estimated 12 million copies of MySQL in use are licensed under the General Public License, which lets companies freely use and modify its code. Most of Sun's estimated $140 million to $150 million in annual MySQL revenue comes from companies that use the GPL version of the database but pay Sun for additional features and technical support. Oracle's $30 billion takeover bingeAbout $20 million to $25 million of MySQL's revenues come from several thousand companies, including computer security software vendors Symantec (SYMC) and F5 Networks (FFIV), that pay Sun to include a commercial, non-GPL version of MySQL in their products, according to the executive familiar with MySQL's business. Oracle said it would continue to offer those agreements on the same terms that Sun had purveyed until Dec. 10, 2014. Shares of Oracle rose 53¢, or 2.3%, to close at 23.31 on Dec. 14. Oracle reports its fiscal second quarter earnings on Dec. 17. Sun Microsystems shares rose 92¢, or 11%, to close at 9.28. Oracle, which has spent $30 billion to acquire nearly 60 companies since 2005, has prevailed over regulators before, most notably in its takeover of PeopleSoft, which began the company's acquisition binge. The Sun buyout has now dragged on for eight months since it was announced on Apr. 20. Oracle thought little of the EU's objections. In a Nov. 9 statement, the company said the arguments showed "a profound misunderstanding of both database competition and open-source dynamics." By engaging the EU on its own terms, Oracle may finally be close to sealing its problematic deal.