Oracle won its protracted legal disagreement with the European Commission Jan. 21 when the agency’s antritrust regulators approved the company’s $7.4 billion acquisition of Sun Microsystems.
The world’s second-largest software maker now can do business combined with Sun in the 27-country European Union. Oracle sells more than 20 percent of its software in the European sector, so the commission’s approval was urgently needed for the deal to be completed.
It took more than five months for the EC to execute due diligence before deciding that Oracle’s ownership of a key Sun asset, the popular open source MySQL database, would not be a detriment to free trade and continued development.
There was no immediate reaction from Sun or Oracle. However, the Redwood City, Calif.-based database and middleware provider was confident enough about the sanction that on Jan. 20 it called a news conference for Jan. 27 to unveil its “Oracle+Sun” strategy for 2010 and beyond.
Oracle is still awaiting similar sanctions from Russian and Chinese regulators. Both jurisdictions have said they would wait until the EC’s decision before making their own determinations. Oracle has said it also expects to obtain approvals in those countries.
The EC said in a statement to the press that “after an in-depth examination, launched in September 2009, the Commission concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.”
The No. 1 sticking point for months has been MySQL, an open-source database that Sun bought for $1 billion two years ago. The EC has been withholding approval of the acquisition since August 2009, seeking some kind of assurance that MySQL, which originated in Finland and Sweden, will be allowed to innovate and compete fairly in the IT marketplace.
That Oracle’s own proprietary database potentially can compete with MySQL in some markets is seen by many industry people as a conflict of interest. Oracle CEO Larry Ellison contends that MySQL does not compete directly with his company’s high-margin databases, but a large number of people working in relevant fields disagree.
EC ‘Satisfied That Competition Will Be Preserved’
“I am now satisfied that competition and innovation will be preserved on all the markets concerned. Oracle’s acquisition of Sun has the potential to revitalise important assets and create new and innovative products,” EC Competition Commissioner Neelie Kroes said in the Jan. 21 statement.
The EC said that “athough Sun’s share of the database market in terms of revenue is low, as users of MySQL can download and use the database for free, given its open source nature, the Commission’s investigation confirmed MySQL’s position as the leading open source database. The Commission’s investigation therefore focused on the nature and extent of the competitive constraint that MySQL currently exerts on Oracle and whether this would be affected by the proposed transaction.
“The Commission’s in-depth investigation showed that although MySQL and Oracle compete in certain parts of the database market, they are not close competitors in others, such as the high-end segment,” the EC said.
EC: PostgreSQL a Credible Alternative
The EC also pointed to the open-source PostgreSQL database as a “credible alternative to MySQL, which could be expected to replace to some extent the competitive force currently exerted by MySQL on the database market. In addition, the Commission found that ‘forks’ [branches of the MySQL code base], which are legally possible given MySQL’s open source nature, might also develop in future to exercise a competitive constraint on Oracle in a sufficient and timely manner.”
The open-source community, which mounted a brisk email protest campaign to the EC last month, nonetheless was generally resigned to accepting the fact that Oracle was going to succeed.
“Oracle still needs clearance from the Chinese and Russian antitrust authorities, and it’s a matter of respect not to consider this process finished until those major jurisdictions have also taken and announced their decisions,” Florian Mueller, a longtime open source activist and representative of Michael “Monty” Widenius, the Finnish-born creator and lead developer of MySQL, told eWEEK.
“The EC’s reasoning has to be reviewed when all the details of the decision are known, but it seems to be a decision based on wishful thinking for the future more so than anything else. PostgreSQL has been around for decades without having had its mainstream breakthrough, so the EC can’t seriously claim that PostgreSQL could replace MySQL as a competitive force,” Mueller said.
“Forks (derived works based on an existing open source project) are a legal possibility but there’s no reason to assume that any MySQL fork, or even a number of such forks collectively, could threaten Oracle to the extent that MySQL could.”
During its discussions with the EC, Oracle set down a 10-point list of promises regarding the stewardship of MySQL on Dec. 14, 2009. While the open source code remains available to anyone under the GPL license, Oracle will own the copyrights to any commercial version or feature of the database.
Mueller isn’t sure about the legal viability of those promises.
“Oracle’s promises are not legally binding per se, and even if they were, they wouldn’t have any noteworthy pro-competitive effect. I can’t think of a single bad thing, short of discontinuing the product immediately, that Oracle couldn’t do while still complying fully with those promises in a legal sense,” Mueller said.
Oracle Must Stop the Bleeding at Sun
Roger Burkhardt, president and CEO of competing open source database Ingres, told eWEEK that “Oracle is going to reshape the MySQL business and channel it in ways that protects its proprietary software business and supports its move into hardware.”
Evidence of this is already out there, Burkhardt said.
“MySQL has removed the migration assets from their Web site that would support a move from Oracle to MySQL. It was removed in recent weeks to reduce choice for their customers before the deal was approved or closed,” Burkhardt said. “Oracle clearly wants to take no risk in cannibalizing their Oracle DBMS business, even though MySQL is a much less-capable product.”
Burkhardt also said that he believes MySQL has stopped reselling and promoting other products based on MySQL that are competitive with Oracle’s database offerings.
“The good news is there is a proven alternative to Oracle’s database,” Burkhardt said. “Ingres has the technology, migration tools, and global partners to support smooth migrations from proprietary databases to the benefits of open source … Ingres customers are running mission critical applications in 59 countries.”
The EC sanction basically saved Sun’s skin, analysts say. Ellison said publicly last fall that Sun was losing about $100 million per month while the EC was doing its research.
“Right now, Sun is the equivalent of a patient excessively bleeding from a major artery,” Enterprise Strategy Group Senior Analyst Brian Babineau told eWEEK. “Customers aren’t purchasing their products because of the unknown.
“Oracle will make some statements about the unknown — the most important from my perspective is its plans for My SQL — but I really want to know how good of an ER doctor they will be. Once they announce their plans, what actions are they going to take? Kill products, invest in products, integrate products with their own? They have to stop the bleeding.”
Go here to read the EC’s complete statement [various languages].
Editor’s note: This story has been updated with additional commentary from database industry sources.