The EU’s decision to formally object to the Oracle/Sun acquisition is yet another twist in this long running saga, but it may prove the most damaging. Back when the EU first announced their intent to take a look at the deal, Larry Ellison made it pretty clear that that he wouldn’t spin-off MySQL to placate the EU (see Ellison: Oracle won't spin off MySQL), but if that was a bluff, then it’s been called. The decision puts the ball firmly back in Oracle’s court as they decide how to respond. I can see three choices, none of which are particularly attractive:
- Oracle can walk away from the entire deal, which would leave Sun in an untenable position. If the deal fails, Sun has few good choices; sell itself at a knockdown price to a competitor assuming there are any buyers, or make massive cuts in its expenditure to better align with shrinking revenues. There may also be some legal implications to walking away as well, depending on the terms of the deal that Oracle struck with Sun back in April.
- Oracle can acquiesce to the EU and sell off MySQL, but as the Motley Fool points out, they would be unlikely to get a fair price given the weakness of their bargaining position. Even if they can get a fair price, the big problem is “who could buy MySQL?” at a price north of one billion dollars. I think you can rule out the likes of Red Hat or Novell, and the more obvious potential suitors such as IBM and Microsoft would have the same problems that Oracle has with the EU.
- Oracle can fight the EU, but this is a high risk strategy, Intel and Microsoft had little luck in this regard, and it’s hard to see Oracle fairing any better. If they lose then they’re back to options (1) and (2). Even if they win it will take time and the victory may be Pyrrhic, I’m not sure how much of Sun’s business will be viable at the end of a protracted legal fight!
Meanwhile, HP and IBM have declared open season on Sun’s customer base and there are no bag limits. Not pretty really, no good choices!
Posted by: Nik Simpson