Oracle fights EU's opposition to bid for Sun
by WSJ | 11th-Dec-09 17:01
Oracle Corp. (ORCL) is digging in against the European Union's objections to its bid for Sun Microsystems Inc. (JAVA).
In a closed-door hearing that began Thursday and is to continue Friday, and in legal papers that haven't been made public, the U.S.-based database giant is mounting a broad attack on the EU's proposition that Sun's MySQL is an important competitive force in the database industry that market-leader Oracle shouldn't be allowed to own.
Oracle contends that the EU's executive arm, the European Commission, misrepresented the opinions of database users and gave a "distorted view" of the market by "selectively" quoting from surveys as it put together its case.
U.S. authorities have cleared the $7.4 billion bid, but the EU's concerns have delayed it.
Complaints that the EU is selective in its use of evidence are common fare from companies that find themselves in the regulator's cross hairs. Recently, Intel Corp. (INTC) claimed the EU ignored exculpatory material in its antitrust finding and EUR1.06 billion ($1.56 billion) fine against the chip maker.
In a legal filing reviewed by The Wall Street Journal, Oracle cites two customers whose survey responses were used by the EU as evidence against the deal, though they wrote letters to the commission to support it.
Another database user, Deutsche Borse Group, told two commission staffers in late November that it was "concerned by the implication that Deutsche Borse's views on the transaction, generally, are negative." According to Deutsche Borse's minutes of the conversation, cited in the Oracle filing, it said "we do not see a negative impact of the Sun/Oracle transaction" so long as Oracle keeps developing MySQL. (Deutsche Borse didn't respond to a request for comment.)
The Oracle filing also cites several other customers who told the EU in market surveys they don't believe the deal is a problem, or that they would have other choices if Oracle manages to kill MySQL. A "great majority of customers do not in fact oppose" the deal, Oracle says. It brought eight to Thursday's hearing to back its view, and it says more than 200 are writing letters.
Of course, the Oracle filing isn't a dispassionate assessment of the data in the EU's analysis. It doesn't present complete, aggregate figures of survey responses, nor does it make the underlying surveys available. Oracle's quotations of the survey responses couldn't be verified.
The commission's antitrust spokesman, Jonathan Todd, didn't address Oracle's claims but said, "The whole point of the commission's investigative process is to allow parties ample opportunity to explain their positions."
In reviewing transactions, the commission sends out questionnaires and solicits inputs from assorted competitors in the market. From those responses, and other data, it determines whether a deal threatens competition.
In September, the commission said it was worried that Oracle's bid could squelch MySQL; last month, it filed a so-called statement of objections, which isn't made public, that laid out its arguments.
The EU has until late January to make a final decision. Blocking a deal is rare; more commonly, the two sides negotiate concessions that lead to a green light. But there haven't been fruitful talks on a possible remedy.
Thomas Vinje, a lawyer for Oracle at Clifford Chance LLP, said he was "extremely happy" with the progress of Thursday's hearing session.
The hearing is to continue Friday with presentations from Microsoft Corp. (MSFT) and SAP AG (SAP), both of whom oppose the deal, and Michael "Monty" Widenius, one of MySQL's founders. Mr. Widenius has warned that Oracle would starve MySQL of the resources needed to develop the product as a competitor to Oracle's own database.
MySQL began life as an open-source database in the 1990s, developed by a Swedish company. Sun bought it last year for $1 billion. The database was initially geared to lower-end uses such as supporting Web sites, though its abilities have expanded. Facebook, for instance, stores users' pages in a MySQL database. Oracle's namesake database is heavy-duty software intended for applications such as processing payroll or bank transactions.
A key piece of the antitrust equation is whether MySQL, which can be downloaded free of charge, has become--or will become--robust enough to compete against Oracle.
In one of its few public statements about the deal, the commission said it determined that Oracle and MySQL "compete directly in many sectors of the database market."
But the Oracle filing quotes several customers who said practically the opposite in response to the EU's market survey. Vodafone Group PLC (VODPF) said it "does not consider that Oracle's database offerings constitute direct substitutes to Sun's offerings." McAfee Inc. (MFE) also said the two don't "constitute direct substitutes." As did General Electric Co. (GE), which added that while "both parties' offerings may on the face of it share some functionality, they are qualitatively different." Said Fujitsu Services Ltd.: "They operate in different markets."
Representatives for those customers either declined to comment or didn't immediately respond to requests for comment.
Another question is whether, if Oracle kills off MySQL, other products could move in as substitutes and thus alleviate anticompetitive effects.
In its statement of objections, the commission says two possible MySQL alternatives, Ingres and PostgreSQL, "are not currently seen as able to fully replace the competitive constraints posed by MySQL." But the Oracle filing cites five customers from the EU's survey who say PostgreSQL is acceptable. "We would most likely have chosen PostgreSQL if MySQL was not available," said one, Nasdaq OMX Group Inc. (NDAQ)