Sun challenges EC to approve Oracle deal

Published on Saturday 14 November 2009 12:09

ORACLE is to take on the European Commission in a last-ditch bid to have its planned £4.5 billion takeover of Sun Microsystems approved.

The American technology giant is assembling an "away team" of key senior executives led by Oracle president Safra Catz, and possibly including founder and chief executive Larry Ellison, for a hearing in Brussels on 25 November,

the day before the start of the US Thanksgiving holiday.

The plan to combine Oracle and Sun, each with a significant presence in Scotland and extensive business in Europe, needs the blessing of European antitrust regulators.

US regulators have approved the deal but negotiations in Europe have escalated into a public row, and the merger now hangs in the balance.

Last week Ellison claimed commissioners displayed a "profound misunderstanding" of competition in the software market. A commission spokesman described his criticism as "facile and superficial".

European regulators say any takeover gives Oracle control of Sun's MySQL database program, a low-cost alternative to other programs sold by Oracle, Microsoft and IBM.

They have until next January to rule on the deal amid concerns it would lead to higher prices and less choice by inhibiting competition.

Oracle has vowed to press for approval but antitrust expert Andrew Gavil said Europe has a history of supporting open-source software more strongly than US officials. A worst-case scenario is that Oracle walks away but David Hilal, of FBR Capital Markets, said: "We believe it more likely Oracle's acquisition of Sun goes through."

Sun continues to lose more than 60 million a month. Its Linlithgow plant employs 500 people but appears to have escaped 3,000 planned job cuts announced last month, 10 per cent of the global workforce.

The beleaguered software company reported a loss of 1.32bn for the year ending 30 June, with many key banking clients hit by the recession.

Analyst Rob Enderlesaid Sun's latest actions were a case of the company "just trying to stay alive".

He warned: "Sales have dropped to almost nothing, pending the acquisition and so they don't have a lot of revenue coming in. This is one of the problems of acquiring a company that is already in trouble.

"In such a case a takeover has to happen very crisply or the company will spiral down. If it continues its downward path much longer, Oracle might back out of the deal."

If the deal finally does go through, Sun's West Lothian operation should still play a part in Oracle's plans.

Linlithgow ceased manufacturing last December but still provides a range of support services. One senior industry insider said: "Oracle are very keen to get this integration happening.

"If the takeover could be achieved soon to prevent Sun haemorrhaging more money then the new set up can develop and deliver some cool technology to a waiting marketplace."