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Oracle and Sun

I’m sure this made Larry’s day:

The European Commission has opened an in-depth investigation under the EU Merger Regulation into the planned acquisition of US hardware and software vendor Sun Microsystems by Oracle Corporation, a US database and application software company. The Commission”™s initial market investigation indicated that the proposed acquisition would raise serious doubts as to its compatibility with the Single Market because of competition concerns on the market for databases. The decision to open an in-depth inquiry does not prejudge the final result of the investigation. The Commission now has 90 working days, until 19 January 2010, to take a final decision on whether the concentration would significantly impede effective competition within the European Economic Area (EEA) or a substantial part of it.

Via.

The area of concern is Sun’s rather odd acquisition of MySQL, an open-source database product. The details behind the EU case can be found here.

I never understood the driver for Sun to get into the open-source database space. I also did not think that it would become a point of contention in a merger scenario.

Sun’s first-quarter results showed a decline of 25 per cent in revenue. And shares in the company are trading well below Oracle’s takeover offer which suggests that investors are worried that the takeover may be in trouble.

Larry Ellison confirmed that  all of the uncertainty around the deal is costing Sun about $100 million US a month. The company has been forced to lay off thousands in a restructuring plan as a result of a mass exodus of Sun customers.

The European roadblock, significant migration of customers, mass firings and dwindling revenue make it increasingly unlikely that Oracle will ever achieve its stated investment goals with the $7.5 billion deal.

Oops.

Of course, there is always another point of view.

Microsoft and the European Commission

Mitchell Baker is the chairperson of the Mozilla Foundation. The Mozilla Foundation is the not for profit organization that brought innovation to the web browser market. Get Firefox here.

She made some interesting points on her blog as she reflected on the proceedings of the European Commission against Microsoft.

The statement of objections states the issue very clearly:

… the Commission sets out evidence and outlines its preliminary conclusion that Microsoft”™s tying of Internet Explorer to the Windows operating system harms competition between web browsers, undermines product innovation and ultimately reduces consumer choice.

Mitchell has some pretty strong thoughts about the Commission’s statement of objections:

In my mind, there is absolutely no doubt that the statement … is correct. Not the single smallest iota of doubt. I”™ve been involved in building and shipping web browsers continuously since before Microsoft started developing IE, and the damage Microsoft has done to competition, innovation, and the pace of the web development itself is both glaring and ongoing. There are separate questions of whether there is a good remedy, and what that remedy might be. But questions regarding an appropriate remedy do not change the essential fact. Microsoft”™s business practices have fundamentally diminished (in fact, came very close to eliminating) competition, choice and innovation in how people access the Internet.

She also expresses another interesting point of view:

In the mid-1990s Microsoft began developing Internet Explorer in response to the success of the product known as Netscape Navigator. In this period Microsoft developed a fine product (particularly the version known as IE 4). Kudos to Microsoft for this. Microsoft also promoted IE through activities that the US Department of Justice and the U.S. Courts determined to be illegal. As result, Internet Explorer ended up with well over 90% market share. Once this happened, Microsoft stopped browser development; even disbanding its browser team. The product stagnated and then became a prime vector for bad actors to inject spyware onto consumers”™ computers. There was no meaningful response or innovation from Microsoft.

And the role of open source software?

Equally important, the success of Mozilla and Firefox does not indicate a healthy marketplace for competitive products. Mozilla is a non-profit organization; a worldwide movement of people who strive to build the Internet we want to live in. I am convinced that we could not have been, and will not be, successful except as a public benefit organization living outside the commercial motivations. And I certainly hope that neither the EU nor any other government expects to maintain a healthy Internet ecosystem based on non-profits stepping in to correct market deficiencies.

Her post is worth reading.