Eye on Oracle

Aug 30 2011   6:51PM GMT

Feds helped Oracle complete Sun acquisition

Mark Fontecchio Mark Fontecchio Profile: Mark Fontecchio

Wikileaks published a document last week revealing that the U.S. government assisted Oracle with the Sun acquisition, mainly by approving it themselves and then pressuring the European Union to do the same.

The 2009 document is a cable from Christopher W. Murray, who was then deputy chief of the U.S. Mission to the European Union. The mission is an office meant to maintain diplomatic relations between the U.S. and the E.U.

In the cable, sent to various other federal agencies such as the Department of Justice, Murray states that the U.S. wanted to “prevent a divergent outcome” in regards to the DOJ’s and EU’s reviews of the Oracle-Sun merger. The DOJ had approved the merger in August 2009. Two months later, in October, the EU was still examining the merger. The EU’s major concern was that Oracle’s acquisition of MySQL through the Sun merger would quash competition in the database market. According to the cable:

Oracle stated that the (European) Commission is pressuring it to divest MySQL as a condition for approval of the merger. Oracle claims such a divestiture will destroy the merger for two reasons: 1) Oracle’s business case for the merger depends on keeping MySQL to make the merger economically viable, since Oracle plans to expand the market for MySQL and its associated support contracts; and (2) Oracle would be forced to take a huge accounting loss if it sold MySQL, since it believes that Sun overpaid in paying nearly $1 billion for MySQL in 2008, and it would only be able to sell it for a fraction of this sum.

As a result:

DOJ/Antitrust views this matter as a high priority. Its senior officials and investigative staff are currently engaging productively and intensely with their (EU) counterparts, and are in close touch with Oracle and Sun, in the hopes of preventing a divergent outcome.

It appears from the summary of the cable that the feds had self-interest involved, mainly because of the potential of job losses or gains depending on whether the merger went through, and also the DOJ’s desire to have its merger approvals not contradicted by another global agency.

Oracle says it is unwilling or unable to make certain divestitures to satisfy the Commission’s concerns, and that merger failure will cause Sun to go bankrupt. Sun announced October 20 that it is cutting 3000 jobs over the next year, as a result of delays in receiving merger clearance from the Commission.

It’s another question whether Oracle helped pressure the feds into helping their cause. The DOJ likely did not want a merger that it approved failing to go through and then causing further job losses and the bankruptcy of a multibillion dollar company in Sun. Needless to say, three months after this cable went out, the European Commission approved the merger without conditions.

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