Summary
This decision by EU Commission to scrutinize and investigate the merger in depth was not totally unexpected as the author suggests. See my original analyzes dated 23rd and 29th July.Given EU's strong stance relating to Microsoft's Windows it was widely expected.
This will seriously damage Sun Inc.'s precarious market/financial position and considerably reduce the chances of a successful and profitable merger.
It will cast serious doubts on any major future merger/takeover bids by Oracle.
Analysis
1. In my original analysis dated 23rd July and the sequel to it dated 29th July I did mentioned the serious possibility of major difficulties in merger due to antitrust issues relating to business/technology/product integration between Oracle and Sun.
I believe this was one of the major reason why IBM pulled out of their efforts for a takeover bid for SUN earlier on in anticipation of a major antitrust suite by various regulatory bodies as mentioned in my analysis dated 29th July.
2. The US administration's approval of the deal indicates yet another rift between the EU and the USA re antitrust and trade related issues.This is highlighted by long standing wangling between them re BOEING Corp. and Airbus Industries for example.
3. MySQL from Sun is hardly a major database competitor compared to IBM's DB2 and products of HP and Oracle in relating to scalability,performance etc.
Given the small annual turnover (USD. 70 million worldwide -14th in the league of database providers ),the reasons given by the EU re reduction of choice and lack of competitiveness re price etc. due to Sun's open source database software MySQL is a red herring.Main reasons are a strong fear of decline in competitiveness and creativity in the software/database markets due to reduction in current three main players such as IBM,Oracle and Microsoft Inc. which hold 85% of market in database software by revenue.
4. It is also very likely to reduce number of serious Open Source vendors like Sun and Red Hat's Linux in already a thin market place catering for SME's and many Webservices/SOA related suppliers.Sun's original leadership in promoting and help establishing Java J2EE international standards is well recognized in the industry.EU quite rightly fears lack of new product innovativeness/independence under Oracle's umbrella.Oracle is bound to call for product integration with Sun's mainstay products and ideas due to cost cutting and rationalisation.
5. Lastly,but not the least is the fact that Sun being one of the four main players in the hardware enterprise server market with IBM and HP who have reduced Sun's market share by carrying out aggressive advertising campaigns and due to customers worried about Sun's future in this market.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
