EU objects to Sun-Oracle deal

European antitrust regulators have formally objected to Oracle Corp.'s $7.4-billion US takeover of Sun Microsystems Inc., citing concerns that the takeover could hurt competition in the database market.

The European Commission sent a statement of objections to Sun on Monday. At the heart of the issue is Sun's MySQL division, which makes the most popular open source database software. Oracle is the market leader in proprietary database software — the kind that is protected by copyright.

The EU launched a probe of the proposed merger in September, a month after U.S. regulators gave the deal their blessing. The EU competition commissioner's objection throws into question the merger plan announced in April. 

Oracle quickly responded that the European concerns are baseless. The EU's objection "reveals a profound misunderstanding of both database competition and open source dynamics," the company said in a statement.

"It is well understood by those knowledgeable about open source software that because MySQL is open source, it cannot be controlled by anyone. That is the whole point of open source."

Oracle also said there are "at least eight strong players" in the database market — a point echoed by the U.S. Justice Department on Monday when it again defended its clearance of the merger as being "unlikely to be anticompetitive."

Sun pins hopes on Oracle

The last time EU regulators objected to a major acquisition that American regulators had cleared was General Electric's purchase of Honeywell in 2000. The EU ended up blocking the deal in 2001. 

Sun bought MySQL last year for $1 billion US. It has struggled for years to turn itself around and arranged for its acquisition by Oracle as a way of giving itself new life.

The uncertainty caused by the EU probe is costing Sun $100 million US a month, Oracle CEO Larry Ellison has said. When Sun released its first-quarter results last week, it revealed a revenue decline of 25 per cent, as competitors IBM and HP, among others, benefited from customer unease over Sun's future.

Investors also appear worried that the takeover may be in trouble. Sun shares are trading well below Oracle's takeover offer of $9.50 US a share. Sun stock traded Tuesday morning at $8.31 US, up seven cents from Monday's close.

EU Competition Commissioner Neelie Kroes has earned a reputation as a fierce supporter of open source technology and has shown no fear of flexing her office's muscle. Earlier this year, the EU fined Intel more than €1 billion for anticompetitive practices.

The European Commission must decide by Jan. 19 whether to approve or reject the Sun-Oracle deal.