Mergers & Acquisitions on Ulitzer

The United States Senate waded into the Oracle-Sun imbroglio Tuesday.

Fifty-nine senators from both sides of the aisle led by one-time presidential hopeful John Kerry (D-Mass) and perennial presidential pretender Orrin Hatch (R-Utah) signed a letter to the European Commission asking it to wrap up its investigation of the Oracle-Sun merger as soon as possible pleading Sun's precarious financial position and its inability to continue to employ thousands of people endlessly under current conditions.

The senators - there are only a hundred of them - tried reasoning proportion with the EC saying, "It is our understanding the Commission is concerned about competition in the database software market. However, we have been informed by Sun Microsystems that their subsidiary, which competes in this specific market, generates only €17 million in revenue and that the same market has competitors with capitalizations of tens of billions of Euros."

In an explanatory statement accompanying the letter Kerry said, "The deal between Oracle and Sun was announced in April and seven months have gone by without a resolution. Continued delay of the European Commission's decision on clearance threatens thousands of American jobs, so we felt compelled to ask for a speedy resolution. The EC is within its sovereign rights to set the rules for operation in its market, but with our Department of Justice having made a compelling case that the merger does not pose a threat to competition, it is fair to ask the EC for the basis on which a delay on decision making is warranted and to make a decision one way or the other."

Hmm. "One way or the other."

Odd thing about the delay is that Oracle, which has complained to just about everybody about the EC's foot-dragging, just asked for and got more time ostensibly to develop its arguments.

What use six more days will be to Oracle is a question. The regulator seems intent on blocking the merger unless Oracle divests MySQL, which - come to find out from the senators' letter only generates a pissant $25 million in revenue, half of what was generally supposed when Sun bought the thing for - be still, my heart - a frigging billion dollars.

Senator Hatch's statement was a bit testier and mirrors more accurately American public option.

"I have become increasingly concerned about the growing body of evidence that foreign regulatory agencies are unfairly using their review processes to impede the business of American corporations," he said. "This transaction has been thoroughly reviewed by the United States Department of Justice, which has decided to take no action. Therefore, I hope the EC will quickly conclude their investigation into this transaction."

The Senate's letter is the second time Washington has commented on the EC's intransigence on the Oracle-Sun merger.

On November 9, the day Sun got the EC's reportedly 155-page statement of objections, the Justice Department issued a statement saying that it had looked at the MySQL issue and concluded that "the proposed transaction is unlikely to be anticompetitive."

There are plenty of open source and proprietary databases, it said, and so the consumer is unlikely to be harmed. Plus there's a large community of MySQL developers and users with the expertise to maintain, improve and support it.

Such a thing seems to make no never mind with the EC, which thinks Oracle will adopt a licensing and development strategy that prevents MySQL from cannibalizing its revenues even though hasn't happened yet and they're in two separate markets, as Oracle has maintained.

The DOJ's tone was civil - and although its statement hints - as many people surmise - that the EC is bent on a political agenda having little to do with antitrust issues, relations between the two bodies have yet to degenerate into the prickly tension that marked their affairs after the EC blocked the GE-Honeywell merger a few years back.

Still with each passing day the EC, widely seen as a victim of misguided principle, makes itself a bigger target for the critics who see it as a protectionist haven for every malcontent competitor who can't cut it in the marketplace; who wonder what bright boy made it judge, jury and executioner; who are uncomfortable with its 16^th century Star Chamber-like level of secrecy and its guessing game set of rules; and who question its objectivity, which was recently criticized by its own overseer after reviewing the Intel antitrust case.

European lobbyist Florian Mueller, who's working for MySQL creator Monty Widenius on opposing Oracle's acquisition of MySQL - though both men made a killing when Sun bought MySQL for a ludicrous billion dollars - claims the Senate gambit isn't going to work and that the "revenues argument is pointless."

"Twitter had zero revenues last year but no one could argue it wasn't a major force in the market," Mueller said, suggesting that the 59 senators should send Larry Ellison a letter asking him to commit to divesting MySQL so he can close the transaction quickly.

"Oracle could have a deal any day of the week by giving up MySQL," Mueller said.

However, John Briggs, an antitrust expert and an old Brussels hand, told Reuters the pressure from the US senators could affect the EC's decision. In his opinion it "will have a hard time ignoring this."

OK, so other than Thanksgiving why did Oracle really want more time?

Apparently to bring pressure like it just did with the senators.

And it got the hearing that was scheduled for November 25, the day before Thanksgiving, shifted to December 10 according to Reuters.

Apparently Oracle could have asked for more than six days. Apparently it was the one who asked for the six-day grace period. The God of the Book of Genesis created the world in six days. Does Larry actually expect to change the EC's mind in an extra six days? God, people say, had an easier job.

Apparently Oracle blew through a November 20 deadline to come up with a remedy. And it now has at least until November 30 to come up with one and avoid an automatic three-week extension of the EC's final decision, whose deadline is now January 27 instead of January 19. So if Oracle doesn't come up with an acceptable solution we could be talking about a final decision on February 17, close to 10 months after Sun and Oracle cut their deal. Meanwhile, the delay is said to be costing Sun a $100 million a month.

Former Ellison lieutenants swear that Larry ain't as perturbed about the EC's delay as Oracle lets on, that he ain't gonna pay the nominal $7.4 billion ($9.50 a share) he offered for Sun (nominal less the money Sun has in the bank) and that he's going to renegotiate the price down complaining that Sun has been materially damaged by the EC's dicking around.

They also say that Ellison could give a hoot about MySQL - it would be nice to have and he doesn't want a serious competitor to have it - but it's not the reason he's interested in Sun. Java, Sparc, Solaris and the Sun installed base is what he's after.

It's hard to imagine Ellison backing off from this fight but, if he wearies of it, he might offer to dump MySQL into an open source project or foundation like, say, Eclipse, or maybe he just needs six days to cut a handshake deal with a company that won't do much at all with MySQL and distancing Oracle from the licensing control that seems to have the EC so perturbed.

It can't control who Oracle might spin it off to.

By way of revenge, if it goes to a player, odds are Oracle will then do whatever's possible to stomp that sucker flat - even if MySQL isn't a direct competitor of Oracle's database.

That said here's the Kerry-Hatch letter:

Chargé d'Affaires Angelos Pangratis

Acting Head of Delegation
Delegation of the European Commission to the United States
2300 M Street, NW
Washington, DC 20037

Dear Chargé d'Affaires Pangratis:

As fellow government officials committed to the principle that competition is the cornerstone of healthy economic growth, we would like to take this opportunity to share our thoughts with you as to the proposed acquisition of Sun Microsystems, Inc. by Oracle Corporation.  In addition, due to Sun Microsystems' deteriorating financial condition and the possible negative effect on employment of the company's workforce, we respectfully request the European Commission expedite the completion of its investigation into this transaction.

The United States Department of Justice, after an intensive investigation, closed its inquiry into this transaction without taking any action. In fact, the Justice Department did not find documentary evidence that this acquisition would harm competition. We recognize that the European Commission has a sovereign right to thoroughly investigate transactions where corporations utilize the European Union's marketplace. Further, it is our understanding the Commission is concerned about competition in the database software market. However, we have been informed by Sun Microsystems that their subsidiary, which competes in this specific market, generates only €17 million in revenue and that the same market has competitors with capitalizations of tens of billions of Euros.

Unfortunately, Sun Microsystems' financial position has become more precarious and the Commission's inquiry has continued. Some have raised concerns over the company's ability to continue to employ its thousands of workers. Accordingly, we respectfully request the European Commission complete its investigation of this transaction as quickly as possible.

Thank you for your attention to this matter.

See http://kerry.senate.gov/cfm/record.cfm?id=320244 for all the signatures.

• Oracle Says ‘No Compromise’ on MySQL: Reuters
• So Who All’s Going to the Oracle-Sun Hearing?