Europe May Save Oracle from Sun Deal

Oracle says it will “vigorously oppose” a European Commission ruling that its $7 billion acquisition of Sun Microsystems would dampen competition and technology development by putting the MySQL database in the hands of its primary rival.

The strong language aside, some solution providers and vendors around Silicon Valley are speculating that this is precisely the opportunity that Oracle CEO Larry Ellison has been waiting for to get out of what some are describing as a potential “Waterloo” deal.

Oracle practically stole Sun out from underneath IBM when Big Blue’s acquisition talks stalled. Oracle’s $5.5 billion package includes stock and debt assumption that was slightly less than the IBM offer. Oracle’s bid, however, had the benefit of getting to completion faster. The only thing that stood in Oracle’s way was regulatory reviews.

On paper, Oracle’s acquisition of Sun was curious. Oracle is a software company through and through. Sun is a jumbled mess of high-end hardware, mixed proprietary and open-source software, and professional services. The deal would give Oracle access to servers, storage and security solutions that tie nicely to its existing software portfolio, as well as ownership of the Java programming language. It also has things that wouldn’t mesh nicely, such as the MySQL database and SPARC processors.

Oracle has made statements and taken actions reflecting its commitment to seeing the Sun deal through, including severing ties with its server ally, Hewlett-Packard. Ellison has even gone so far as to say that he thinks Oracle could become a player in the processor and chip market.

Since then, Oracle has discovered that the dog it bought has a few fleas. Oracle announced that Sun is losing $100 million a month due to the uncertainty of its future caused by the extensively long regulatory review process. U.S. authorities cleared the merger last August, but the European Commission has been taking its time.

Sun’s mounting losses and precarious competitive position to x86 hardware vendors, many speculate, could cause Ellison & Co. to rethink the wisdom of the acquisition and use the European ruling as air cover to back out. If that should happen, observers say, Sun would be left out to dry with a much damaged valuation. Sun’s channel, they add, would be ravaged by the after-effects.

Nothing is certain until it’s done, and Larry Ellison has a history of both pulling off miracles and surprises.

What do you think of the Oracle-Sun drama? Should Oracle use the EC decision to back out? Is there a better fit for Sun elsewhere?