M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Thursday, October 22, 2009

Oracle Fiddling While Sun Burns?

MySQL, an afterthought in Oracle's decision to buy Sun last April has turned into a major obstacle with the EU Competition Commission standing in the way over the fate of the technology.  According to PC World representatives from Oracle met with the commission yesterday and, well, it didn't go well. 

In a meeting with Oracle President Safra Catz in Brussels on Wednesday, Competition Commissioner Neelie Kroes "expressed her disappointment that Oracle had failed to produce, despite repeated requests, either hard evidence that there were no competition problems or, alternatively, proposals for a remedy to the competition problems identified by the Commission," a Commission spokesman said.


Meanwhile Sun's sales have been declining as rivals IBM and Hewlett-Packard take advantage of the uncertainty around Sun's business with aggressive migration plans. Oracle CEO Larry Ellison said last month that Sun is losing $100 million a month while it waits for the deal to close.

He has also asserted that Oracle's database competes with Microsoft's SQL Server and IBM's DB2 products, and not with MySQL.

Sun announced a big round of layoffs yesterday, citing the additional time it is taking to close the deal with Oracle. The company said it will lay off 3,000 workers around the world over the next 12 months. Oracle is widely expected to make deeper job cuts if the deal closes.

Although the delay is expensive, short of reaching a deal with the Commission, there's no real end in sight for Oracle.  The Merger Agreement (Sec. 8.01(b)) won't permit Oracle to walk for antitrust reasons until at least April of 2010.  That's six months, or $600 million in losses away. 

In Section 6.10 (below), the parties included what appears to be relatively modest antitrust language. 

(b) Without limiting the generality of the undertakings pursuant to this Section 6.10, the parties hereto shall (i) provide or cause to be provided as promptly as practicable to Governmental Authorities with regulatory jurisdiction over enforcement of any Antitrust Laws (each such Governmental Authority, a “Governmental Antitrust Authority”) information and documents requested by any Governmental Antitrust Authority or necessary, proper or advisable to permit consummation of the transactions contemplated by this Agreement, including preparing and filing any notification and report form and related material required under the HSR Act and any additional consents and filings under any Antitrust Laws as promptly as practicable following the date of this Agreement (but in no event more than fifteen (15) Business Days from the date hereof except by mutual consent confirmed in writing) and thereafter to respond as promptly as practicable to any request for additional information or documentary material that may be made under the HSR Act and any additional consents and filings under any Antitrust Laws; (ii) use their reasonable best efforts to take such actions as are necessary or advisable to obtain prompt approval of consummation of the transactions contemplated by this Agreement by any Governmental Authority; and (iii) use their reasonable best efforts to contest on the merits, through litigation in United States District Court and through administrative procedures in relation to other Government Authorities, any objections or opposition raised by any Governmental Authority;provided, however, that nothing in this Section 6.10 shall require Parent to appeal any Order from a Governmental Authority.

What are "reasonable best efforts" anyway?  The reaction we're hearing from the EU Competition commission suggests that Oracle could be doing something "reasonable" to assuage their concerns, but it's not. "Reasonable best efforts" is one of those ambiguous phrases, like materiality, that people think have meaning, but when one tries to give them meaning, they get harder to actually pin down. One would think that the mounting losses at Sun would be motivation enough for Oracle to give its dealings with the  EU its best effort, but apparently it's not.   I find it hard to believe that Oracle is unable (or unwilling) to respond to EU requests for a report on the marketplace and competition with respect to MySQL.  So, while Oracle digs in its heels over MySQL, Sun is left to suffer.



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