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Oracle-Sun Deal Hit by EC Objection

Oracle's Sun acquisition gets a formal E.C. statement of objections.



) --


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took another


late Monday, when the European Commission issued a formal objection to the deal.

The E.C. statement, which was revealed in an Oracle SEC filing, was not completely out of the blue. European regulators have already voiced their


about Oracle obtaining Sun's

MySQL database

technology, which has strong links to the open source community.

"The statement of objections sets out the commission's preliminary assessment regarding, and is limited to, the combination of Sun's open source MySQL database product with Oracle's enterprise database products," it said. The filing went on to discuss the deal's "potential negative effects on the competition in the market for database products."

Sun shares dipped 14 cents, or 1.7%, to $8.10 in extended trading, although there was no immediate change in Oracle's share price.

There has been speculation that a formal statement of objection would allow the E.C. to flex its muscles, possibly forcing concessions out of Oracle. European antitrust czar Neelie Kroes has earned a reputation as a champion of the open source movement and is certainly not afraid to


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Silicon Valley.

Oracle, however, is unfazed by the E.C.'s statement, and quickly fired back at the Brussels bureaucrats.

"Oracle's acquisition of Sun is essential for competition in the high-end server market," it said, in a statement released after market close. "The transaction does not threaten to reduce competition in the slightest, including in the database market."

The commission's statement of objections reveals a "profound misunderstanding" of both database competition and open-source dynamics, it sniffed.

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

Oracle also explained that the database market contains at least eight major players, including


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, as well as three distinct open source vendors. MySQL and Oracle are very different products, it added, saying that "there is no basis in European law for objecting to a merger of two among eight firms selling differentiated products."

Pointing to the fact that the deal already has Justice Department and Sun shareholder approval, Oracle added that it will "vigorously oppose" the commission's objections. "Given the lack of any credible theory or evidence of competitive harm, we are confident we will ultimately obtain unconditional clearance of the transaction."

Oracle had originally hoped to complete its $7.4 billion Sun acquisition during the summer, although the delay has hammered Sun, which recently announced plans to cut

3,000 jobs

. Fiery Oracle CEO Larry Ellison has already


that the E.C. probe is costing Sun $100 million a month.

The E.C.'s statement of objections, however, does not mean that Oracle will not eventually get hold of Sun. "The issuing of a statement of objections allows addressees to present arguments in response to the commission's preliminary assessment of the competitive effects of a notified transaction," said the Oracle SEC filing. "A statement of objections is a preparatory document that does not prejudge the European Commission's final decision."

-- Reported by James Rogers in New York