Sun-Oracle Deal Could Shake Up Tech

Now that Oracle's Sun buy is finally approved, it could have major ramifications across the tech sector.
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BRUSSELS (TheStreet) -- Oracle (ORCL) - Get Report finally gets its hands on Sun, (JAVA) after the European Union approved the controversial $7.4 billion acquisition.

The deal might have significant ramifications across the tech sector, expanding Oracle's reach well beyond its traditional database software business and increasing competition with

IBM

(IBM) - Get Report

and

Hewlett-Packard

(HPQ) - Get Report

. Brimming with servers and storage, Sun initially seemed a strange target for Larry Ellison's huge firm, although Oracle had already made a play into the hardware business with its Exadata storage server (which uses Sun's kit).

Sun may have earned a reputation for poor execution in recent years, but it has a broad footprint that encompasses enterprises, service providers, and high-end data centers, all of which provide Oracle with an opportunity to carve out additional revenue.

The greater strategic value for Oracle, though, comes in Sun's Java, Solaris and

MySQL

software technology. MySQL, which competes with

Microsoft's

(MSFT) - Get Report

SQL and IBM's DB2, is one of Sun's brightest rays and was the major

bone of contention

in the Oracle-Sun deal. Regulators initially voiced concern over Oracle's willingness to maintain MySQL's open-source credentials.

With the deal now rubber-stamped by the E.U., Oracle can use MySQL to

extend its reach

, particularly into the small- to medium-sized business market.

Sun's Solaris software is also a major platform for Oracle's databases and Ellison is

expected to optimize

his company's software for some of Solaris' high-end features.

Java, on the other hand, could open the door to Sun's vast installed base, as well as its extensive partner ecosystem.

At this stage, Oracle's specific plans for Sun remain shrouded in mystery. The database giant will host a webcast on Jan. 27 to discuss its long-term strategy for the combined companies.

Initial investor reaction to the deal's approval has been positive. Oracle shares rose 42 cents, or 1.66%, to $25.47 shortly after market open, outpacing the broader advance in tech stocks that saw the Nasdaq rise 0.72%. Sun's gains were more modest, with the company's stock rising 4 cents, or 0.42%, to $9.47.

However, there are still plenty of challenges ahead for Oracle, most notably the job of integrating Sun, a company that has underperformed in recent years. With around 29,000 employees, Sun is hardly a tuck-in acquisition for Oracle, which can draw on an impressive M&A record.

Ellison's firm has made some massive acquisitions in recent years, buying PeopleSoft, BEA and Siebel Systems -- but all of these companies were predominantly software firms. Sun represents a journey into uncharted waters.

At least one critic of the deal has already voiced his concern about the broader regulatory implications of the E.U.'s decision. "It should not serve as the basis for decisions taken by other regulators because it would set an awful precedent for merger control in connection with open source and a variety of other IT business models," wrote Florian Mueller, a former MySQL shareholder, in an email to

TheStreet

. He adds that Oracle still needs clearance from antitrust authorities in China and Russia.

European Commission officials had initially issued a formal

objection

to the

deal,

citing

concern

about MySQL's strong

links

to the open source community.

This prompted a

war of words

between Oracle and the

E.C.

, with both sides

trading barbs

.

The acquisition gained approval by both U.S. regulators and Sun shareholders last year, and the E.U. finally gave its blessing early Thursday.

"I am now satisfied that competition and innovation will be preserved on all the markets concerned," explained E.U. competition commissioner

Neelie Kroes

, in a statement. "Oracle's acquisition of Sun has the potential to revitalize important assets and create new and innovative products."

-- Reported by James Rogers in New York

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