European Commision May Kill Sun (JAVA) Deal With Oracle (ORCL)

Oracle (ORCL) probably thought its deal to buy Sun Microsystems (JAVA) was a sure thing once US regulators had approved the deal.

Now, the transaction is in real trouble and some experts believe it may never be closed at all. The European Commission may take several months to review it. A final decision will be about the breath of the investigation, but the EC says it is concerned about the dominance the combined operation could have in the open source server software business.

The setback for Oracle could be considerable. It is planning to buy Sun for $5.6 billion. Sun has been losing sales rapidly and its revenue dropped close to a third in its last reported quarter. Sun has been winding down its operations and an independent company and has assumed that it will no longer have to reports its financial results.

Sun also lost money in the last quarter.

According to recent data, Sun has 10% of the global server market which puts it well behind IBM (IBM) and HP (HPQ). Dell (DELL) even has a larger portion of the market. With its relatively small resource in sales and development, the value of Sun is dropping quickly. And, that makes the price Oracle is paying very high, particularly if it has to wait well into 2010 to get the acquisition closed.

Douglas A. McIntyre