Identifier
Created
Classification
Origin
09BRUSSELS1455
2009-10-27 15:41:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
USEU Brussels
Cable title:
ORACLE CONCERNED OVER EU INVESTIGATION OF SUN MERGER
how-toVZCZCXRO1518 PP RUEHIK DE RUEHBS #1455/01 3001541 ZNR UUUUU ZZH P 271541Z OCT 09 ZDK FM USEU BRUSSELS TO RUEHC/SECSTATE WASHDC PRIORITY RUCPDOC/USDOC WASHDC PRIORITY RUEAWJA/DEPT OF JUSTICE WASHDC PRIORITY RHEHNSC/NSC WASHDC PRIORITY INFO RUCNMEM/EU MEMBER STATES COLLECTIVE RUCNMEU/EU INTEREST COLLECTIVE
UNCLAS SECTION 01 OF 02 BRUSSELS 001455
SENSITIVE
SIPDIS
NOT FOR INTERNET DISTRIBUTION
DOJ FOR CALDWELL HARROP
STATE PASS TO FTC FOR JOHN PARISI
DOC FOR DAVID DEFALCO
STATE FOR EUR/ERA, EEB/TPP/MTA, EEB/OIA
PLEASE PASS TO USTR - DAVID WEINER
E.O. 12958: N/A
TAGS: ECIN ECON EINT ECPS ETRD EUN
SUBJECT: ORACLE CONCERNED OVER EU INVESTIGATION OF SUN MERGER
BRUSSELS 00001455 001.2 OF 002
UNCLAS SECTION 01 OF 02 BRUSSELS 001455
SENSITIVE
SIPDIS
NOT FOR INTERNET DISTRIBUTION
DOJ FOR CALDWELL HARROP
STATE PASS TO FTC FOR JOHN PARISI
DOC FOR DAVID DEFALCO
STATE FOR EUR/ERA, EEB/TPP/MTA, EEB/OIA
PLEASE PASS TO USTR - DAVID WEINER
E.O. 12958: N/A
TAGS: ECIN ECON EINT ECPS ETRD EUN
SUBJECT: ORACLE CONCERNED OVER EU INVESTIGATION OF SUN MERGER
BRUSSELS 00001455 001.2 OF 002
1. (SBU) SUMMARY. Oracle visited USEU October 21 over concerns that
its $7.4 billion plan to acquire Sun Microsystems is at risk of
being blocked by the European Commission. The merger, approved by
USDOJ in August, is under review by the Commission. USDOJ is
coordinating closely with the Commission to try to prevent a
divergent outcome in this matter. Oracle expects the Commission to
issue a Statement of Objections shortly. A Statement of Objections
is a normal part of a Commission merger review, and the Commission
has until January 19 to approve or prohibit the merger. Oracle says
it is unwilling or unable to make certain divestitures to satisfy
the Commission's concerns, and that merger failure will cause Sun to
go bankrupt. Sun announced October 20 that it is cutting 3000 jobs
over the next year, as a result of delays in receiving merger
clearance from the Commission. END SUMMARY.
EUROPEAN COMMISSION'S ORACLE-SUN MERGER REVIEW
-------------- -
2. (SBU) Oracle President Safra Catz met the week of October 20 with
European Union Competition Commissioner Neelie Kroes to discuss the
company's concerns over the Commission's review of the proposed $7.4
billion Oracle - Sun merger. Oracle also visited the U.S. Mission
October 21 to urge the U.S. to push for rapid European Commission
approval of the merger.
3. (SBU) The Oracle-Sun merger, announced last spring, was approved
by the U.S. Justice Department (DOJ) in August. The Commission
opened a second phase investigation of the merger in September. The
Commission is concerned that Oracle will hamper development of
MySQL, an open-source database that competes with Oracle and with
products of several other firms, such as Microsoft and IBM. DOJ
investigated this aspect of the transaction during its own review
and concluded otherwise.
4. (SBU) Oracle said that the DG COMP case team told the company to
expect a formal "Statement of Objections" (formal charge of
violation of EU competition law) soon. If a Statement of Objections
(SO) is issued, Oracle and Sun will then have the right to an oral
hearing to defend the merger. The Commission has until January 19
to issue a final decision approving or blocking the merger.
Commission phase II proceedings historically result in merger
prohibitions only about 10 percent of the time, but around half of
cases are cleared subject to conditions such as divestitures. A
Statement of Objections is a normal step in many of these cases,
which often results in intensified negotiations.
5. (SBU) Oracle stated that the Commission is pressuring it to
divest MySQL as a condition for approval of the merger. Oracle
claims such a divestiture will destroy the merger for two reasons:
1) Oracle's business case for the merger depends on keeping MySQL to
make the merger economically viable, since Oracle plans to expand
the market for MySQL and its associated support contracts; and (2)
Oracle would be forced to take a huge accounting loss if it sold
MySQL, since it believes that Sun overpaid in paying nearly $1
billion for MySQL in 2008, and it would only be able to sell it for
a fraction of this sum.
6hber 20 that it is cuttiext year, blaming the dapproval of the
merger. thp@ r@n expects action
fro to merger approval, suggQdepends on Oracle produci that
there were noproposal for a remedy rns identified by the
viewpoint as presented Qeen forthcoming with
BRUSSELS 00001455 002.2 OF 002
the Commission and that it has disproved the Commission contention
that significant competition problems exist. While this may appear
to be a standoff, additional discussions between the company and DG
COMP seem to be underway.
9. (SBU) DOJ/Antitrust views this matter as a high priority. Its
senior officials and investigative staff are currently engaging
productively and intensely with their DG COMP counterparts, and are
in close touch with Oracle and Sun, in the hopes of preventing a
divergent outcome. END COMMENT.
10. (U) This cable has been cleared by USDOJ's antitrust division.
MURRAY
SENSITIVE
SIPDIS
NOT FOR INTERNET DISTRIBUTION
DOJ FOR CALDWELL HARROP
STATE PASS TO FTC FOR JOHN PARISI
DOC FOR DAVID DEFALCO
STATE FOR EUR/ERA, EEB/TPP/MTA, EEB/OIA
PLEASE PASS TO USTR - DAVID WEINER
E.O. 12958: N/A
TAGS: ECIN ECON EINT ECPS ETRD EUN
SUBJECT: ORACLE CONCERNED OVER EU INVESTIGATION OF SUN MERGER
BRUSSELS 00001455 001.2 OF 002
1. (SBU) SUMMARY. Oracle visited USEU October 21 over concerns that
its $7.4 billion plan to acquire Sun Microsystems is at risk of
being blocked by the European Commission. The merger, approved by
USDOJ in August, is under review by the Commission. USDOJ is
coordinating closely with the Commission to try to prevent a
divergent outcome in this matter. Oracle expects the Commission to
issue a Statement of Objections shortly. A Statement of Objections
is a normal part of a Commission merger review, and the Commission
has until January 19 to approve or prohibit the merger. Oracle says
it is unwilling or unable to make certain divestitures to satisfy
the Commission's concerns, and that merger failure will cause Sun to
go bankrupt. Sun announced October 20 that it is cutting 3000 jobs
over the next year, as a result of delays in receiving merger
clearance from the Commission. END SUMMARY.
EUROPEAN COMMISSION'S ORACLE-SUN MERGER REVIEW
-------------- -
2. (SBU) Oracle President Safra Catz met the week of October 20 with
European Union Competition Commissioner Neelie Kroes to discuss the
company's concerns over the Commission's review of the proposed $7.4
billion Oracle - Sun merger. Oracle also visited the U.S. Mission
October 21 to urge the U.S. to push for rapid European Commission
approval of the merger.
3. (SBU) The Oracle-Sun merger, announced last spring, was approved
by the U.S. Justice Department (DOJ) in August. The Commission
opened a second phase investigation of the merger in September. The
Commission is concerned that Oracle will hamper development of
MySQL, an open-source database that competes with Oracle and with
products of several other firms, such as Microsoft and IBM. DOJ
investigated this aspect of the transaction during its own review
and concluded otherwise.
4. (SBU) Oracle said that the DG COMP case team told the company to
expect a formal "Statement of Objections" (formal charge of
violation of EU competition law) soon. If a Statement of Objections
(SO) is issued, Oracle and Sun will then have the right to an oral
hearing to defend the merger. The Commission has until January 19
to issue a final decision approving or blocking the merger.
Commission phase II proceedings historically result in merger
prohibitions only about 10 percent of the time, but around half of
cases are cleared subject to conditions such as divestitures. A
Statement of Objections is a normal step in many of these cases,
which often results in intensified negotiations.
5. (SBU) Oracle stated that the Commission is pressuring it to
divest MySQL as a condition for approval of the merger. Oracle
claims such a divestiture will destroy the merger for two reasons:
1) Oracle's business case for the merger depends on keeping MySQL to
make the merger economically viable, since Oracle plans to expand
the market for MySQL and its associated support contracts; and (2)
Oracle would be forced to take a huge accounting loss if it sold
MySQL, since it believes that Sun overpaid in paying nearly $1
billion for MySQL in 2008, and it would only be able to sell it for
a fraction of this sum.
6hber 20 that it is cuttiext year, blaming the dapproval of the
merger. thp@ r@n expects action
fro to merger approval, suggQdepends on Oracle produci that
there were noproposal for a remedy rns identified by the
viewpoint as presented Qeen forthcoming with
BRUSSELS 00001455 002.2 OF 002
the Commission and that it has disproved the Commission contention
that significant competition problems exist. While this may appear
to be a standoff, additional discussions between the company and DG
COMP seem to be underway.
9. (SBU) DOJ/Antitrust views this matter as a high priority. Its
senior officials and investigative staff are currently engaging
productively and intensely with their DG COMP counterparts, and are
in close touch with Oracle and Sun, in the hopes of preventing a
divergent outcome. END COMMENT.
10. (U) This cable has been cleared by USDOJ's antitrust division.
MURRAY