VZCZCXRO1518
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 
 
 
¶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 
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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