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November 11, 2009

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Europeans object to Sun-Oracle deal

EUROPEAN antitrust regulators have formally objected to Sun Microsystems Inc's planned US$7.4 billion sale to Oracle Corp, escalating a battle over a deal that has already been cleared in the United States.

The so-called "statement of objections" that Sun received on Monday from the European Commission isn't entirely surprising, since the commission already had expressed concerns about possible harm to the database market from an Oracle-Sun tie-up when it launched a formal antitrust probe of the deal in September.

The objection, though, ratchets up tension about the fate of the deal, which Sun badly needs to go through, and presents an interesting challenge for the Obama administration, which has vowed to vigorously pursue antitrust cases and now finds itself at odds with European regulators.

Uncertainty about the deal, which both companies had hoped would close this summer, has wounded Sun, which is losing market share in computer servers to rivals like IBM Corp and Hewlett-Packard Co. Last week Sun revealed that it lost US$120 million in the quarter ended September 27.

In a filing with the US Securities and Exchange Commission on Monday, Sun stressed that European regulators' objections are the result only of a preliminary investigation and that the commission hasn't made its final decision about the matter. Sun and Oracle are allowed to argue their case to the commission, which Oracle said it will do to correct what it called a "profound misunderstanding" about the companies' markets.

Investors, however, appear skeptical about the deal's chances.

Sun's stock has been stuck below Oracle's US$9.50 per share offer for the company. On Monday it edged up 6 cents to US$8.30 as Oracle released comments signaling its willingness to fight to keep the transaction in its current form alive.

The European Commission has said it is worried that businesses could have fewer choices and see higher prices if Oracle, the world's biggest proprietary database company, swallows Sun, whose MySQL division makes the leading open-source database.



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