Software
The $7.4 billion purchase may close within a day if the European Commission gives consent, according to ISI Group analyst Heather Bellini in New York. The Brussels-based regulator is reviewing whether Oracle may use Suns MySQL, the worlds most-popular open-source database, to quash competition, she said in an interview.
“Oracle is the biggest seller of the commercial software, and its a question of whether Oracle will take away competition in the database market,” said Bellini. MySQL, whose software code is available free online, generates so little revenue in Europe it wont affect the deal, she said.
The antitrust authority for the 27-member EU also is examining Suns licensing of Java software, said Peter Alexiadis, an antitrust lawyer at Gibson Dunn & Crutcher LLP in Brussels. More than 6 million developers use Java to create applications, according to Suns Web site. Oracle also writes business-management and so-called middleware software on Java.
For the commission to block the deal or begin an in-depth investigation, it must have “serious doubts” about competition, said Alexiadis, who doesnt work for either company. That means regulators must prove that Oracle will raise prices or change conditions for accessing programs such as Java, he said.
Investors, speculating the deal wouldnt close by todays deadline, traded bearish Oracle options to the highest in three months yesterday. Trading of puts that give the right to sell the stock surged to 32,708 contracts, five times the four-week average and double the number of call options, which give the right to buy the stock.
Bearish Options
The most-active contracts were December $20 puts, which gained 19 percent to 95 cents and accounted for about two-thirds of the puts changing hands. October $18 puts rose 50 percent to 15 cents for the biggest gain among Oracle options.
“Option trades on Oracle indicate that investors are taking caution given the uncertainty over the ECs ruling,” Caitlin Duffy, equity options analyst at Greenwich, Connecticut- based Interactive Brokers Group Inc., wrote in a note.
The EC said in July it would either approve the deal by Sept. 3 or extend its investigation of the transaction by 90 working days. The U.S. Justice Department approved the acquisition last month.
Prolonged Review
If European regulators prolong their review, the purchase could still be completed within about 30 days without conditions, Bellini said in a report.
Suns shareholders voted July 16 to accept Oracles offer. Oracle, based in Redwood City, California, announced plans to buy Sun in April, to gain the companys Java programming language and Solaris operating system. Oracle Chief Executive Officer Larry Ellison said Java was the main reason behind his decision to buy Sun.
Oracle, which trails only Microsoft Corp. in software sales, fell 17 cents to $21.77 at 4 p.m. New York time in Nasdaq Stock Market trading yesterday. The shares had advanced 23 percent this year before today. Sun advanced 12 cents to $9.32.