Did the European Union hurt its own interests?

Everything was on schedule for Oracle to close its acquisition of Sun Microsystems last September when the European Union decided to hold everything up in order to determine if the deal would lead to the demise of the mySQL open source DBMS. As a result, the deal was delayed until late January of this year when it finally was approved. During that period of over four months IBM, H-P and others grabbed a number of points of market share from Sun.

Last Friday, Oracle made a regulatory filing indicating that it now expects to spend up to $875 million more than anticipated on transition costs from the acquisition. Those costs are primarily severance costs associated with laying off thousands more Sun employees than originally planned. The loss of market share appears to be a major contributor. The majority of the layoffs are expected to come from facilities in Europe and Asia.

There may not be a direct cause and effect relationship between the EU decision to hold up approval and the loss of jobs in Europe this year. It will never be possible to know exactly what might have happened had there been no delay. At the same time, it has to be at least a little frustrating to the EU to see that its actions may have caused far more damage to its own selfish interests than anything that might have been gained.

It is hard for me to believe that Oracle actually had a sinister plan to drop mySQL after the acquisition – the concern that triggered the delay. Oracle has never shown any paranoia about the possibility of open source code of any kind ruining markets it cares about. It might be hubris, but Oracle executives do not seem to think that software created and supported by volunteers is ever going to put a noticeable dent in demand for things that Oracle can sell at a profit. I tend to agree with them.

This episode needs to be filed under the “no good deed goes un-punished” category. By trying to make sure that mySQL did not become an endangered species the EU may have cost some of its members high tech jobs at a time when jobs of any kind are a very scarce and valuable commodity.

Boris Goldenberg Says:

June 11, 2010 at 6:23 am

Interesting analysis, David. Brings back memories of the browser wars a few years back, and all the fines levied on Microsoft. I’m concerned about the EU policies. How much further left will they be leaning? With their anti-business, big unions and socialist programs, who can blame a company for exiting that hostile environment?

Jorge Velasquez Says:

June 11, 2010 at 8:24 am

The article shows a good example of how government policies react slow to potential opportunities that can benefit the people. Congratulations to the author for a concise and well constructed criticism.

I’d also like to say to Mr Goldenberg, that I don’t think is a problem created by leftists policies nor anti business nor big unions. I’m sure we could find similar examples here in the US, South America, Asia and other places. Keep in mind that the Economy is global now, the models have more similarities than differences. I’m not sure that we can label the EU as a hostile environment for business, just because they mantain a close eye (regulation) of companies’ activities than the US does.

The EU is not India where many big companies, including Oracle, moved operations looking for “new opportunities”, that translated into lower labor costs and less regulations than those existing in other developed countries in the the West. No doubt that this policy has helped those companies’ bottom line, but it has not necessarily helped at the same level the job market in the US and Europe.