When it comes to deal-making, predicting what Larry Ellison will do next is never easy – which is just the way he wants it.
So what to make of the fact that Mr Ellison’s pursuit of Sun Microsystems has now reached a point few expected, with the European Commission close to drawing a line in the sand with a formal objection to the deal?
This doesn’t necessarily mean that Brussels will act to block it. But it does show that things have reached an impasse in Brussels, which at the very least means a longer delay – with further detrimental effects to Sun’s business.
Assuming neither side balks before the EC issues its objection, Mr Ellison now appears to have a number of options.
Compromise. With the formal issuance of a Statement of Objections, the Commission will have to lay out its case in some detail. That could make it easier for the Oracle camp to craft a compromise that meets the EC objections without having to give too much away. The trouble with this scenario, though, is that Mr Ellison has already had two months to suggest compromises but, from what we hear, has shown no sign of giving any ground at all, so why would he change course now?
Stand firm. The Oracle boss has shown he is ready to take a stand, having fought – and won – against the US Department of Justice over PeopleSoft. That would be highly risky in this case, though. If the Commission sticks to its guns and Oracle is forced into a long battle, it could prove disastrous for Sun, which Mr Ellison said recently was bleeding $100m a month.
Renegotiate. One explanation whispered around Wall Street is that Mr Ellison might be looking for a reason to cut the price he is paying for Sun, and that allowing a stand-off to develop with Brussels gives him an excuse to renegotiate. If he is forced into spinning off MySQL, which is the focus of the EC objections, he might demand a lower price. Again, though, that sounds a highly risky move.
Walk. Oracle might use the cover of the EC delay as an excuse to abandon the deal altogether. But history suggests that when Mr Ellison wants something he sticks with it to the end, so dropping Sun at this point would be surprising.
Logic suggests that compromise is still the right approach. But in the heat of the fight, logic can sometimes be the first casualty.
