What if Oracle's buyout of Sun falls through?

InfoWorld - With Oracle's proposed acquisition of Sun Microsystems stalled by European Union deliberations, industry dignitaries offered mixed perspectives recently on the ultimate fate of the deal and what it could mean for Sun technologies if the deal falls through.

The $7.4 billion merger is stalled over EU concerns over the fact that the commercial database giant would own the open source MySQL database, which is now Sun property. And the stalled buyout has left Sun's fate up in the air, with customers and employees uncertain as to what will happen -- perhaps leading to an erosion of Sun's values as customers and employees begin looking elsewhere.

[ InfoWorld's Neil McAllister says the EU is being dishonest about its objections to the Sun buyout. | Relive the rise and fall of Sun in our slideshow. ]

"There's been a pause or lull in the market regarding Sun products because Sun customers have been waiting" on the merger, said Gartner analyst Ray Valdes. There is a lack of clarity on which products Oracle will invest in, he said. (Oracle has offered some guidance, emphasizing intentions to continue technologies such as Java, MySQL, Sun hardware, and the OpenOffice application suite.)

Competitors are certainly noticing the effects: "I just wouldn't want to be one of those customers with uncertainty and ambiguity," said Tim O'Brien, Microsoft's senior director of platform strategy. Meanwhile, the layoffs at Sun keep coming, with 3,000 job cuts announced recently.

Sun's options if Oracle walks away But what if Oracle walks away from the Sun buyout rather than accept conditions the EU might impose to protect MySQL? A failure to consummate the buyout would leave Sun in a weakened state but could in fact provide more clarity on the future of the Sun portfolio, said Valdes. Right now, Sun cannot say much about what it is doing, he said. (Oracle's Larry Ellison has stated publicly that he has every intention of completing the Sun buyout. Neither Oracle nor Sun would comment for this story.)

Still, if Oracle does walk away, it's likely Sun would then look for a new buyer rather than try to remain independent, said RedMonk analyst Stephen O'Grady. The recession of 2008-09 hit Sun at the worst possible time, and Oracle provided a safe haven in troubled times when it agreed to buy Sun last April. Since then, Sun's position has gotten worse, so it would still need a rescuer.

Not that finding another owner would be easy: "They are well down the road to considering themselves part of Oracle, so the logistics of finding another buyer are difficult," he noted -- especially because Sun reportedly is losing $100 million a month, O'Grady said. "The economic implications for Sun, if the deal falls through, are not good," he said: A new buyer would not pay as much as Oracle did.