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Antitrust Objections Unlikely in Oracle-Sun Deal

Oracle buys Sun

Oracle is unlikely to face serious antitrust objections as it moves to enter the computer hardware market by buying Sun Microsystems for more than $7 billion, antitrust experts said.

They did not anticipate that federal regulators would be troubled by the deal since Oracle (NASDAQ: ORCL) primarily focuses on database and business oriented software and Sun (NASDAQ: JAVA) sells mainly high-end servers.

"Far from competing, the products of Sun are largely complementary with Oracle's products. Indeed, Oracle software is frequently installed on Sun servers," said Beau Buffier, an antitrust lawyer with law firm Shearman and Sterling.

"Of course, Sun has some important software, such as Java and its Solaris operating system, but in these key areas there really is no meaningful competition with Oracle," Buffier said.

Oracle's database and related software already work closely with Sun's Java software and Solaris operating system.

IBM (NYSE: IBM) may have abandoned its bid to buy Sun partially because of perceived antitrust concerns, according to a research note from Stifel Nicolaus.

Sun previously rejected IBM's offer to pay up to $9.40 a share, according to sources with knowledge of the matter. Oracle will pay $9.50 a share for Sun.

"We believe an Oracle-Sun deal faces significantly fewer obstacles in the antitrust review than an IBM-Sun deal would have, particularly as it does not raise the issues regarding consolidation in the server and storage markets that would have been problematic for a deal with IBM," the research note said.

Thomas Morgan of the George Washington University Law School pointed to the U.S. Justice Department's unsuccessful challenge to Oracle's purchase of software rival PeopleSoft in 2004 as a reason that regulators would be unlikely to oppose this less controversial deal.

"On that precedent, the acquisition of a hardware company is likely to be even less of a problem," he said. "It looks like the kind of thing that is likely to go through."

But Morgan also raised the possibility that President Barack Obama's administration might use the case to prove its determination to be a tougher antitrust enforcer than the Bush administration was.

"This case is likely to be a test at least of the early attitude of the Obama administration," said Morgan. "One might expect to see, or one might watch to see, if this is a place that the new Justice Department leadership would choose to at least try their stuff."

The Senate was expected to vote on Monday night on Obama's decision to nominate Christine Varney to head the Justice Department's antitrust division.

The deal would make Oracle the world's fourth-largest maker of servers, with the No. 2 slot in the high-end of the market, which was worth about $17 billion last year. Oracle is already the world's No 2 maker of business software after IBM.