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By Peppi Kiviniemi and Jessica Hodgson
Of DOW JONES NEWSWIRES
BRUSSELS -(Dow Jones)- Oracle Corp. (ORCL) has had to withdraw its application to get antitrust clearance in Russia for its $7.4 billion acquisition of Sun Microsystems Inc. (JAVA) due to timing issues, people familiar with the deal said Friday.
The latest hitch for the database and software giant in buying hardware maker Sun comes alongside a separate probe by European antitrust authorities into the acquisition. Oracle, which requires European clearance to close the deal, has warned the delay is costing money and Sun has said it plans to lay off thousands of workers.
A growing number of hurdles to the deal's closing appear to be weighing on investors in Sun's stock. By mid-afternoon Eastern Daylight Time Friday, Sun's stock was trading at $8.23, a 14% discount to the $9.50 offer price. Oracle shares were trading down 1.6% at $21.17, in line with a lower overall technology market.
While its unclear whether the Russian antitrust issue will impact Oracle's more significant challenge of clearing the deal in Europe, it adds to the uncertainty.
Most antitrust experts think the deal will ultimately receive European Union backing. But it is proving a growing headache for both the companies and the regulators.
Oracle's chief executive, Larry Ellison, said in a recent speech in Silicon Valley that Sun was losing around $100 million a month as competitors such as International Business Machines Corp. (IBM) and Hewlett-Packard Co. (HPQ) capitalize on the uncertainty about the company's future, luring away customers.
Sun said in October it planned to lay off about 3,000 employees, or about 10% of its workforce, in part because of delays in closing the deal.
EU officials have also expressed their frustration with Oracle for not having produced adequate evidence to back its case, an EU spokesman said earlier.
Oracle declined comment Friday.
The Russian antitrust hitch is largely due to "procedural" issues, people familiar with the matter said. In Russia, once the antitrust body has been notified of a deal the companies involved have a maximum of 90 working days to get the deal done. The system is rigid, and Oracle was told it either had to withdraw its notification or face a blocking decision from the Russians, one person said.
The Russian authorities basically want to see how Europe is going to deal with the issue first, the person added.
Oracle plans to reapply for antitrust clearance as soon as possible, another person said.
It is unclear if the Russian authorities have specific issues with the deal apart from those the EU has flagged.
EU regulators launched an in-depth probe in September, citing "serious concerns" that the deal could hurt competition in the database market, in which both Oracle and Sun compete. The commission is particularly focused on MySQL, an open-source database that Sun acquired in 2008.
The U.S. Department of Justice earlier this year cleared Oracle's planned acquisition of Sun after an investigation.
While both Oracle and Sun have marshalled executives and technology experts to publicize the benefits the deal will bring, others say it is a real competition risk. Michael "Monty" Widenius, the developer who created MySQL, recently posted a press release on his blog, saying that European regulators were right to be concerned about the deal's impact on competition.
-By Peppi Kiviniemi and Jessica Hodgson, Dow Jones Newswires; +3227411483; peppi.kiviniemi@dowjones.com