The European Union told Oracle Corp on Wednesday that it has failed to produce hard evidence to placate concerns that its purchase of Sun Microsystems Inc would hurt competition.
The comments by EU Competition Commissioner Neelie Kroes suggested that Oracle would not win approval for the $7 billion acquisition any time soon, and sent Sun shares falling 2.8 percent.
Oracle wants a quick resolution because it says that Sun, the fourth-biggest maker of computer servers, is losing $100 million a month as rivals like Hewlett-Packard Co and IBM poach customers amid uncertainty about the closing of the deal.
This is bad news for Oracle, said Eben Moglen, founding director of the Software Freedom Law Center who has been closely watching the case.
Representatives for Sun and Oracle declined comment. Oracle shares were flat at $22.19 while Sun shares fell 25 cents to $8.76. Sun said on Tuesday it was cutting 3,000 jobs worldwide, blaming delays in the Oracle sale.
The European Commission, which polices competition in the 27-country EU, faces a January 19 deadline on whether to approve the planned takeover of Sun by Oracle, the world's second-largest business software maker.
Kroes set out her views on Wednesday in a meeting with Oracle President Safra Catz in Brussels, said Kroes' spokesman, Jonathan Todd.
Commissioner Kroes expressed her disappointment that Oracle had failed to produce, despite repeated requests, either hard evidence that there were no competition problems or, alternatively, proposals for a remedy to the competition problems identified by the (European) Commission, Todd said.
Heads of big companies have come to Brussels before to meet Commission officials. Such meetings usually indicate the situation is serious.
The EU executive can issue a so-called statement of objections to companies in an in-depth investigation, which involves the Commission setting out its concerns in writing.
The Commission said last month it was concerned about direct competition between Oracle's databases and Sun's open source database MySQL and it wanted to ensure alternatives remained available to users.
MySQL, which competes mainly against Microsoft Corp's SQL Server, is used to run websites operated by companies including Google Inc, Facebook and Amazon.com Inc. Its main customers are small and medium-sized companies.
Oracle Chief Executive Larry Ellison has said he will not spin off MySQL, and that he expects unconditional European regulatory clearance.
Kroes told Catz the regulator was willing to move quickly to reach a final decision but it was up to Oracle to find a solution, Todd said.
Richard Brosnick, an attorney with the law firm Butzel Long, said that he suspects the European Union may require Oracle to sell MySQL before it approves the deal.
He said that Kroes' comments appeared to be public posturing. It could be that they're playing poker, he said.
Sun shares fell 28 cents, or 3.1 percent, to $28.73 as the Nasdaq Composite Index gained 0.8 percent. Oracle shares rose 3 cents to $22.22.