IBM (IBM) is smart. IBM has been there before. IBM knew from experience that that U.S.’s Democratic Party does not like the information technology (IT) industry. The Democrat’s disdain for IT is probably because IT pretty much avoids unionization and moves too fast to be regulated. (Regulation is popular with Democrats because it--in turn--requires regulators, which in turn allows political payoffs.)
IBM foresaw that the new-U.S.-Democrat-administration’s Department of Justice (DoJ) would have more than a laizzez-faire interest in the first high-profile IT acquisition that came over its transom. IBM priced its offer for Sun (JAVA) accordingly.
Oracle (ORCL) outbid IBM, probably without figuring in a long drawn out DoJ investigation. Maybe Oracle even figured because it was a left-coast, California-dreaming, Democratic-party sort of company (once rumored to be putting Bill Clinton on its board), it would get a pass. Add that to the fact that Sun is a money-losing systems supplier that no one else except IBM really seemed to want and Oracle can be forgiven for thinking this acquisition would be fast tracked.
But Sun has a nebulous asset called Java that might need to be regulated from the Democrat's point of view. So instead the new Democratic-party DoJ is opening up a Pandora’s box of IT market research issues such as we haven’t seen since the last U.S. Democratic administration’s DoJ investigation of Microsoft. What is an IT product vs. a feature? How should either be licensed? Who is more important, the consumer or the competitor, in deciding whether to pursue anti-trust cases? How far can the government go in inhibiting free trade in the name of encouraging it?
Worse yet, can those bizarre people at the European Union (EU) Competition Commission, who until recently regulated the size and shape of vegetables, be far behind?
Who knows? IBM may even have been smart enough to have encouraged the DoJ to hold up Oracle-Sun approval through a back door on K Street. Or maybe the Obama administration decision to derail Oracle-Sun came via an IBM guy that walked in the front door (actually according to this blog post, through the side door to the Oval Office that leads off Patrick Leahy's Senate suite).
-- Dennis Byron
Comments