Costly delays to European Commission approval of Oracle's proposed $7.4bn acquisition of Sun Microsystems look set to continue.
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Sun has also blamed the delay as the reason the company was forced to announce a further 3,000 job cuts last month.
But European competition regulators are said to be close to issuing an official statement of objections in a first step to blocking the deal, according to sources cited by the Financial Times.
The move is thought to be likely because Oracle has refused to offer any concessions to meet concerns over the company's acquisition of Sun's open source MySQL database software.
European competition commissioner Neelie Kroes is concerned MySQL users will lose out if it becomes a serious competitor to Oracle's core database business in the longer term.
EC officials have complained that despite repeated requests, Oracle has neither provided evidence that the deal will not cause competition problems, nor proposed any remedies.
If the EC does not back down, Oracle will be forced to offer concessions or face a legal battle to save the deal, which will cause further damaging delays for Sun.
Sun's business has already suffered because of IT budget cuts due to the recession and according to analysts, prolonged delays to the deal could jeopardise its survival.