Larry Ellison, the founder and CEO of Oracle (ORCL), would claim he has been patient while regulators work through his company's deal to buy Sun Microsystems (JAVA), which is probably a fair assessment. Oracle cut a deal to purchase Sun in late April for a price of $9.50 a share, or $7.4 billion. An offer that was much higher than Sun's share price at the time of just above $6.

U.S. regulators approved the buyout fairly early, but E.U. regulators have been much more sluggish. Oracle promised its shareholders that the Sun deal would help earnings, so the smaller company was forced to lay off 3,000 people last month to help its faltering margins. And to make matters worse, Sun's server business has deteriorated since the acquisition was announced.

The E.C. contends that the marriage of the two companies would give the combined firms a high market share in certain enterprise software businesses. Several media reports predict that the European Commission will tell Oracle that in order to prevent the transaction being blocked, Oracle needs to make compromises by divesting itself of some of Sun's businesses as part of its plan to integrate the company into its operations. But according to the FT, "The US software company has refused to offer any concessions to European regulators to meet their concerns about the deal."

Now Oracle is faced with the issue of whether to walk away from Sun completely. The move would almost certainly involve a legal battle with Sun for breaking a definitive purchase agreement, but Ellison is probably facing a legal fight with the EC if he does not give into requests from its anti-competition authority. In the meantime, the value of Sun assets that Oracles is getting for its $7.4 billion investment is continuing to drop, and at some point the investment will become financially foolish.

Sun would be devastated if Oracle walks away. It was on its last legs before the buyout was announced, and may not even be a viable company anymore if the deal is killed.

Douglas A. McIntyre is an editor at 24/7 Wall St.