TELECOM Digest OnLine - Sorted: EU Still Trying, Without Success, to Collect on Microsoft Fine

EU Still Trying, Without Success, to Collect on Microsoft Fine

Patrick Seitz (
Tue, 11 Jul 2006 15:07:24 -0500

Microsoft Vs. The EU May Hit Another Level
Patrick Seitz

The European Union hopes to get Microsoft to comply with its more than
2-year-old antitrust ruling by threatening to boost the daily fines it
can levy against the software giant.

The EU's European Commission is discussing whether to raise the
ceiling on future fines because Microsoft (NASDAQ:MSFT - News) has
failed to comply with the March 2004 decision that the company abused
its dominant market position. The current ceiling is 2 million euros
($2.5 million) a day. But regulators are considering raising it to 3
million euros ($3.8 million), according to a Reuters report.

The European Commission is meeting this week to decide how much to
fine Microsoft for defying sanctions to remedy its abuses. The penalty
could approach the record 497 million euro ($620 million) fine the
Commission already imposed in its landmark decision against Microsoft.

A decision on the total daily fines Microsoft owes to date is expected
on Wednesday.

Commission members have complained that Microsoft has been stalling in
enacting reforms. The EU's antitrust authority ruled that Microsoft
had shut out rivals by not disclosing technical information about how
its ubiquitous Windows PC operating system communicates with its
server software.

Servers are central computers that form networks among PCs and perform
such tasks as storing files, printing documents and hosting Web sites.

Can Exploit Windows

The EU is seeking to level the playing field for makers of software
for work group servers. It claims Microsoft has an advantage because
its server software can exploit hidden software interfaces in Windows.

Microsoft claims that disclosing all the information that the EU has
demanded would infringe its intellectual property rights.

Redmond, Wash.-based Microsoft has until July 18 to provide the
required documentation to European regulators.

Microsoft's stock rose nearly 1% Monday to close at 23.50. For the
year, shares are down 10%. Microsoft shares have been virtually flat
for four years.

Legal overhangs have dogged Microsoft's stock for years, says Brent
Thill, an analyst with Citigroup. The EU case isn't likely to be
resolved soon and it won't be the last such case for Microsoft, he

Microsoft has appealed the European Commission's original decision to
the Court of First Instance, Europe's second-highest court. A ruling
could take months.

"It just seems like once they get something cleared up on the legal
side, something else emerges," Thill said. "It's a function of their
size and their power in the industry."

Bundling New Features

Microsoft has been attacked for its bundling of software features and
products. But that approach has benefited customers by reducing
complexity and creating a better user experience, he says.

But since Microsoft's Windows operating system runs more than 90% of
personal computers worldwide, that bundling creates what many see as
an unfair advantage.

Microsoft's planned upgrades to its core products early next year --
Windows Vista and Office 2007 -- will continue its strategy of
bundling new features and applications.

The interoperability issue hasn't hurt the growth of open-source
Linux, says Rob Enderle, an analyst with the Enderle Group.

"Linux has been a large and growing competitor in the server space,
displacing most of the existing Unix products that are out there in
Europe and the U.S.," Enderle said. "The interoperability problem
doesn't appear to be causing any major issues."

Microsoft's rivals appear to be using the courts to try to
"significantly hobble Microsoft," Enderle said. "Whatever Microsoft
does, the competitors won't be happy."

Microsoft has proceeded cautiously in giving out information about
server interoperability, he says. If Microsoft wins its appeal, the
damage from the release of information about its intellectual property
will be irreversible, Enderle says.

Much of what the EU sees as stalling by Microsoft was the company
trying to get clarification about what specifically the Commission was
seeking in its broad demands, he says.

Copyright 2006 Investor's Business Daily

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