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 says.
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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