(Mis-)Reporting Microsoft and the EU
Well said! Indeed, masterfully said. Humble. Conciliatory. Quick to point out how the industry has changed. Quick to point out the expanded investment in Europe. Now let's look at the positioning.
The PR machine actually started the day before the announcement in the Financial Times ("Microsoft says rivals may rue siding with EU") with:
"Obviously, law that is made for Microsoft is going to apply to other market leaders as well. IBM, Google, Apple and others would have to look very carefully at the implications for their business models," — Brad Smith, Microsoft General Counsel
The New York Times started the week with "European Court Rejects Microsoft Antitrust Appeal". The best quote:
“What this ruling will do is send a message to companies that if they establish a good market position with a successful product, they will be forced in Europe to essentially give up that product to their competitors.” — Robert Kramer, a vice president of public policy for CompTIA, [a Microsoft ally]
The venerable Wall Street Journal further raises the spectre of anti-American sentiment under the banner "Microsoft Loss In Europe Raises American Fears", and picks up on the innovation thread with:
Microsoft's backers said the ruling will stifle innovation by making it tougher to design products with new features.
What utter PR-induced rubbish. What is at question is NOT whether Microsoft is simply in a market leading position, or how they were shipping innovative features, but rather whether they abused a market dominant position with anti-competitive practices. Here's how the EU actually describes a market dominant position in Article 82:
A dominant position is a situation of economic power held by a firm which allows it to hinder effective competition in the relevant market. It puts the firm in a position to exert considerable influence on the conditions in which competition is to develop, and to act without having to take that into account. ["Relevant Market" is defined here.]
One of the things that Article 82 goes on to discuss is "making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which have no connection with the subject matter of such contracts." This would be something that U.S. Department of Justice followers might remember from the discussion around Microsoft OEM deals and bundling. So the EU and the DoJ may not be as far apart as Thomas Barnett (U.S. DoJ) is quoted in the WSJ article.
Andy Updegrove's analysis is probably closer to reality. Microsoft got off lightly here. Just as US$100M in inbound litigation a year is the cost of doing business as a US$50B company, so to is this judgement.
While today's judgment is significant, it is worth noting that the penalties that Microsoft has incurred to date – roughly $1 billion, plus an obligation to reimburse a far smaller amount of legal fees – are minute in comparison to the magnitude of the profits it has garnered over the ten-year investigative period. During that time, its market share in both of the subject markets has grown dramatically. As a result, while Microsoft has nominally lost in court, it continues to win at the bottom line, given that the only impact on its products to date has been more symbolic than effectual - the requirement to offer a version of Windows that does not bundle a free copy of its media player.
Stated another way, a billion dollars spread over ten years is $100 million a year. During the same period, Microsoft revenues have grown enormously, to over $50 billion a year, fueled primarily by the continuing growth of its operating system and Office products. It has been a tiny cost of business to pay, and a shrewd and cynical business decision to incur, a liability to pay one fifth of one percent of annual gross revenues to retain the freedom to dominate so lucrative a market in spite of the 2004 judgment.
It sort of puts all Mr. Smith's encouraging and friendly quotes about the growth of the Microsoft business over the past ten years in Europe into perspective.