Microsoft CEO Steve Ballmer hasn’t seemed like his old self lately.
The charismatic head of the software giant has been known for most of the past 20 plus years as hyper to the point of eccentricity – and virtually always cheerful.
But onstage during Wednesday’s launch of the company’s latest versions of its major server products in Los Angeles, Ballmer appeared more reserved than normal. His constant pacing across the stage as he talked was there, but he hardly broke a smile throughout his keynote speech, and the overt enthusiasm that has always characterized his presence both on and offstage was somehow lacking.
That may have something to do with a different announcement on Wednesday, this one half a world away in Brussels, home of the European Union (EU). In what may be the final stage of the company’s long-running antitrust case with the European Commission’s (EC), Microsoft was fined a record $1.35 billion.
The EC decided that Microsoft had overcharged third-party companies for patent licenses over an almost year and a half period.
True, the fine was levied for behaviors that the EC admits have been remedied, as of last fall.
Still, at a point when Microsoft has been steadfastly trying to cut the load of litigation that seems to pursue it everywhere these days, being the recipient of the largest fine in EC antitrust history is definitely something likely to take the breath out of even the usually exuberant Ballmer.
Microsoft has not yet decided whether it will appeal the fine, but emphasized that the penalties are for past behaviors that it has since settled with the EC. Now, it’s just time to pay the final bill – or not.
“We are reviewing the Commission’s action. The Commission announced in October 2007 that Microsoft was in full compliance with the 2004 decision, so these fines are about past issues that have been resolved,” a Microsoft spokesperson said in a statement. The spokesperson would not say whether the company is considering an appeal of the fine.
Some analysts believe Microsoft is likely to appeal this latest fine, given the amount of money involved.
“It would not surprise me if they appealed [the fine because] it’s a lot of money, even for Microsoft,” Tom McQuail, head of the antitrust practice for legal firm Howrey LLP in London, told InternetNews.com.
Tim Bajarin, president of Silicon Valley consultancy Creative Strategies, is even more emphatic. “I’d be very surprised if Microsoft doesn’t fight this,” he told InternetNews.com.
Still, given Microsoft’s recent spate of legal losses, particularly in the area of antitrust, the company has plenty of reasons to be circumspect about such a decision. For one, the judge overseeing Microsoft’s antitrust settlement in the U.S. recently extended oversight of the company’s consent decree for another two years.
“I think they will look very carefully to see if there are good grounds to appeal,” McQuail added.
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Other observers think it would be fool-hardy for the company to keep banging its head against a major international government, particular in light of its previous losses in the case.
“You can play these [hardball-style] games with other companies, but not with governments,” Rob Enderle, principal analyst at researcher Enderle Group, told InternetNews.com.
The trouble begins
Microsoft’s troubles began in 2004 when the EC ruled that Microsoft had abused its dominance in operating system sales by bundling Windows Media Player with Windows and by refusing to provide technical information to competitors in the workgroup server space to allow their products to interoperate with Microsoft’s servers.
The company appealed, and in September 2007, the EU’s Court of First Instance (CFI) ruled against Microsoft across the board.
In a stinging rebuke, the CFI let the fines that the EC had imposed up to that point to stand. Microsoft was fined an initial $613 million in March 2004 and then, two years later, an additional roughly $357 million as penalty for dragging its feet in delivering the interoperability documentation it was ordered to provide.
The latest fine was levied because the EC decided that Microsoft had overcharged companies who licensed its patents between June 2006 and October 22, 2007, when the company decided to drop all further appeals in its European antitrust case and radically lowered its licensing rates.
“[EC competition] Commissioner Kroes is to be commended for her perseverance over the last three years in the face of Microsoft’s foot dragging and appeals,” said a statement by Thomas Vinje, legal counsel and spokesman for the European Committee for Interoperable Systems (ECIS).
The ECIS, which counts among its membership such Microsoft competitors as Adobe, Corel, IBM, Nokia, Opera, Oracle, RealNetworks, Red Hat, and Sun Microsystems, is also a complainant in another probe of the company opened by the EC in January.
That, and a second probe, are not directly part of the 2004 case, which Microsoft agreed to settle on October 22, 2007. Microsoft is also potentially facing a third probe over its alleged strong-arm efforts in trying to get its Office Open XML formats – the default file formats for Office 2007 – adopted by the International Organization for Standardization (ISO).
Continued scrutiny
The continuing scrutiny may have had something to do with last week’s announcement by Microsoft senior executives that the company will fundamentally embrace “openness” in its software going forward. However, if Ballmer and company had hoped the announcement would help to soften the EC’s attitude, that doesn’t appear to have worked.
In fact, Microsoft finds itself in an unenviable position with the EC at this point, analysts say. “The EC doesn’t trust Microsoft right now and rebuilding trust is going to take time,” Enderle said.
Such a ‘once a perp, always a perp’ attitude can easily become ingrained, and that can be costly.
“They assume you’re a criminal so it’s lot harder proving you’re not dong something bad,” Enderle added. “Getting out from underneath this perception should be a top priority for Microsoft.”
Antitrust lawyer McQuail underlines that point.
“Historically, the company has fought the regulatory battles, but it does take up senior management’s time and resources,” he added.
Perhaps that was what was on Ballmer’s mind on Wednesday – that it’s time to draw a line under the legal battles and get back to the business of making software — pronto.
