Tuesday, July 11, 2006

Stupid is as stupid does

I haven't posted for a while because frankly, there wasn't much of interest to post about. But now we have the mother of all issues - the EU court case - set to take its next step. According to reports, tomorrow MSFT can expect to be fined as much as $2.5M/day backdated to December of 2005 for failure to comply with the EU Commission's demands. That would also give MSFT the dubious distinction of being the first company to ever be fined by the EU Commission for failure to comply. Additionally, it looks like the EUC may ratchet up the fines to $3M/day moving forward if MSFT continues to disobey.

For the record, I think the EU Commission's original charges were even weaker than the DOJ's, and I hope that the European Court of First Instance restores what little faith I still have in European justice (not to mention common sense) by finding against the EUC when they ultimately hand down their verdict on MSFT's appeal. That said, we have the current mess to deal with and one of the best summaries of that imo, is this one by David Hunter at HunterStrat:

I particularly like this line, talking about the European Union’s Competition Commissioner Neelie Kroes :

...she runs an interminable process that makes a sieve look tight with her as the head blabbermouth.

That's a fact: the EUC has been a sieve of leaks from day one, which should be totally unacceptable. Like me though, Hunter is left scratching his head as to why compliance by MSFT has been so problematic. The EUC and most MSFT detractors seem to back the theory that "MSFT management tried to play chicken with us and failed". That's certainly possible and if so, I think MSFT's board of directors have no choice but to ask for Ballmer's resignation - seriously. MSFT on the other hand, is going with the "we tried our best to comply, but the EUC kept changing the ground rules" defense. This argument would have had a lot more credibility if MSFT had made it two years ago versus just over the past 6 months. However, the EUC's apparent expansion of scope while simultaneously refusing to document said, does raise some concerns which, along with their leaks, mean that I can't discount this scenario entirely. Finally, there's the possibility that MSFT decided early on that providing the requested documentation in full was not in the company's best interests, and has been stalling all along hoping to close the gap to where the appeal could be heard.

If I had to guess, I'd say there are elements of truth in both scenario #1 and #2, but that #3 seems to explain what we've seen best. If so, it's a very dangerous strategy. First of all, MSFT is not guaranteed to win the appeal, whereas their shoe-dragging to date is guaranteed to have pissed off the EUC and made them less amenable moving forward - not exactly what you want if the Court of First Instance ends up backing the EUC 100%. Second, I wonder whether the cost/benefit analysis that might have gone into such a decision, included the further damage to MSFT's credibility amongst Governments, customers and investors as this extended saga has played out in the press worldwide? In any event, I guess we'll know more tomorrow. Meanwhile, MSFT is doing their usual clumsy job of trying to deflect attention from this impending bad news:

And of course the stock is taking another major hit...


  • OK. My opinion on the EU case. While the EU is MASSIVELY flawed in their logic and you make some good points...Microsoft has a major customer relations problem in Europe. I put this squarely at the feet of the executives in the EMEA sub. If our "good" partners like Siemens and SAP (for example) were to go to the EU and tell them to lay off, if our big customers like Citibank, like AXA (France), like BT or BP, like Allianz or Zurich Insurance were to go to the EU and say, "gee, Microsoft is a strategic platform for us and we need you to lay off"...I have a feeling that the EU would back off. The same goes for the individual country governments to which we sell. That's what we call a customer relationship strategy issue and takes executive love, attention and leadership. Something we're in sore need of. So while the EU is wrong, we've done nothing on the enterprise customer front to make this easier for us to get out of.

    You know what? How about if we just told the EU, OK, we're not selling Windows (the covered SKUs under the indictment) in the EU anymore. We just pull out products. Wouldn't that be cheaper than the fines we are paying. Just tell them we're pulling Windows Update and new products and all that other stuff. I have a feeling that our enterprise customers would tell the EU to back off since we ARE a strategic bet for so many over there. Time for some leadership...if you ask me.

    By Anonymous Anonymous, at 7:33 PM  

  • Here is the story about accountability on one group - WinFS(SQL).

    Almost two years ago, Peter gave a big talk about how accountability was missing in Windows org and how he told Allchin that all the GMs who missed dates should have been given 2.5s

    Two years later, Quentin - PUM for WinFS gets promoted to SQL GM after making a mess of a 4-year, 300 person project called WinFS. A bunch of other loyal management types get promoted as well.

    By Anonymous Anonymous, at 11:00 PM  

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