Analysts: Sun Deal Could Sway Microsofts EU Outcome

Despite claims to the contrary from the European Commission, some European analysts say it's too early in the appeals process to gauge the deal's impact.

LONDON—Despite claims from the office of the European Commissions Competition Directorate, the deal between Sun Microsystems Inc. and Microsoft Corp., which settled the two companies long-running legal action, may ultimately prove to have a significant impact on the outcome of the ECs antitrust case against the Redmond company.

Earlier this week, Amelia Torres, spokeswoman for the EC Competition Directorate, claimed that the deal with Sun "does not call into question the decision of the 24th of March," when Microsoft was hit by a record fine of 497 million euros ($613 million) for abusing its dominant market position with Windows.

/zimages/3/28571.gifClick here to read about the details of the ruling.

"The commissions decision is not limited to the interests of any one company," Torres said. "We took the decision because we thought it was in the interest of European consumers."

But some European analysts cast doubt on the significance of the statement. "Its difficult to see how the EC can make any real comment about the impact of the deal at the moment, as its far too early in the appeals process to say much, said Neal Macehiter, research director at Ovum. "Microsoft will be able to point to the deal and to Suns comments about it in the appeals process."

In a joint statement about their deal, Sun and Microsoft noted that Sun was "satisfied that the agreements announced [April 2] satisfy the objectives it was pursuing in the EU actions pending against Microsoft."

Although Microsoft was ordered by the EC to provide information to other server vendors about its operating system within 120 days of the ruling, it is appealing the sanctions to the European Court of First Instance in Luxembourg and could potentially point to its deal with Sun as a signal that an immediate implementation of the decision is no longer necessary.

But Macehiter said it was unlikely the deal had been specifically put together by Microsoft to influence the court. "This deal has probably been in discussion for a year," he said. "Its not something you could turn around in a week."

With Microsoft appealing to the European Court of First Instance and a final decision in that case not expected for several years, other factors could come into play that would impact the case.

"This is a highly political issue in Europe, and you have to consider the views of the member states," said Chris Ingle, a group consultant in the systems group at IDC in London. "Some of them have differing views about competition to others."

Ingle also pointed out that, with the EU set to expand significantly over the next few years, the political climate on competition could change in Microsofts favor before the case comes to court. Ten states—Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia—will join the EU on May 1, bringing the total number of members to 25. Other countries, including Bulgaria, Romania, Croatia and Turkey, are expected to join before the end of the decade.

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