Microsoft vs. the world: The punches keep coming

On top of fines and taxes, Microsoft got bad news on Windows RT, Windows 8, and Office 2013

Microsoft took a drubbing this week, particularly in the old country, where it's under attack or in retreat on multiple fronts.

Starting with the category of minor inconveniences, the EU slapped Microsoft on the wrist for its scofflaw ways, according to InfoWorld's Simon Phipps. The $731 million fine issued for failing to offer Windows 7 users a browser choice page, as required by a 2009 antitrust settlement, "is so infinitesimal relative to the $51 billion in cash Microsoft has amassed from its European operations alone -- money that is exempt from the 35 percent U.S. corporate tax -- that it amounts to a small service charge on Microsoft's profits," writes Robert X. Cringely.

Europe's antitrust chief Joaquin Almunia could have imposed a fine of up to 10 percent of Microsoft's global annual revenue: around $7 billion. But this is the first time the Commission has fined a company for failing to honor commitments, and Almunia might have been feeling a trifle abashed, admitting the Commission had been "naive" to appoint Microsoft to monitor itself.

The Danish government is not nearly so trusting. If a report in The Register is to be believed, it's coming after Microsoft to the tune of nearly $1 billion in missing tax revenue stemming from Microsoft's 2002 purchase of accountancy software firm Navision.

According to sources in the Danish tax ministry, Microsoft worked to dodge Denmark's notoriously high taxes by selling the rights to Navison's code to its Irish subsidiary, which is owned by Redmond offshoots in the Virgin Islands and Bermuda. Says the Register, "This allowed [Microsoft] to redirect revenues back into its corporate coffers, diverting nearly $11bn in local revenues out of the country and paying a pittance to the Danish authorities." A source told local media outlet DK that the Danish government thinks it can prove Microsoft sold the rights at significantly below market value and has submitted a tax bill of 5.6 billion Danish kroner ($980 million) for lost taxes and interest.

Financial skullduggery aside, the city of Munich hit out at Microsoft this week in an ongoing dispute over costs associated with open source. In 2004 the city began migrating 13,000 computers from Windows NT and Microsoft Office to a custom build of Ubuntu and OpenOffice, claiming the project would save the city $13 million. Microsoft fought back, disputing that figure in a study produced last year by Hewlett-Packard.

Now, ZDnet reports, the press office at the city of Munich is defending its claims and calling out several flawed assumptions in the report. Among them: It claims the report overestimated the number of IT staff working on the project by putting it at 1,000 -- which is the total number of IT staff working for Munich -- and exaggerated the cost of porting business apps to Linux. Microsoft stands by its study, saying, "The study is reliable from our perspective."

It's not only governments on the continent that aren't feeling the love for Microsoft these days. European users are rejecting Windows RT, in particular, with Samsung confirming Thursday it will halt sales of its Windows RT tablet in Germany. This is a major blow to Microsoft, as Germany is the biggest economy in Europe; weak demand for Windows RT there indicates sales hints at even softer markets in other European regions. Microsoft hasn't confirmed any sales figures since the tablet launched in October, but "DigiTimes says Taiwan-based supply chain makers estimate that the Surface RT sold up to 700,000 units, while sales of all other Windows RT tablets from the likes of Asus, Dell, Lenovo, and Samsung are estimated at about 4000,000 units in total, which is well below initial estimates of up to 4 million units," reports PC World.

Demand for Windows 8 is also failing to meet expectations, and Redmond this week "did something it's historically been loath to do: discount prices for the copies of Windows it sells to computer makers," notes Gregg Keizer of Computerworld. Allan Krans, an analyst with Technology Business Research, said Microsoft has "always been insistent on maintaining that pricing, but a discount makes sense, given the holiday season, the back-and-forth with the OEMs, and the slow start to the Surface." Though it's significant Microsoft has been able to sustain its OEM prices this long, Krans added: "But this is a reflection of the state of the computer market, which has been difficult for both OEMs and Microsoft. They have to get out in front of this shift."

Microsoft was trying to get out in front of user discontent -- and a possible avalanche of threatened lawsuits -- when it reversed its Office 2013 license transfer rule this week. InfoWorld's Woody Leonhard has been a vocal opponent of the controversial rule, which stated that licensed users lost the ability to move their Office 2013 applications if they changed machines. Now, writes Leonhard, "if Microsoft would only allow Office 2013 upgraders the same multi-PC licensing options they had with Office 2010. " Users can hope.

Meanwhile, Microsoft -- in the words of the aforementioned Simon Phipps -- is looking like "a tired technology corporation scrambling to protect its cash cows on the legacy PC desktop and failing to gain traction in the new markets of note, namely Web information and the devices that provide access to it."

This article, "Microsoft vs. the world: The punches keep coming," was originally published at Get the first word on what the important tech news really means with the InfoWorld Tech Watch blog. For the latest business technology news, follow on Twitter.

Copyright © 2013 IDG Communications, Inc.

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