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Microsoft (MSFT) to Unbundle Teams From Office 365 in Europe
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Microsoft (MSFT - Free Report) recently announced to make some proactive changes in response to the European Commission's (EC) formal investigation regarding the bundling of Microsoft Teams with Microsoft 365 and Office 365 suites for business customers in the European Economic Area (EEA) and Switzerland.
Salesforce.com (CRM - Free Report) -owned Slack, a fierce rival of Microsoft, filed a complaint in July 2020, accusing MSFT of anti-competitive behavior by forcing Teams onto Office subscribers and obscuring its true cost. This move led to the European Union (EU) investigation that started in October 2021.
Starting from Oct 1, 2023, the company will unbundle Microsoft Teams from its Microsoft 365 and Office 365 suites in the EEA and Switzerland. This means that customers in these regions will have the option to choose a business suite without Teams at a lower price (2 euros per month or 24 euros per year).
Teams will still be available for new enterprise customers to purchase separately at a price of 5 euros per month or 60 euros per year. Existing enterprise customers, who already have a suite with Teams, can choose to remain with their current suite or move to a suite without Teams.
Microsoft acknowledges the need for better interoperability between rival communication and collaboration solutions and Microsoft 365 and Office 365 suites. The company plans to enhance its existing resources on interoperability, making it easier for application developers to work with Microsoft 365 and Office 365 apps and services.
New support resources will be created to guide developers and customers in using application programming interfaces and extensibility features, including data transfer from Teams to other solutions.
MSFT will develop new mechanisms to allow third-party solutions to host Office web applications. This move aims to address requests from competitors of Teams who wish to rely on Microsoft's functionality instead of building their own solutions. This approach will be similar to how the company hosts Office web applications within Teams.
Microsoft suggested that these steps may not necessarily resolve all concerns, but the company sees them as constructive actions to address immediate issues. MSFT remains open to further engagement with the EC and other stakeholders to find pragmatic solutions that benefit both customers and developers in Europe.
The Zacks Consensus Estimate for MSFT’s first-quarter fiscal 2024 revenues is pegged at $54.41 billion, indicating year-over-year growth of 8.56%. The consensus mark for earnings is pegged at $2.65 per share, indicating a year-over-year increase of 12.77%.
Mounting Pressure on Microsoft's Cloud Business Practices
The tech giant previously faced a fine of 2.2 billion euros ($2.40 billion) in EU antitrust over the past decade for bundling or tying multiple products together.
The EU is also reportedly worried about Microsoft's data collection practices and whether it complies with the privacy regulations, such as the General Data Protection Regulation.
In May, the EC opened an investigation into MSFT's Azure cloud business. The probe comes amid rising concerns that the U.S. tech giant is leveraging its market power to edge out rivals.
The EC's investigation is focused on whether Microsoft is using its dominant position in the operating system market to give its Azure cloud business an unfair advantage. The probe also investigates if MSFT is using its relationships with large customers to lock them into its Azure cloud platform.
German cloud provider, Nextcloud, has also filed a complaint with the EU about the bundling of OneDrive with Windows. There are also concerns from other cloud providers, both local European shops and global rivals, about the cost of running Microsoft software in their own clouds.
Microsoft settled a joint complaint brought by OVHcloud, DCD and Aruba S.p.a in March, although the contents were confidential and there is no intent to make them public, prompting critics to complain over the parties' lack of transparency.
MSFT's attempt to acquire Activision Blizzard is facing regulatory scrutiny in the U.K. The U.K.'s Competition and Markets Authority (CMA) had initially blocked the acquisition due to concerns about potential anti-competitive effects in the emerging cloud gaming market.
However, Microsoft has submitted a new proposal for the acquisition, which includes concessions aimed at addressing these concerns. This restructuring involves transferring the cloud streaming rights for all current and new Activision Blizzard PC and console games released over the next 15 years to Ubisoft Entertainment (UBSFY - Free Report) . The CMA will now review this new proposal, with a deadline for a decision by Oct 18.
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Microsoft (MSFT) to Unbundle Teams From Office 365 in Europe
Microsoft (MSFT - Free Report) recently announced to make some proactive changes in response to the European Commission's (EC) formal investigation regarding the bundling of Microsoft Teams with Microsoft 365 and Office 365 suites for business customers in the European Economic Area (EEA) and Switzerland.
Salesforce.com (CRM - Free Report) -owned Slack, a fierce rival of Microsoft, filed a complaint in July 2020, accusing MSFT of anti-competitive behavior by forcing Teams onto Office subscribers and obscuring its true cost. This move led to the European Union (EU) investigation that started in October 2021.
Starting from Oct 1, 2023, the company will unbundle Microsoft Teams from its Microsoft 365 and Office 365 suites in the EEA and Switzerland. This means that customers in these regions will have the option to choose a business suite without Teams at a lower price (2 euros per month or 24 euros per year).
Teams will still be available for new enterprise customers to purchase separately at a price of 5 euros per month or 60 euros per year. Existing enterprise customers, who already have a suite with Teams, can choose to remain with their current suite or move to a suite without Teams.
Microsoft acknowledges the need for better interoperability between rival communication and collaboration solutions and Microsoft 365 and Office 365 suites. The company plans to enhance its existing resources on interoperability, making it easier for application developers to work with Microsoft 365 and Office 365 apps and services.
New support resources will be created to guide developers and customers in using application programming interfaces and extensibility features, including data transfer from Teams to other solutions.
MSFT will develop new mechanisms to allow third-party solutions to host Office web applications. This move aims to address requests from competitors of Teams who wish to rely on Microsoft's functionality instead of building their own solutions. This approach will be similar to how the company hosts Office web applications within Teams.
Microsoft suggested that these steps may not necessarily resolve all concerns, but the company sees them as constructive actions to address immediate issues. MSFT remains open to further engagement with the EC and other stakeholders to find pragmatic solutions that benefit both customers and developers in Europe.
Shares of this Zacks Rank #3 (Hold) company have gained 36.7% year to date compared with the Zacks Computer and Technology sector’s rise of 40.3% in the same period. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for MSFT’s first-quarter fiscal 2024 revenues is pegged at $54.41 billion, indicating year-over-year growth of 8.56%. The consensus mark for earnings is pegged at $2.65 per share, indicating a year-over-year increase of 12.77%.
Microsoft Corporation Price and Consensus
Microsoft Corporation price-consensus-chart | Microsoft Corporation Quote
Mounting Pressure on Microsoft's Cloud Business Practices
The tech giant previously faced a fine of 2.2 billion euros ($2.40 billion) in EU antitrust over the past decade for bundling or tying multiple products together.
The EU is also reportedly worried about Microsoft's data collection practices and whether it complies with the privacy regulations, such as the General Data Protection Regulation.
In May, the EC opened an investigation into MSFT's Azure cloud business. The probe comes amid rising concerns that the U.S. tech giant is leveraging its market power to edge out rivals.
The EC's investigation is focused on whether Microsoft is using its dominant position in the operating system market to give its Azure cloud business an unfair advantage. The probe also investigates if MSFT is using its relationships with large customers to lock them into its Azure cloud platform.
German cloud provider, Nextcloud, has also filed a complaint with the EU about the bundling of OneDrive with Windows. There are also concerns from other cloud providers, both local European shops and global rivals, about the cost of running Microsoft software in their own clouds.
Microsoft settled a joint complaint brought by OVHcloud, DCD and Aruba S.p.a in March, although the contents were confidential and there is no intent to make them public, prompting critics to complain over the parties' lack of transparency.
MSFT's attempt to acquire Activision Blizzard is facing regulatory scrutiny in the U.K. The U.K.'s Competition and Markets Authority (CMA) had initially blocked the acquisition due to concerns about potential anti-competitive effects in the emerging cloud gaming market.
However, Microsoft has submitted a new proposal for the acquisition, which includes concessions aimed at addressing these concerns. This restructuring involves transferring the cloud streaming rights for all current and new Activision Blizzard PC and console games released over the next 15 years to Ubisoft Entertainment (UBSFY - Free Report) . The CMA will now review this new proposal, with a deadline for a decision by Oct 18.