At the height of the tech boom, Microsoft inspired an equal mix of loathing, awe and imitation in Europe. Mostly what’s left is the loathing.
The U.S. court ruling against what critics claim is a predatory monopoly has shattered the image of Microsoft as a role model for young European entrepreneurs. Now that the American government has abandoned efforts to break up the world’s largest software company, the center of anti-Microsoft activity has shifted to Europe. Why? Microsoft embodies a giant American threat to some of Europe’s most promising technology–and its dearest values. And now that the bubble era is over, Europe is no longer too dazzled by American business to defend itself.
There are four active fronts in this battle. European investigators are examining charges that Microsoft is angling to create a monopoly in the server market, which could lead to a $2 billion fine later this year. They are also eying the Redmond giant as a threat to privacy. Microsoft has launched an online ID program called Passport, which could give the company a powerful tool to collect personal info on all its customers. That spooks computer users everywhere. But Europe has strict privacy laws that could pose a major roadblock. Meanwhile Linux, the free Finnish alternative to Windows, is broadening its cult following to become the server of choice for many European companies. In recent weeks the governments of Norway and Germany have chosen Linux servers to reduce their reliance on Microsoft. Perhaps most important, Nokia of Finland is leading an industry effort to prevent Bill Gates from doing to the mobile phone what he did to the PC–making it just an increasingly cheap shell for expensive Microsoft software.
Until recently, European critics were just one element in a global subculture of Microsoft haters. Techies like to dump on Windows for everything from reliability and security (think Love Bug) to arrogance and cost. Magnus Borg, founder of the Linux Users Group in Stockholm, complains about irritating American marketing. “It’s that peppy thing that we have a problem with.” There is also a feeling of loyalty, especially in Scandinavia, to Linux founder Linus Torvalds, a Finn. Otherwise the attitude is more anti-monopoly than anti-American. “Microsoft is a nation unto itself,” says Volker Hett, a Linux specialist in Bremen who ends his correspondence with: “This e-mail is written 100 percent Microsoft free.”
Still, transatlantic culture clashes animate the growing resistance to Microsoft, particularly on privacy matters. European law and custom hold that all information is private unless the public can demonstrate a need to know. U.S. law holds the opposite: all data is public unless there’s a good reason to keep it secret. Microsoft walked right into this contradiction when it introduced Passport two years ago, as part of its .NET strategy to become a major player in Web services. Passport’s extensive ability to process personal information set off alarm bells in the European Union, which has much tighter rules than the States about what Web sites can do with private data. An EU task force of national data-privacy agencies held two meetings this year dedicated entirely to Microsoft. It has released a list of ways Microsoft could run into legal trouble if Passport is not modified or better explained, including how it deals with customer consent and control over personal information. Microsoft believes that it is in compliance with EU law, but stresses that they are in an “ongoing dialogue.”
At the same time Bill Gates is going up against an anti-monopoly regulator who is not at all intimidated by boardroom icons. Competition Commissioner Mario Monti believes that Microsoft leveraged its dominance of operating systems for PCs to boost sales of software for servers. (Any time a company adds a Web site, it needs to invest in a string of servers, so that’s where the real commercial action is.) The commission also alleges that Microsoft is illegally bundling its Media Player with Windows, which hinders competition. Microsoft denies any wrongdoing. But a recent setback at the European Court of Justice, which criticized Monti’s team for sloppy work, appears only to have strengthened their resolve to nail the case against Microsoft. “I get no sense they are backing off,” says a Brussels attorney familiar with the case.
And now Microsoft is poised to hit Europe where it lives: on the mobile phone. Executives at Nokia insist there is no Nokia-vs.-Microsoft battle brewing, and note they are probably Microsoft’s largest customer in Finland. But most Europeans, proud of the one tech field they dominate, are not so coy. “Microsoft wants to enter this market, and no one wants Microsoft around,” says Jon von Tetzchner, founder of Opera Software, a Norwegian company that makes a browser for mobile phones. Adds Erik Ringertz, London director for Swedish consulting firm Netlight, “It is actually very emotional, especially in Scandinavia, because we had this advantage.”
Microsoft’s strategy to put a scaled-down version of Windows onto mobile phones got off to a bad start in 1998. Overtures to Nokia were spurned, a joint venture with Ericsson fizzled. Microsoft’s Pocket PC software for mobile devices flopped. Put on alert, mobile rivals banded together in fear of Microsoft. Nokia, Ericsson, Psion and (later) Motorola joined a consortium called Symbian to create a standard mobile operating system, as a pre-emptive alternative. Recently, Nokia decided to license cheap copies of the software that controls the functions of the mobile phone. The idea: make the software inexpensive and interchangeable, and keep the hardware pricey, thereby preventing Microsoft from hollowing out the profit in Nokia mobile phones the way it did with IBM and PCs.
Now Microsoft is challenging the Nokia approach head-on. It has licensed its Smartphone software to four obscure mobile-phone makers (the big names declined) and is working with 26 manufacturers to create Pocket PCs for its new, improved Pocket PC software. To get around the brand power of Nokia, which sells 35 percent of all mobile phones, Microsoft is asking telecom operators to distribute its products to customers. The battle is heating up: both Nokia and Microsoft have just launched “smart” phones in Europe that can send photos and browse the Web.
Their strategies could not be more different. Microsoft sees the future of wireless as an extension of the PC, and is betting that people will be drawn to the familiar Windows look and function of its software. “We come from the data world, and data in the future will drive revenues, not just the looks of a phone,” says Robbie Ray Wright, head of Microsoft’s mobile business in Europe. Pertti Korhonen, head of Nokia’s Mobile Software division, respectfully disagrees. He says Microsoft’s data-first approach will yield a scaled-down computer: Nokia, in contrast, wants software designed to fit the space and battery limits of a mobile phone people want to hold. Hardware matters to Nokia. “Mobile communication devices should have a personal look and feel,” he says. “That’s in our DNA.”
Europe knows it’s up against a tough and relentless rival. Yet even Microsoft’s most committed foes tend to be customers, too. After describing how his programmer father raised him on Linux, German Internet consultant Tobias Gewinner, 21, admits beneath his breath, “You simply need Microsoft for some games!” The issue is not whether Microsoft will advance in Europe. It’s how far.
