Elated investors greeted chairman Bill Gates and chief
executive officer Steve Ballmer for Microsoft's victory in
the titanic antitrust lawsuit brought against it by the
Department of Justice and assorted state attorneys general.
They also demanded that Microsoft distribute its pile of
cash - $40 billion in monopoly profits - as dividends.
But Microsoft may need that hoard. The battle is far from
over. The European Commission, though much weakened
by recent European Court of First Instance rulings against
its competition commissioner, Mario Monti, can fine the
company up to one tenth its worldwide turnover if it finds
against it. Microsoft is being investigated by the European
watchdog for anti-competitive practices now threatening
to spread into the high-end server software and digital
media markets.
But the software colossus faces an even more daunting
third front in central and eastern Europe and Asia. It is the
war against piracy. Both its operating system, Windows,
and its office productivity suite, Office, are widely
cracked and replicated throughout these regions.
Three years ago, Microsoft negotiated a $3 million
settlement with the government of Macedonia, one of the
single largest abusers of intellectual property rights in this
tiny country. More than 1 percent of Macedonia's GDP is
said by various observers to be derived from software and
digital content piracy.
According to Yugoslavia's news agency, Tanjug, The
governments of Serbia and Yugoslavia purchased, last
month, 30,000 software licenses from the Redmond giant.
Another 10-15,000 are in the pipeline. Aleksandar
Bojovic, public relations manager of Microsoft's
representative office in Belgrade was ebullient:
"Before the signing of an agreement on a strategic
partnership with authorities of Yugoslavia and Serbia, the
percentage of legal software used by the citizens and
industry of Serbia and Montenegro was only a few
percents. Presently it is about 20 percents. Microsoft is
more than surprised at the interest for legalization that
exists in Yugoslavia".
According to the Yugoslav newspaper Danas, Microsoft
Yugoslavia has developed versions of Windows and
Office in Serbian, replete with a spell-checker. There are
c. 1 million computers in Yugoslavia. The company
undertook, last year, to revamp the Yugoslav labyrinthine
health, education, customs and tax systems. It also sent
representatives to a delegation of businessmen that visited
Bosnia-Herzegovina in February.
Microsoft obstinately refused to price its products
differentially - to charge less in poorer markets. The
Office suite costs the equivalent of 6 weeks of the average
wage in Macedonia and a whopping 3 months' wages in
Serbia. This extortionate pricing gave rise to resentment
and thriving markets in pilfered Microsoft applications.
Pirated software costs between $1.5 per compact disk in
Macedonia and $3 in Moscow's immense open-air
Gorbushka market.
According to the Russia-based Compulog Computer
Consultants, quoted by USA Today, most communist
states maintained large-scale hacking operations involving
not only the security services, but also the computers and
electrical engineering departments of universities and
prestigious research institutes. American bans on the sale
of certain software applications - such as computer-aided
design and encryption - fostered the emergence of an
officially-sanctioned subculture of crackers and pirates.
In the last few years, Russian organized crime has evolved
to incorporate computer fraud, identity theft, piracy of
software and digital media and other related offenses. The
Russian mafia employs programmers and graduates of
computer sciences. The British Daily Express reported in
September that - probably Russian - hackers broke into
Microsoft's computer network and absconded with
invaluable source codes. These are believed to be now
also in the possession of the FSB, the chief successor to
Russia's notorious KGB.
The Business Software Alliance, a United States based
trade group, claims that 87-92 percent of all business
computer programs used in Russia are bootlegged - a
piracy rate second only to China's. Microsoft sells c. $80-
100 million a year in the Russian Federation and the CIS.
Had it not been for piracy, its revenues could have
climbed well above the $1 billion mark.
According to Moscow Times and RosBalt, Microsoft's
sales in Russia almost doubled in the last 12 months and it
has decided to expand into the regions outlying Moscow
and into Kazakhstan and Ukraine. Yet, the company's
attempts to stamp out illicit copying in the last years of
Russian president Boris Yeltsin's regime - including a
much publicized visit by Bill Gates and a series of
televised raids on disk stamping factories - floundered and
yielded a wave of xenophobic indignation.
Still, central and eastern Europe is a natural growth
market for the likes of Microsoft. The region is awash
with highly qualified, talented, and - by Western measure
- sinfully cheap experts. Purchasing power has increased
precipitously in countries like the Czech Republic,
Hungary, Slovakia, Slovenia, parts of Russia, and Croatia.
Both governments and businesses are at the initial stages
of investing in information technology infrastructure.
Technological leapfrogging rendered certain countries
here more advanced than the West in terms of broadband
and wireless networks.