EU Asks Microsoft to Remove Vista Security Features

[Bio-Hazard]

How stupid is this of the EU..............:confused:

The EU calls for Microsoft to remove security features from Vista


It looks as though Microsoft and European regulators are butting heads once again (http://online.wsj.com/article/SB115806114589360506.html?mod=rss_whats_news_techn ology). The European Union is asking Microsoft to remove new security features, including its improved built-in firewall, that have been added to Vista. Microsoft is urging the European to back off and has threatened to delay Vista’s European launch (http://www.informationweek.com/management/showArticle.jhtml?articleID=192700289) as a result of the latest calls for feature reductions. The new features, which make Vista a more stable and secure platform that its Windows XP predecessor, are seen as a stifling competition. "Less diversity and innovation would ultimately harm consumers through reduced choice and higher security risks," said Jonathon Todd, an EU competition spokesman.

[Kasrkin Guard]

Far too many have been saying this and it's quite simple really, pull away from the EU and see how they fare. :roll:

[dracos]

So if MS pulls out of the EU are they all going to switch to Linux?!?!?!

Somehow I just don't see that happening anytime soon, way to much work involved...

Although I would like to see it though, talk about chaos!!!!

[Bio-Hazard]

That's the way I see it as well. Hell, the EU has already fined MS almost a billion in the last 2 years, why take the chance for anymore huge fines, just don't seel it in the EU and let the users that really want Vista order it from somewhere outside of their silly area rules..................;)

[Kougar]

Yeah, this is just such total BS. Attempting to force MS to leave security up to third parties benefits NO ONE, not MS, and especially not those who will use Vista. I wonder if there are any security companies pulling strings in the EU, or if they were simply trying to milk the MS piggy bank again, as if $1 Billion isn't enough for them already.

What is even more ironic? The EU has not even stated what they want MS to do exactly.

Microsoft on Thursday threatened to delay the release of Windows Vista in the Europe Union unless EU antitrust regulators spell out the changes they demand in the operating system.

Well guess what... the EU IS after more money. I wonder how much larger than $1 billion they could be planning?

Microsoft may be wary of future fines because of a new fine structure, first published in June, that was made official Saturday, Sept. 2. The new schedule lets the EU punish companies in violation of antitrust laws with larger fines to larger companies at fault for longer periods of time. In particular, the new rate structure allows the Commission to apply much larger fines for repeat offenders.

[Bio-Hazard]

The EU will just wait until after it's out and then fine the crap out of MS. Hell, it seems like MS is supporting the EU Commission high dollar life style and their next pay raise as well.

[Enigmachine]

As far as I can tell, they want SOME of the security features to be removed, not all of them. A firewall can be modular without slowing down the OS, but things like secure memory managers can't really be removed without making it look like a different OS. In that case it would be crazy to ask Microsoft to remove those features that are essential to the OS.

It makes sense for the EU to help the diversity of security products, after all would you really trust all of your government's security to the closed code of a USA-based company?

I think that's one of the reason why many EU countries are in favor of the use of Linux, they sometimes make their own flavour of it too. Would making Vista not available in the EU really cause chaos? I don't think so; governments could keep using XP or Linux, only gamers really need it for DX10. :) What are the selling points of Vista except DX10 & security?

So Microsoft will probably bend over to please the EU and release an "Entreprise" or "Government" version that doesn't have the extra security. Of course it will be more expensive than a normal complete version, MS guys are no fool, if the EU governments are asking for less features, by Jove they're going to pay for it! :)

Just my 2 cents. Need coffee.

[vfrex]

Do you really think Microsoft could get out of the EU? Think about it. Gates owns something like 957,499,336 shares of MSFT. If there was any credible threat that microsoft would LEAVE the EU, the stock would plummet, plain and simple. The business that they do in the EU trumps these fines by a huge margin. Leaving the EU would take a huge chunk out of their sales, and the markets know that. Not only would Gates lose a huge amount of personal wealth (showstopper right there), it is extremely immoral (if not illegal) for them to conduct in actions that would decrease shareholder value.

[Kougar]

They've already lost $1 billion, and the EU has set the stage to fine them even larger sums than $651 million in a single go should they so choose. I don't think those figures are an insignificant portion of their OS sales to the EU.

They can afford to withhold Vista just fine and let them keep using "Windows XP N" that they wanted. Considering MS's stock has been on the same line for the last four years, and that MS has been steadily buying back large portions of their own stock, and last but not least that Gates probably has enough of their stock to give him "controlling interest" (The magic number is 51% of a company's stock), then if he wants them to not sell Vista to the EU or MS goes to him for the okay first, then they are well within their shareholder rights to not sell. So that wouldn't be a problem.

Secondly the EU has not said what they WANT removed or changed. If there was something they didn't like enough to force MS to change Vista, I would think they would have already said what it was and what they wanted done. Excuse me, but didn't the EU do this the last time around and not outright tell MS what they wanted, just to sack them with a fine for "not complying"? Yes, the EU did that, and tried to make it look like it was MS not playing ball with them.

[Bio-Hazard]

Very well put Kougar......;)

[Xero (1)ne]

only gamers really need it for DX10.
im sure crackers are going to be all over dx10 compatability hacks

[vfrex]

and last but not least that Gates probably has enough of their stock to give him "controlling interest" (The magic number is 51% of a company's stock), then if he wants them to not sell Vista to the EU or MS goes to him for the okay first, then they are well within their shareholder rights to not sell. So that wouldn't be a problem.

I think you misunderstood me there. Microsoft suspending sale of their operating system to the EU would kill their stock. Gates would be shooting himself in the foot to approve of it.

[Kougar]

No, I understood you but I disagree with the conclusion.

Lets say MS releases to the EU. Then the company gets another $657million to $1billion fine because EU fails to tell MS exactly what they want (again) and then sticks it to them, their stock would also tank anyway. And because $1 billion will about kill any sort of profits made, if not cause a loss for that market segment, you can expect future dividends released to shareholders to also tank, which will only further decrease their stock valuation.

So yes they would likely take a hit for not selling to the EU, they would take much worse of a hit if they did. The only thing I don't know is the sort of yearly profit MS generates from OS sales to that region. While I am sure they would recoup a $1 billion loss over the long term, there is no way they will make up such an expense for any time in the near future, and there is nothing stopping the EU from racking up further higher fines. The EU just passed the legislation themselves to give themselves that very power.

I hope Gates tell's the CEO of MS to "go screw them". :-P

[Bio-Hazard]

That's exactly what I see happening as well Kougar, the EU is just waiting to cash in off of MS. Now MS would still beable to get some sort of cash flow/sales from end-users within the EU from online sales, so all is not lost there, there biggest loss would be from the EU OEM builders and suppliers, they wouldn't beable to offer Vista at all. And from a few things I've been reading at a few German sites, they all pretty much think the EU Comission sucks as well and would like to see Vista the same time as the rest of the world. Why don't the butt heads listen to the people.

[vfrex]

And because $1 billion will about kill any sort of profits made, if not cause a loss for that market segment, you can expect future dividends released to shareholders to also tank, which will only further decrease their stock valuation.

Windows is the gift that keeps on giving. Once you get Windows, you're going to get Office. Those two represent their two biggest markets. Even if they lose marginally the first year on Vista sales in the EU, I doubt Wall Street will care. Remember, market share is critical in this game. Microsoft can't afford to withdraw from the EU because they would lose just that. Even if selling in the EU means that they will lose money temporarily in the OS segment, they will make it back in other business components and in future OS sales. Withdrawing from EU would be a lot more costly than you are currently allowing for.

MSFT's stock has flatlined for years now precisely because they don't pay a dividend and that you can't possibly call them a GROWTH company. What reason would investors have to put their money in them? They don't grow, and they don't pay dividends. They sit around with their thumbs up their asses sporting tens of billions of dollars of cash.


Here are a few interesting tidbits I dug out of their most recent 10k:

Revenue, classified by the major geographic areas in which our customers are located, were as follows:

(In millions)

Year Ended June 30 2006 2005 2004

United States(1) $29,730 $26,949 $25,046
Other countries $14,552 $12,839 $11,789

Total $44,282 $39,788 $36,835



Due to our integrated business structure, operating costs included in one segment may benefit other segments. Therefore, these segments are not designed to measure operating income or loss that is directly related to the products included in each segment. Inter-segment cost commissions are estimated by management and used to compensate or charge each segment for such shared costs and to motivate shared effort. Segments should not be viewed as discrete or easily separable businesses.

(In millions)

Year Ended June 30 2006

Operating Income/(Loss)
Client $ 10,043
Server and Tools 3,525
Information Worker 8,982
Microsoft Business Solutions 14
MSN 111
Mobile and Embedded Devices (11 )
Home and Entertainment (1,283 )
Reconciling amounts (4,909 )

Consolidated $ 16,472






Not the best formatting, but I think it is understandable.

[Xero (1)ne]

i think i better stop reading before my head explodes from too many numbers and buisiness words:confused:

but w/e is going on, isnt it M$'s job as the seller to provide the customer with w/e it is they want to buy?

if you dont lke wuht your buying, dont buy it

cant we all just get along!?!?!:(

[Kougar]

Actually, Microsoft does pay a dividend, and has been since 2003.

On January 16 and September 12, 2003, our Board of Directors declared annual dividends on our common stock of $0.08 and $0.16 per share, respectively. The dividends were paid on March 7 and November 7, 2003, respectively, to shareholders of record at the close of business on February 21, and October 17, 2003.

Further, to see more current dividends per share here's a good table: http://www.microsoft.com/msft/reports/ar05/staticversion/10k_fr_inc.html (http://www.microsoft.com/msft/reports/ar05/staticversion/10k_fr_inc.html) $3.40 is rather absurdly huge, actually. I'm going to have to wade through the numbers, but the 8 cents and 16 cents figures do match up. (Editing this post and I haven't even posted it yet! According to their Statement of Cashflows, they have indeed paid $3.40 in divideds in the 2005 fiscal year. Total cost of this alone: $36.1 billion! :wink: ).

This is not including their offer of around ~$3 per share of stock, with their goal to purchase back $30 billion worth of their own Microsoft stock back, which is halfway completed as of last July. After looking at their statement of cash fllows, for the period of 2003-2005 alone MS has paid out $18 billion in cash for their own stock, not including the 2006 fiscal year (August 1st 2005 to July 31st, 2006) CNN Money (http://money.cnn.com/2004/07/20/technology/microsoft/index.htm).

I am still trying to find the breakdown for the total market share that belongs to the EU, however basic Revenue numbers (Revenue does not account for all expenses or any other costs) will have to do.


Year Ended June 30-----2003------2004-------2005
United States--------$22,077-----$25,046-----$26,949
Other countries------$10,110-----$11,789-----$12,839
(In millions)


Since we are primarily focused on the EU, we obviously want "other countries". The problem is, this includes EVERYONE. Canada, all of the European countries NOT a part of the EU, Latin America, China, Great Britain, etc, and all of these I named alone are major sources of income. So these numbers are already grossly overinflated, since we only need the EU segment. I'd bet the EU comprises only about 1/15th of those numbers!

Now, those raw numbers from above when * a million are $10.1, $11.7, and $12.8 billion respectively... That sounds like alot right? Now, keep in mind this number is for REVENUE. Revenue is profit, before any and all taxes (40% off for just taxes, is a safe bet), expenses, losses, and dividends to shareholders have been subtracted, including whatever was spent on the stock buyback plan ($18 billion total spent as of July 31st, 2005 remember? $8 billion from that specific fiscal year).

So! Lets guess 15% of that "$10.1, $11.7, and $12.8 billion" is actually only revenue from the EU. Now lets drop those numbers again by 40% to estimate taxes. Now keep in mind this is still before the expenses for running a business and selling products is factored in, and before dividends and their stock buyback. So I am getting $606, $707, and $770 million. That is less than $1 billion, and the actual numbers will be smaller. Taxes in the EU are usually higher than those incurred in the US from what I know, and then regular company expenses will also total in the tens to hundreds of millions.

In other words... It looks like it will take MS an absolute minimum of 2 years to recoup a $1 billion fine from the EU. And who says the EU will only stop at $1 billion, not counting expenses incurred in complying with whatever wishes the EU might hopefully decide to share with the rest of the world?

[vfrex]

They have declared special dividends on occasion. The actual amount they regularly pay out though is tiny. Can we agree that Microsoft isn't a growth company? I realize that techs don't usually pay out decent dividends, but Microsoft isn't a typical tech company. Compare their payout to mature firms in other industries.

Altria pays 3.44/share, a yield of 4.10%
MSFT is now paying 0.36/share, yielding 1.4%
Coca Cola pays 2.8%

Considering the fact that Microsoft's stock has flatlined for years, why would anybody invest in them aside from novices and experts trying to exploit short term trends? Your money would be beckst served elsewhere. Looking at it another way, if I bought equivalent positions in Microsoft and Altria's stock and held them for one year, Microsoft's stock would need to go up at least 3% more than Altria's stock for my return to be equivalent. Now expand this picture to all of the mature, large cap companies. They are safe bets because they don't move a lot, and you get a 3-4% payout over any gains or losses.

There are two things that will drive Wall Street to invest in Microsoft stock. A trusted annual dividend or the prospect of growth. The latter is unlikely. I think the share buyback is misguided because it is still a "one-time", out of the blue thing. Increasing their regular dividend payout would be the proper way to shed excess cash for them.

I also think that you are understating microsoft's revenue flow from the EU. It constitutes the second largest economic region in the world. Piracy isn't as severe in Europe as it is in Asia (and I think Latin America). I would imagine 10-15% of their international sales are from the EU at the very least.

Also: Income Taxes
Our effective tax rate for fiscal year 2006 was 31% as compared to 26% for fiscal year 2005.


NOTE 10 INCOME TAXES
The components of the provision for income taxes were as follows:

(In millions)
Year Ended June 30

2005

Current taxes:

U.S. Federal
$3,401
U.S. State and Local
152
International
911


Ultimately, I think we're running around in circles making assumptions that we can't really confirm or deny on information that Microsoft releases.

2005:
$39,788 of revenue
$33,757 of gross profit
$12,254 of Net Income (that is post expenses and taxes)

12,254/39788 = 30.8% profit margin

At the higher end of my estimate, they are making $593,000,000 in profit per year from operations in the european union. That is still just two years to make up the fines before becoming profitable in the region. They can prevent the EU from imposing another fine by doing what was requested. I doubt that would be more costly than withdrawing operations from the EU.

Ultimately, we are making assumptions on information Microsoft isn't releasing. Unless we can see how much of their revenue and profits are generated from operations in the European Union, we have no way of settling the major portion of this debate.

[Bio-Hazard]

Looks like the EU is still doing the Teaxa 2 Step, they still haven't given up any info to MS. It will dearly hurt the EU if Vista is delayed.


The Microsoft-commissioned study published on Thursday said Vista could drive $40 billion in economic activity and create 100,000 new jobs in six European countries next year.
However, International Data Corporation (IDC), the author of the report, said any delay in releasing the new product could halve the number of new jobs.
"From what we describe as the bounce effect, we estimate that at least 50,000 fewer jobs would be created," Marcel Warmardan, researcher at IDC told a news conference.

http://news.com.com/Microsoft+says+Vista+Europe+launch+on+track/2100-1016_3-6115572.html?tag=nefd.top

Jobs are a big ticket item in a area where jobs are tight anyway.

[Kougar]

To bad it wouldn't hurt those running the show, as much as such a delay would everyone else in the EU.

vFrex, how can MS do what was requested when the European Union won't even tell them what they want done? Let alone that any fines would only be $1 billion this time, not after the EU just gave themselves the power to give bigger fines, and extra-big fines to repeat offenders, namely MS.

I agree, the numbers can be worked a dozen different ways to different conclusions, although yours are roughly close to my own with the same 2 year conclusion... ;)

I can't give it up though. :-P Just looking at their statements though without throwing math around, what MS earns in the US is not quite double what the MS earns in the entire rest of the globe combined. Canada, Asia, Latin America, and those nations in Europe not a member of the EU (most noteably Great Britain) are going to shrink that half-sized figure down. So, I think it would be extremely optimistic to assume MS earns 1/4th in the EU of what they earn in the US alone.

[vfrex]

Eh, I thought Britain was in the EU. They just haven't joined the EMU.

[Bio-Hazard]

They are in Europe, but don't play the EU games, that's why they still have their own money instead of the Euro. They were one of the few countries that saw through the EU smoke screen before it started...........;)
It's sort of a strange situation there, I haven't been following it all that much after I moved back to the US.

[vfrex]

I thought they were moving towards adopting the Euro though sadly. I don't really support the EMU, but that's a topic for another thread. When it comes down to it, they ARE in the European Union.

Here is a (supposedly) Microsoft funded study: http://news.com.com/Study+Vista+could+create+50%2C000+jobs+in+Europe/2100-1016_3-6115797.html?tag=nefd.top

[GIBSON]

FYI: the only reason brittain didn't adopt the euro is because their current monetary system is worth more. Adopting the euro could have hurt their economy. There were even a few series of coins made for the UK (I own such a set).