Microsoft Corporation (MSFT) wins in court against Cisco for Skype deal concerns

Posted Dec 11, 2013

Microsoft Corporation (NASDAQ:MSFT) was able to defeat Cisco Systems in court regarding competition concerns in their $8.5 billion acquisition of Skype. Europe’s second-highest court ruled against claims by Cisco that the Microsoft-Skype deal would harm competition. Microsoft will be able to continue marketing Skype video calling to consumers and businesses without having to make concessions to Cisco Systems.

Cisco Systems sells expensive hardware for companies to set up video conferencing. But Microsoft enables enterprises to perform similar services through computers that have Skype.

Cisco claims that Microsoft’s acquisition of Skype would create a monopoly in the video and voice messaging services. Cisco said that the European Commission was wrong for approving a deal without demanding concessions from Microsoft. The General Court in Luxembourg said that Cisco failed to show how the takeover would harm competition.

“Microsoft’s acquisition of Skype is compatible with the (European Union’s) internal market. The merger does not restrict competition either on the consumer video communications market or on the business video communications market,” stated the judges.

The court said that Cisco’s large enterprise communications market share and the existence of other rivals prevents Microsoft from monopolizing the competition.

Cisco filed the challenge with Skype rival Messagenet SpA. The companies will not be appealing to the EU Court of Justice.

“Cisco is disappointed that the court did not require the Commission to revisit inter-operability requirements for the Microsoft/Skype merger,” stated Cisco spokeswoman Alison Stokes in an interview with Reuters. “However we remain committed to inter-operability and will continue to work to make video calling as easy as making a phone call or sending an email.”

Consumers are starting to prefer voice and video services that are alternatives to Skype. This includes Google Hangouts, Google Talk, WhatsApp, Viber, and Snapchat. Skype has over 280 million users that spend over 100 million minutes per month on the service.

This case was filed under T-79/12 Cisco Systems and Messagenet SpA v Commission.

[Source: Reuters]