Cisco appeals approval of Microsoft-Skype deal

Cisco is appealing the European Commission's approval of Microsoft's purchase of Skype.

Story highlights

  • Cisco to appeal Microsoft-Skype deal citing competition concerns
  • $8.5B deal got green light in October, five months after it was announced
  • Cisco wants EU to push for open videoconferencing standards
  • Microsoft says it's confident the deal will pass any further scrutiny
Cisco Systems is to appeal against the European Union's regulatory clearance of Microsoft's takeover of Skype, it has announced, citing concerns that the new entity will dominate video calling to the detriment of the wider market.
The network equipment maker, which sells a range of high-end video conferencing equipment, wants the EU's courts to consider whether the Microsoft-Skype alliance should have been compelled to open up its popular video network to callers from other platforms as a precondition for receiving clearance.
The European Commission cleared the $8.5bn acquisition in October, five months after it was announced, without resorting to an in-depth investigation.
Cisco unsuccessfully argued at the time that a combination of Skype's 145m active users with Microsoft's own networking tools would effectively make it prohibitively difficult for other groups to compete.
It wants the EU to push for open videoconferencing standards, that would allow its own users to call contacts on Skype or other platforms such as Google Talk.
"This appeal is about one thing only: securing standards-based interoperability in the video-calling space," Cisco wrote in a blog post explaining its Wednesday filing. "Making a video-to-video call should be as easy as dialling a phone number. Today, however, you can't make seamless video calls from one platform to another, much to the frustration of consumers and business users alike."
Cisco shares up 45% in last six months
Cisco shares up 45% in last six months


    Cisco shares up 45% in last six months


Cisco shares up 45% in last six months 03:05
Cisco is unlikely to be able to block the deal by bringing it to the General Court of the EU, which considers appeals against EU decisions, but could prompt the Commission to reconsider its stance and extract further concessions from Microsoft.
Cisco has been struggling to turn around its business in the past year, backtracking on experiments in 10 new areas and undergoing a drastic restructuring that has resulted in 11,000 job losses. Cisco now has 63,465 employees worldwide.
The company has been refocusing on its core businesses in switching and routing equipment, as well as on videoconferencing, a business communications format the company believes will grow to be as pervasive as telephone and email. Cisco's video products have been a successful segment for the company.
Though Skype is a video communication tool for consumers, Cisco believes that Microsoft intends to turn it into a business communication tool that it will bundle with other Microsoft services, cutting out the opportunity for Cisco to sell its video product as a standalone.
"[Microsoft] has made it increasingly hard for competing enterprise US IT platforms to participate on an equal basis," said a person familiar with the appeal.
The person said that Cisco had pursued "regular, consistent, and intensive communication" with Microsoft over the matter, but found compromise elusive.
A person familiar with Microsoft's position said Cisco's demands in the negotiation were unclear and the person believed Cisco was looking to protect its dominant position in the unified business communications market.
"The European Commission conducted a thorough investigation of the acquisition, in which Cisco actively participated, and approved the deal in a 36-page decision without any conditions," Microsoft said. "We're confident the Commission's decision will stand up on appeal."
The European Commission declined to comment.