Google filed an antitrust complaint with the European Commission on Wednesday accusing Microsoft of using unfair licensing contracts to stifle competition in the multibillion-dollar cloud computing industry.
At the heart of Google’s complaint is the allegation that Microsoft uses unfair licensing terms to “lock in” clients and exert control over the cloud market.
Google alleges that Microsoft, through its dominant Windows Server and Microsoft Office products, can make it difficult for its massive roster of clients to use anything but its Azure cloud infrastructure offering.
The internet giant said in its complaint that restrictions contained in Microsoft’s cloud licensing terms makes it harder for customers to move their workloads from Microsoft’s Azure cloud technology to competitors’ clouds, despite there being no technical barriers to doing so.
European businesses and public sector organizations have been forced to pay the firm up to 1 billion euros ($1.1 billion) a year in licensing penalties due to restrictions on customers’ ability to switch from one cloud provider to another, Google said, citing a 2023 study by CISPE, a trade body for the cloud computing sector.
The antitrust complaint from Google arrives after CISPE and its members in July agreed a settlement with Microsoft which would see the firm make changes to address competition concerns.
Referring to the CISPE settlement, Microsoft said in a statement Wednesday that it expects the European Commission to dismiss Google’s complaint.
“Microsoft settled amicably similar concerns raised by European cloud providers, even after Google hoped they would keep litigating,” a Microsoft spokesperson told CNBC via email. “Having failed to persuade European companies, we expect Google similarly will fail to persuade the European Commission.”
Microsoft’s cloud ‘tax’ at issue
In a summary of the complaint, Google — which ranks third globally in the cloud computing market behind market leaders Amazon Web Services and Microsoft Azure, respectively — said that Microsoft “harms cybersecurity and undermines innovation.”
According to Google, if a company runs Microsoft’s Office suite of productivity tools and other applications on Google Cloud Platform or other competing clouds, they are effectively required to pay a “tax” in the form of punchy licensing fees to Microsoft.
Google said that Microsoft undermined competition in cloud, and referred to findings of a U.K. Competition and Markets Authority study which determined Microsoft acquired over 60% to 70% of all new British businesses in 2021 and 2022.
Google also suggested that Microsoft’s cloud practices have potentially made businesses more prone to security issues.
In an interview with CNBC’s Arjun Kharpal Wednesday, Amit Zavery, Google Cloud’s head of platform, said Google believes Microsoft is “100%” in violation of EU antitrust rules.
“We would like the cloud market to remain and become very vibrant and open for all the providers including European vendors, vendors like us, AWS and others,” Zavery said.
“Today the restrictions does not allow choice for customers,” Zavery said. “Today the restrictions does not allow choice for customers,” he said, adding that Microsoft included restrictions once it realized the massive commercial potential of the technology.
“So, we would want those restrictions to be removed and allow customers to have and choose whatever cloud provider they think is best for them commercially and technically,” he added.
Zavery told CNBC that if Microsoft makes changes to its cloud licensing terms as a result of its complaint, Google and cloud customers more broadly would be “very happy.”
Following the July settlement agreement with Microsoft, CISPE said the tech giant would work with its members to release an enhanced version of Azure Stack HCI, a cloud infrastructure product, to offer the same features that Microsoft customers using its Azure product currently benefit from.
Google, which is not a CISPE member, said it disagreed with the settlement and chose not to participate in the agreement. Amazon Web Services, which is a CISPE member, and Alibaba‘s cloud unit AliCloud, also chose not to become part of the settlement.
For its part, Microsoft has denied that its cloud practices harm competition. In response to a cloud market study initiated by the U.K.’s Competition and Markets Authority, the firm said that it “firmly believes that the cloud services market is functioning well.”
CEO of Nvidia, Jensen Huang, speaks during the launch of the supercomputer Gefion, where the new AI supercomputer has been established in collaboration with EIFO and NVIDIA at Vilhelm Lauritzen Terminal in Kastrup, Denmark October 23, 2024.
Ritzau Scanpix | Mads Claus Rasmussen | Via Reuters
Nvidia is replacing rival chipmaker Intel in the Dow Jones Industrial Average, a shakeup to the blue-chip index that reflects the boom in artificial intelligence and a major shift in the semiconductor industry.
Intel shares were down 1% in extended trading on Friday. Nvidia shares rose 1%.
Nvidia shares have climbed over 170% so far in 2024 after jumping roughly 240% last year, as investors have rushed to get a piece of the AI chipmaker. Nvidia’s market cap has swelled to $3.3 trillion, second only to Apple among publicly traded companies.
Companies including Microsoft,Meta, Google and Amazon are purchasing Nvidia’s graphics processing units (GPUs), such as the H100, in massive quantities to build clusters of computers for their AI work. Nvidia’s revenue has more than doubled in each of the past five quarters, and has at least tripled in three of them. The company has sginaled that demand for its next-generation AI GPU called Blackwell is “insane.”
With the addition of Nvidia, four of the six trillion-dollar tech companies are now in the index. The two not in the Dow are Alphabet and Meta.
While Nvidia has been soaring, Intel has been slumping. Long the dominant maker of PC chips, Intel has lost market share to Advanced Micro Devices and has made very little headway in AI. Intel shares have fallen by more than half this year as the company struggles with manufacturing challenges and new competition for its central processors.
Intel said in a filing this week that the board’s audit and finance committee approved cost and capital reduction activities, including lowering head count by 16,500 employees and reducing its real estate footprint. The job cuts were originally announced in August.
The Dow contains 30 components and is weighted by the share price of the individual stocks instead of total market value. Nvidia put itself in better position to join the index in May, when the company announced a 10-for-1 stock split. While doing nothing to its market cap, the move slashed the price of each share by 90%, allowing the company to become a part of the Dow without having too heavy a weighting.
The switch is the first change to the index since February, when Amazon replaced Walgreens Boots Alliance. Over the years, the Dow has been playing catchup in gaining exposure to the largest technology companies. The stocks in the index are chosen by a committee from S&P Dow Jones Indices.
Charles Liang, chief executive officer of Super Micro Computer Inc., during the Computex conference in Taipei, Taiwan, on Wednesday, June 5, 2024. The trade show runs through June 7.
Annabelle Chih | Bloomberg | Getty Images
Super Micro investors continued to rush the exits on Friday, pushing the stock down another 9% and bringing this week’s selloff to 44%, after the data center company lost its second auditor in less than two years.
The company’s shares fell as low as $26.23, wiping out all of the gains for 2024. Shares had peaked at $118.81 in March, at which point they were up more than fourfold for the year. Earlier that month, S&P Dow Jones added the stock to the S&P 500, and Wall Street was rallying around the company’s growth, driven by sales of servers packed with Nvidia’sartificial intelligence processors.
Super Micro’s spectacular collapse since March has wiped out roughly $55 billion in market cap and left the company at risk of being delisted from the Nasdaq. On Wednesday, as the stock was in the midst of its second-worst day ever, Super Micro said it will provide a “business update” regarding its latest quarter on Tuesday, which is Election Day in the U.S.
The company’s recent challenges date back to August, when Super Micro said it would not file its annual report on time with the SEC. Noted short seller Hindenburg Research then disclosed a short position in the company and wrote in a report that it identified “fresh evidence of accounting manipulation.” The Wall Street Journal later reported that the Department of Justice was in the early stages of a probe into the company.
Super Micro disclosed on Wednesday that Ernst & Young had resigned as its accounting firm just 17 months after taking over from Deloitte & Touche. The auditor said it was “unwilling to be associated with the financial statements prepared by management.”
A Super Micro spokesperson told CNBC that the company “disagrees with E&Y’s decision to resign, and we are working diligently to select new auditors.” Super Micro does not expect matters raised by Ernst & Young to “result in any restatements of its quarterly financial results for the fiscal year ended June 30, 2024, or for prior fiscal years,” the representative said.
Analysts at Argus Research on Thursday downgraded the stock in the intermediate term to a hold, citing the Hindenburg note, reports of the Justice Department investigation and the departure of Super Micro’s accounting firm, which the analysts called a “serious matter.” Argus’ fears go beyond accounting irregularities, with the firm suggesting that the company may be doing business with problematic entities.
“The DoJ’s concerns, in our view, may be mainly about related-party transactions and about SMCI products ending up in the hands of sanctioned Russian companies,” the analysts wrote.
In September, the month after announcing its filing delay, Super Micro said it had received a notification from the Nasdaq indicating that its late status meant the company wasn’t in compliance with the exchange’s listing rules. Super Micro said the Nasdaq’s rules allowed the company 60 days to file its report or submit a plan to regain compliance. Based on that timeframe, the deadline would be mid-November.
Though Super Micro hasn’t filed financials with the SEC since May, the company said in an August earnings presentation that revenue more than doubled for a third straight quarter. Analysts expect that, for the fiscal first quarter ended September, revenue jumped more than 200% to $6.45 billion, according to LSEG. That’s up from $2.1 billion a year earlier and $1.9 billion in the same fiscal quarter of 2023.
Peopl walk outside Steve Jobs Theater at the Apple Park campus before Apple’s “It’s Glowtime” event in Cupertino, California, on Sept. 9, 2024.
Nic Coury | AFP | Getty Images
Apple will buy Pixelmator, the creator of image editing apps for Apple’s iPhone and Mac platforms, Pixelmator announced Friday in a blog post.
Pixelmator, a Lithuanian company, was founded in 2007, and in recent years has been best known for Pixelmator and Pixelmator Pro, which compete with Adobe Photoshop. It also makes Photomator, a photo editing app.
Apple has highlighted Pixelmator apps over the years in its keynote product launches. In 2018, Apple named Pixelmator Pro its Mac App of the year, citing the company’s enthusiastic embrace of Apple’s machine learning and artificial intelligence capabilities, such as removing distracting objects from photos or making automated color adjustments.
“We’ve been inspired by Apple since day one, crafting our products with the same razor-sharp focus on design, ease of use, and performance,” Pixelmator said in its blog post.
Apple does not acquire as many large companies as its Silicon Valley rivals. It prefers to make smaller acquisitions of companies with products or people that it can use to create Apple features. Neither Pixelmator nor Apple provided a price for the transaction.
Pixelmator said in its blog post that there “will be no material changes to the Pixelmator Pro, Pixelmator for iOS, and Photomator apps at this time.”
Earlier this week, Apple released the first version of Apple Intelligence, a suite of features that includes photo editing abilities such as Clean Up, which can remove people or objects from photos using AI.
Apple has acquired other popular apps that received accolades at the company’s product launches and awards ceremonies.
In 2020, Apple bought Dark Sky, a weather app that eventually became integrated into Apple’s default weather app. In 2017, it bought Workflow, an automation and macro app that eventually became Shortcuts, the iPhone’s scripting app, as well as the groundwork for a more capable Siri assistant.