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21 April 2024

Microsoft to separate Teams and Office globally amid antitrust scrutiny

Published
By Reuters

Microsoft (MSFT.O), opens new tab will sell its chat and video app Teams separately from its Office product globally, the U.S. tech giant said on Monday, six months after it unbundled the two products in Europe in a bid to avert a possible EU antitrust fine.

The European Commission has been investigating Microsoft's tying of Office and Teams since a 2020 complaint by Salesforce-owned (CRM.N), opens new tab competing workspace messaging app Slack.

Teams, which was added to Office 365 in 2017 for free, subsequently replaced Skype for Business and became popular during the pandemic due in part to its video conferencing.

Rivals, however, said packaging the products together gives Microsoft an unfair advantage. The company started selling the two products separately in the EU and Switzerland on Oct. 1 last year.

"To ensure clarity for our customers, we are extending the steps we took last year to unbundle Teams from M365 and O365 in the European Economic Area and Switzerland to customers globally," a Microsoft spokesperson said.

"Doing so also addresses feedback from the European Commission by providing multinational companies more flexibility when they want to standardise their purchasing across geographies."

After the Justice Department sued Microsoft in 1998 for using its dominance of the Windows platform to stifle competition from rival web browsers, the company eventually made concessions that loosened its control of what software computer manufacturers could install on their products.

Rival internet browsers surged in popularity following that change, but Microsoft's separation of Teams from Office may not have as dramatic an effect, analysts said.

"Enterprise products are a different beast and Teams is so embedded into workflows that I don't think this has that same impact," said RBC Capital Markets analyst Rishi Jaluria.

After Microsoft Teams was unbundled from the Microsoft 365 and Office Suites in Europe in Oct. 2023, the platform has seen the size of its user base remain mostly unchanged, according to Sensor Tower data.

According to the market intelligence firm's estimates, Microsoft Teams' mobile app Monthly Active Users in the first quarter of 2024 remained relatively flat compared to fourth quarter of 2023, both at 19 million.

Microsoft said in a blogpost that it was introducing a new lineup of commercial Microsoft 365 and Office 365 suites that do not include Teams in regions outside the EEA (European Economic Area) and Switzerland, and also a new standalone Teams offering for Enterprise customers in those regions.

Starting April 1, customers can either continue with their current licensing deal, renew, update or switch to the new offers.

For new commercial customers, prices for Office without Teams range from $7.75 to $54.75 depending on the product while Teams Standalone will cost $5.25. The figures may vary by country and currency. The company did not disclose prices for current packaged products.

Microsoft's unbundling may not be enough to stave off EU antitrust charges which will likely be sent to the company in the coming months as rivals criticise the level of the fees and the ability of their messaging services to function with Office Web Applications in their own services, sources said.

"This move may not completely ward off further regulatory scrutiny, but showing regulators Microsoft is willing to be proactive could still soften the stance by regulators," according to Gil Luria, a senior software analyst at D.A. Davidson.

Microsoft, which has racked up 2.2 billion euros ($2.4 billion) in EU antitrust fines in the past decade for tying or bundling two or more products together, risks a fine of as much as 10% of its global annual turnover if found guilty of antitrust breaches.

($1 = 0.9265 euros)