* Cisco appeals EU OK of Microsoft/Skype merger
* Says EU should have imposed tougher conditions
* Microsoft confident deal will stand up on appeal
(Adds lawyer comment, more Cisco comment)
By Nicola Leske and Foo Yun Chee
Feb 15 Cisco Systems Inc has
challenged EU clearance of Microsoft Corp's acquisition
of Internet voice and video service Skype at Europe's second
highest court, saying the commission should have put tougher
conditions on the deal.
"Cisco does not oppose the merger, but believes the European
Commission should have placed conditions that would ensure
greater standards-based interoperability, to avoid any one
company from being able to seek to control the future of video
communications," Cisco said on Wednesday.
Cisco launched its apppeal in the EU's General Court in
concert with Italian fixed-line and voice over Internet protocol
(VoIP) telephone provider Messagenet SpA, a Skype rival.
Microsoft said it was confident the decision would stand up
"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,"
a spokesman said.
The Luxembourg-based General Court generally backs the
Commission in antitrust cases, but it has on occasion overturned
Nevertheless, challenging the Commission's decisions in EU
courts is risky, with the last successful appeal dating back to
"It is a huge uphill battle; there has only been one
successful appeal by a third party against a merger cleared by
the EU Commission, but if the companies can raise good
arguments, it may stand a chance," said an antitrust lawyer who
declined to be named because of the sensitivity of the case.
The court, known then as the Court of First Instance,
annulled in 2006 the Commission's clearance of the 2004 merger
between the Sony Music and BMG record labels after a challenge
by Impala, an independent group of music producers. However,
Europe's highest court subsequently overturned the ruling.
Cisco said it has asked for the court to speed up the
process, which would still run to about a year.
Cisco, whose core business is routers and switches that
manage the Internet, is betting on future growth in video, which
Chief Executive John Chambers has said will be the future of
Cisco argued that Microsoft's plan to integrate Skype
exclusively into its Lync Enterprise Communications Platform
could lock-in businesses that want to reach Skype's 700 million
account holders to a Microsoft-only platform.
"Imagine how difficult collaboration would be if you were
limited to calling people who only use the same carrier or if
your phone could only call certain brands and not others," Cisco
According to Cisco, interoperability between devices and
systems is key to speeding up innovation, creating economic
value and increasing choice for users.
The video communications market is also very lucrative, with
double-digit growth expected to continue through 2015,
according to Infonetics research.
Microsoft gained EU approval in October last year to buy
Skype for $8.5 billion in its largest-ever acquisition.
Investors initially questioned the wisdom of Microsoft's
acquisition, especially its high price tag, but have been
warming up to the decision, thinking Microsoft would be making a
smart move buying advanced communications technology it could
put into its products, along with acquiring a ready base of
Skype, which appointed ex-Cisco manager Tony Bates as its
chief executive officer in 2010, popularized the VoIP method of
using a computer as a telephone. It is the clear leader in the
market, with 145 million users who sign in at least once a
The European Commission has said it did not see any
competition concerns arising from the deal because there were
numerous players in the market, including Google Inc.
The U.S. Federal Trade Commission cleared the deal in June.
(Reporting By Nicola Leske in New York and Foo Yun Chee in
Brussels, Additional reporting by Bill Rigby in Seattle; Editing
by Andre Grenon and Gerald E. McCormick)