IBM Forgets Its Past and Lands in European Union Monopoly Probes

Last Updated Jul 30, 2010 4:21 PM EDT

IBM (IBM) has managed to become the subject of two simultaneous European Union antitrust investigations, as if one wouldn't be enough. What it demonstrates is not that the EU is hungry to protect its own high tech industries -- which, by the way, it is -- but that even a company as smartly run as IBM can land in hot water when hubris directs it to disregard the past.

One of the probes started because of complaints by two companies in the emulation space: the French company TurboHercules SAS, which has an open source emulation of IBM mainframe systems, and Tampa-based T3 Technologies that moves certain types of mainframe software to HP (HPQ) servers running Microsoft (MSFT) Windows.

EU regulators started the second probe on their own accord:

In addition, the Commission has concerns that IBM may have engaged in anti-competitive practices with a view to foreclosing the market for maintenance services (i.e. keeping potential competitors out of the market), in particular by restricting or delaying access to spare parts for which IBM is the only source.
IBM issued a statement in which it blamed the T3 and TurboHercules complaints ultimately on Microsoft "and its satellite proxies." But let's be clear here: IBM only addresses the one action that the complaints sparked, not the one that the EU filed on its own. And although I've been critical about how the free and open source software companies must find ways to compete while dealing with the same intellectual property laws as everyone else, that's not the issue. IBM is scared about the future of one of its critical business segments:
You can see the tensions within IBM by the results of its server sales. Revenue for System X servers, based on Intel x86 CPU architecture, was up by 30 percent, year-over-year. The Power Systems line, running Unix on IBM-proprietary microprocessors, were down 10 percent in revenue. System z mainframe products? Down 24 percent in revenue. It wasn't just revenue. The total System z computing power, measured in millions of instructions per second, that IBM shipped was down 14 percent year-over-year. Corporations are buying less mainframe capacity. IBM clearly has charged significantly less to close the deals that it did get, because the revenue had dropped significantly faster than the computing power.
That type of pressure can make companies reckless -- and that the EU has separately weighed in, after recently going after Microsoft and Intel (INTC), suggests that this is not case of playing favorites. In fact, IBM was a mover and shaker in the EU's moves against Microsoft's domination of the browser market. Did the company forget? Did it expect that such an attack would never court a pay-back? Finally, has all of IBM forgotten its previous experience as a 13-year-long target of US antitrust activities?

A smart large company realizes the pain that antitrust litigation can cause and guards against the possibility by being more restrained in its activity. Do it before the suits fly, and its an annoyance. Wait until the subpoenas fall, and you wind up flinching and blowing one decision after another. You'd think that IBM would have learned the lesson in the past. But greed and a nearly 30 year gap, in which the institutional memory has left, can do not-so-funny things.


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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.