Microsoft to Unbundle Teams from Office Amid EU Scrutiny

• Microsoft (MSFT) shares dropped to $452.84 in early trading as the company proposed unbundling Teams from Office 365 and Microsoft 365 to address EU antitrust concerns.
• The European Commission detailed Microsoft’s commitments to offer Teams-free suites at reduced prices, improve interoperability for competitors, and enable data portability, aiming to enhance competition in the cloud-based productivity market.
• Microsoft’s proposals, developed through constructive EU dialogue, could reshape its European software strategy and set precedents for global tech competition.

Shares of Microsoft (MSFT) dipped slightly to $452.84 in early trading on Friday following the company’s offer to unbundle its Teams workplace communication app from Office 365 and Microsoft 365 suites to address European Union competition concerns, as reported by CNBC. The European Commission, the EU’s executive body, announced that Microsoft proposed commitments to resolve issues surrounding the integration of Teams with its widely used productivity tools, such as Word and Outlook. These proposals include offering versions of Office 365 and Microsoft 365 without Teams at a reduced price, allowing customers to opt out of Teams even under existing contracts, and enhancing interoperability for Teams’ competitors with other Microsoft products. Additionally, Microsoft pledged to enable customers to transfer data from Teams to rival platforms, aiming to foster greater competition in the workplace communication market.

The EU’s scrutiny of Microsoft’s practices stems from a 2020 legal complaint by Slack, acquired by Salesforce (CRM) for $27.7 billion in 2021, which argued that bundling Teams with Office constituted an abuse of market power. Sabastian Niles, Salesforce’s president and chief legal officer, told CNBC that the European Commission’s announcement underscores Microsoft’s anticompetitive behavior and called for a binding remedy, noting that Salesforce would closely evaluate the proposed commitments. Microsoft’s vice president of European government affairs, Nanna-Louise Linde, described the proposals as a comprehensive resolution developed through months of constructive dialogue with the Commission, asserting that they would provide European customers with greater choice.

This development reflects broader regulatory efforts to curb the dominance of tech giants in critical software markets. The EU’s focus on Microsoft’s bundling practices aligns with its ongoing push to ensure fair competition, particularly in cloud-based productivity and communication tools, where Teams has gained significant traction. The proposed changes could reshape how Microsoft markets its software suites in Europe, potentially benefiting competitors like Slack and other workplace communication platforms. However, the effectiveness of these commitments will depend on their implementation and enforcement, as well as the response from competitors and customers. As Microsoft navigates these regulatory challenges, its stock price movement suggests cautious investor sentiment, with the $452.84 level reflecting a balance between the company’s proactive compliance and the potential costs of unbundling its flagship products.

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