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Cisco appeals EU's approval of Microsoft-Skype deal

Wed, 02/15/2012 - 9:05am
Nicola Leske and Foo Yun Chee, Reuters
Network equipment maker Cisco Systems Inc has challenged the European Commission's approval of Microsoft Corp's acquisition of Internet voice and video service Skype, 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 appeal 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 on appeal.

"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 video communications market has been showing double-digit growth and according to Infonetics research will continue to generate double-digit growth through 2015.

Cisco, whose core business is routers and switches that manage the Internet, is betting on video, which Chief Executive John Chambers has said will be the future of communication.

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 made a smart move buying advanced communications technology it can put into its products along with a ready base of users.

Skype, which appointed ex-Cisco manager Tony Bates as its CEO in 2010, popularized the VoIP - voice over Internet protocol - 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 month.

The European Commission 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.

The Luxembourg-based General Court is Europe's second-highest court. While the court generally backs the Commission in antitrust cases, it has on occasion overturned decisions.

Nevertheless, challenging the Commission's decisions in EU courts is risky, with the last successful appeals dating back to 2002.

Cisco said it has asked for the court to speed up the process, which would still run to about a year.

(Reporting By Nicola Leske in New York and Foo Yun Chee in Brussels, additional reporting by Bill Rigby in Seattle; Editing by Andre Grenon)

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