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  • Microsoft, Amazon facing UK antitrust probe over cloud services | CNN Business

    Microsoft, Amazon facing UK antitrust probe over cloud services | CNN Business

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    London
    CNN
     — 

    Microsoft and Amazon could be in hot water over apparently making it difficult for UK customers to use multiple suppliers of vital cloud services.

    The Competition and Markets Authority (CMA), the country’s antitrust regulator, said Thursday it was launching an investigation into the UK cloud infrastructure services market to determine whether players were engaged in anti-competitive practices.

    Cloud computing firms, such as Microsoft and Amazon Web Services (AWS), use data centers around the world to provide remote access to computing services and storage. This “cloud infrastructure” forms the foundation for how software applications, such as Gmail and Dropbox, are developed and run.

    The CMA probe has been initiated following a report from Britain’s media and communications regulator Ofcom, which found that the supply of cloud infrastructure in the United Kingdom is highly concentrated and competition limited.

    “We welcome Ofcom’s referral of public cloud infrastructure services to us for in-depth scrutiny,” CMA CEO Sarah Cardell said in a statement.

    “This is a £7.5 billion market that underpins a whole host of online services — from social media to [artificial intelligence] foundation models. Many businesses now completely rely on cloud services, making effective competition in this market essential.”

    The CMA said it would conclude its investigation by April 2025.

    The probe is the latest evidence of increased scrutiny of big tech companies by European regulators, which have tightened rules in recent years in areas such as data protection and targeted advertising.

    The European Digital Services Act, which came into force at the end of August, reflects one of the most comprehensive and ambitious efforts by policymakers anywhere to regulate tech giants. It applies to companies including Amazon (AMZN), Apple (AAPL), Google (GOOG), Microsoft (MSFT), Snapchat, TikTok and Meta (META), the owner of Facebook and Instagram.

    According to Ofcom, last year Microsoft and AWS had a combined market share of 70-80% in the UK cloud infrastructure services market. Google is their closest competitor with a share of 5-10%.

    In its report, Ofcom identified features of the market that make it more difficult for customers to change providers or to use multiple providers, such as switching fees.

    “If customers have difficulty switching and using multiple providers, it could make it harder for competitors to gain scale and challenge AWS and Microsoft effectively for the business of new and existing customers,” Ofcom wrote.

    The report also raised concerns about the software licensing practices of some cloud providers, particularly Microsoft.

    Both Amazon and Microsoft said they would engage “constructively” with the CMA.

    But a spokesperson for AWS added that the company disagreed with Ofcom’s findings. “We… believe they are based on a fundamental misconception of how the IT sector functions, and the services and discounts on offer,” the spokesperson said, noting that “the cloud has made switching between providers easier than ever.”

    A spokesperson for Microsoft added: “We are committed to ensuring the UK cloud industry remains innovative, highly competitive and an accelerator for growth across the economy.”

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  • Microsoft quarterly profit falls 12% but cloud computing business shows strength | CNN Business

    Microsoft quarterly profit falls 12% but cloud computing business shows strength | CNN Business

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    CNN
     — 

    Microsoft on Tuesday posted weaker-than-expected revenue and a double-digit percentage drop in profit for the final three months of last year amid broader economic uncertainty and reduced demand for personal computers and software.

    The tech giant reported revenue of $52.7 billion for the quarter, a modest 2% increase from the year prior but slightly less than analysts had expected. It reported net income of $16.4 billion, a 12% decline from the year prior.

    The earnings results come at a turbulent moment for Microsoft, and the tech industry as a whole. Microsoft said last week that it plans to lay off 10,000 employees as part of broader cost-cutting measures. In his explanation of the cuts, CEO Satya Nadella pointed to changing demand for digital services years into the pandemic as well as looming recession fears.

    Demand for personal computers, and the Microsoft operating systems that power them, has pulled back after experiencing a boom early in the pandemic. Consulting firm Gartner said earlier this month that worldwide PC shipments fell more than 28% in the fourth quarter of 2022 compared to the same period the prior year. This marked the largest quarterly shipment decline since Gartner began tracking the PC market in the mid-90s.

    On Tuesday, Microsoft reported revenue declines from its Windows OEM operations and from its Xbox content and services lines. Microsoft also said it would incur $800 million in severance expenses from the layoffs announced this month, as well as charges from “changes to our hardware portfolio, and costs related to lease consolidation activities.”

    But the earnings report had some bright spots. Revenue from its cloud computing division, a key area of focus for Microsoft in recent years, increased 22% from the prior year. An analyst at Evercore described the results as “a sigh of relief.”

    Shares of Microsoft rose 4% in after-hours trading Tuesday on the news.

    “The next major wave of computing is being born, as the Microsoft Cloud turns the world’s most advanced AI models into a new computing platform,” CEO Satya Nadella said in a statement accompanying the results. “We are committed to helping our customers use our platforms and tools to do more with less today and innovate for the future in the new era of AI.”

    Earlier this week, Microsoft confirmed it is making a “multibillion dollar” investment into OpenAI, the company behind the viral AI-powered chatbot tool ChatGPT. The deepening partnership between the two companies – Microsoft was an early investor in OpenAI – could help catapult Microsoft as an AI leader and pave the way for the company to incorporate elements of ChatGPT into some of its hallmark applications, such as Outlook and Word.

    In his memo to staffers announcing the job cuts, Nadella said the company will continue to invest in “strategic areas for our future” and pointed to advances in AI as “the next major wave” of computing.

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