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Piracy, Y2K dog Microsoft
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July 20, 1999: 8:22 a.m. ET
Millennium bug, illicit software could hinder revenue, says international chief
By Staff Writer Rod Cant
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LONDON (CNNfn) - Computer bugs and software piracy are the major challenges facing Microsoft's international operations, a senior executive told CNNfn.com Tuesday.
Michel Lacombe, president of Microsoft Europe, Middle East and Africa, revealed robust revenue growth of 24 percent in the fourth quarter ended June 30, but warned that conditions in "a special year" would likely become more testing.
Revenue growth in the region for the year ahead is likely to be somewhere in the high teens mark on a percentage basis, he predicted.
In an interview, Lacombe highlighted the problems that lie ahead from the millennium bug and adjustments in Europe to the effects of the Kosovo crisis and Russia's economic collapse.
Storming stock price
Microsoft's share price has soared in recent months, taking the company's value over $500 billion as the company announced blockbuster revenue and profit growth.
Lacombe warned the pace will slow though, echoing comments made Monday by Microsoft Chief Financial Officer Greg Maffei.
The Y2K bug will see "some large companies in freeze mode for six months," warned Lacombe, although he pointed out that Microsoft had felt "no noticeable slackening" in demand as yet.
Riding out the Russian storm
Other uncertainties that lie ahead include the situation in Russia. Lacombe admits Microsoft has suffered following the economic crisis that erupted there last August, but he is determined to ride out the storm.
"Our business has been hit in Russia," he conceded, but he maintained Microsoft had no plans to scale back its involvement. "It's tough, but we are there for the long term," he added.
The thorny issue of software piracy also troubles Lacombe. He points out that more than one third of existing software is illegal in the region for which he is responsible.
"It's a big deal," confirmed Lacombe, a 16-year Microsoft veteran, indicating that piracy in Europe cost software companies $2.7 billion in lost business during 1998.
European lag = opportunities
On a brighter note, Microsoft expects European economies to pick up over the next 12 months, and Lacombe predicts the continuing technology lag with the United States will prove a great opportunity. Lacombe pointed to the far lower penetration rate of PCs among workers -- 24 percent in Europe versus 51 percent in North America -- as one area in which Microsoft will benefit as Europe plays catch-up.
The launch of new products has been well received in the region too, with Office 2000 making an apparently bright debut in Europe's major markets in the last few weeks of June.
Predicting an exciting year ahead, Lacombe told CNNfn.com he expected "lots of opportunities, but lots of risks."
Microsoft shares closed Monday at 98-3/8, down 1-1/16.
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