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IBM subject of European antitrust probe

By David Goldman, staff writer

NEW YORK (CNNMoney.com) -- The European Union has launched an antitrust investigation into whether IBM has abused its dominant position in the mainframe computer market.

The formal probe, announced Monday, stems from the EU's own findings in a preliminary investigation as well as complaints by software vendors T3 and TurboHercules. Both companies make software that allows users to run applications on non-IBM hardware.

IBM immediately accused Microsoft (MSFT, Fortune 500) of pushing TurboHercules and T3 to lodge complaints with the EU. Microsoft invested in both of those companies just two months before they filed their complaint against IBM.

Microsoft could not be immediately reached for comment.

IBM is by far the largest maker of mainframe computers in the world, and software programs that run on IBM's mainframes have to be compatible with IBM's mainframe operating system -- just as PC software has to be compatible with Windows.

Mainframes are the computers that businesses and large organizations use to process and store data.

The EU alleged that IBM has "engaged in illegal tying of its mainframe hardware products to its dominant mainframe operating system." IBM (IBM, Fortune 500) is also accused of restricting access to spare parts to mainframe service companies, cementing its dominance in mainframe maintenance and keeping potential competitors out of the market.

The company said it may have a dominant position but it earned that place.

"Certain IBM competitors which have been unable to win in the marketplace through investments in fundamental innovations now want regulators to create for them a market position that they have not earned," IBM spokesman James Sciales said in a statement. "IBM is fully entitled to enforce its intellectual property rights and protect the investments we have made in our technologies."

IBM said mainframes are a very small subset of the server market that Microsoft and chipmaker Intel dominate. Mainframe and mainframe operating system sales were $11 billion worldwide last year, according to the EU.

Still, the company said it intends to fully cooperate with the EU's inquiries, adding "there is no merit to the claims being made by Microsoft and its satellite proxies.

EU regulators have not shied away from investigating American tech companies. Intel (INTC, Fortune 500) paid a record $1.45 billion fine in May 2009. Also last year, the EU dropped antitrust charges against Microsoft after the company agreed to give users the choice of other Web browsers with its Windows operating system.

Shares of IBM fell less than 1% on Tuesday. To top of page

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Data as of Oct 8


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