Microsoft – Dream Team

Good luck and good timing give great results.

• Microsoft is backing away from bundling Teams with Office 365 which I expect will have no impact at all on its use and popularity as it is now popular enough that the network effect alone will continue to ensure its success.
• Microsoft has announced that it will no longer bundle Teams with Office 365 but how this will be executed will make all the difference when it comes to the opinion of the regulator.
• Teams is Microsoft’s 3^rd attempt at a work-based video collaboration service after the truly awful Lync and the diabolically bad Skype for Business.
• In this case, it was 3^rd time lucky as Teams is a good service with all the right usability, functionality and stability required to make it a success.
• Microsoft was also incredibly fortunate in that it was released just before the pandemic triggered 2 years of working from home.
• The fact that Teams came free with an Office 365 subscription left Microsoft with an open goal which it made the most of.
• Teams is still not as good as Zoom which is still easier to use and has great stability during periods of network volatility but Zoom comes at an extra cost.
• For anyone who is a Microsoft customer, Teams just magically appeared one day and its deep integration with Outlook makes it very easy to schedule and create meetings.
• Critically the meetings work well and are easy enough to use.
• So suddenly at the time of greatest need, Microsoft customers had a collaboration tool that got the job done and didn’t cost them anything extra.
• This is extremely hard to compete against as being installed by default is almost impossible to beat even with a superior service.
• This is what attracted the ire of Slack which complained to the EU and asked it to force Microsoft to sell Teams separately from Office as it felt it was being unfairly disadvantaged.
• Microsoft has got ahead of the EU by saying it will no longer bundle Teams with Office 365, but the key distinction is whether Office 365 customers will have to pay extra to get Teams.
• What Slack (and presumably Zoom) would like is for Office 365 users to have to pay extra to get Teams because that would make it easier for them to charge more for their products.
• However, I suspect this is not what Microsoft has in mind.
• Instead, I suspect that it will offer the option to install Teams at the point of Office 365 installation which I think that almost everyone will accept.
• The problem here is whether the EU will see this as enough or force Microsoft to go further and charge for Teams.
• Microsoft has form in this department as it promised to unbundle Internet Explorer from Windows in 2008 and then was fined €561m in 2013 for not living up to this promise.
• Hence, I suspect that the EU will intend to take a harder line with Microsoft but the fact that it is moving to unbundle without being forced will put some brownie points in its column.
• Whatever the outcome, I think that Teams is already entrenched meaning that the network effect will ensure that most users will want to use it.
• Consequently, whatever the EU decides is likely to have little effect meaning that Slack and Zoom are unlikely to benefit much from regulatory intervention.
• This is excellent timing from Microsoft in recognizing the point at which the bundling doesn’t matter anymore and getting out of the way as much as it can of the regulator.
• This is how it can reap all the benefits but still be in a good position to minimize the impact of its competitors moaning to the regulator.
• Microsoft is firing on all cylinders at the moment and it finally has Google running scared even if there is very little for Google to be scared of.
• However, the shares still look pretty pricey to me, and I still have very little desire to get involved.