EU Votes for Microsoft Fine

The European Commission has decided to slap Microsoft(MSFT Quote - Cramer on MSFT - Stock Picks) with a massive fine and will announce the amount next week, according to wire service reports from Europe.

According to the Associated Press, antitrust regulators from the European Union's 25 countries voted unanimously Monday to levy new daily fines on Microsoft for flouting a 2004 ruling.

The fine will not be trivial. Even Microsoft believes that the EC will levy a fine of roughly $2.5 million a day. Regulators claim that Microsoft has not complied with the order to provide more information on the software giant's technology to the company's competitors.

In a memo to employees now circulating on the Internet, Microsoft associate general counsel Horacio Gutierrez said: "One of the EU governments has leaked news that a decision on whether or not Microsoft has complied will come in July this year -- and is indeed likely to include a fine.

"This non-compliance fine could total 100's of millions of Euros for the period Microsoft is judged not to have complied and it will come in addition to the original fine back in March 2004," the memo said.

The initial fine was $626 million, and if the commission does indeed levy an additional penalty, it likely will be retroactive to last December, which implies an initial hit of more than $500 million.

Even if the fine ran for a whole year, it wouldn't total $1 billion, so the issue here is more one of public perception and positioning than financial distress. Microsoft, after all, spins off more cash than that every month.

In the March quarter, for example, the company generated $4.2 billion in free cash (cash from operations minus capital expenditures), or an average of $1.4 billion a month. Moreover, the company continues to set aside money for antitrust expenses.

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