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9/20/2011
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EU Drops Antitrust Probe Against IBM

European Commission says Big Blue also on track to resolve concerns in a separate case related to mainframe licensing.

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Europe's competition watchdog said it has closed an investigation into IBM's mainframe licensing practices and that Big Blue is making progress toward resolving concerns in a related case.

Investigators with the European Union's European Commission said they have ended their probe into whether IBM was using unfair means to dominate the $12 billion market for mainframe computers. The investigation was launched last year after IBM rivals Turbo Hercules, Neon Enterprise Software, and Microsoft-backed T3 Technologies complained that IBM's refusal to license the operating system for its System z mainframes to clone makers violated antitrust laws.

The Commission said it would take no action against IBM in the matter. "The three complaints have been withdrawn," the EC said. The U.S. Department of Justice, meanwhile, continues to investigate IBM for possible antitrust violations related to its dealings with T3, according to IBM's most recent quarterly filing. A source familiar with the DoJ's investigation confirmed that it remains ongoing.

EC officials also said they were pleased with progress IBM has made in addressing allegations that it unfairly limited third-party mainframe service providers' access to crucial parts and information. "I commend IBM's readiness to address our concerns about fair competition in the market for large computers which are crucial for the functioning of today's economy," said European Competition commissioner Joaquin Almunia, in a statement.

In response to concerns voiced by the EC in August, IBM said it's prepared to make mainframe components available to service providers "under commercially reasonable and non-discriminatory terms" for five years. The company also said it has created a "relationship manager" position that will be tasked with ensuring that service providers are able to obtain parts and related supplies and information in a timely fashion.

The Commission has yet to decide whether to make IBM's commitments legally binding on the company. Competitors have a one-month period in which they can weigh in on IBM's proposals.

"IBM welcomes the European Commission's decision to close the investigation of IBM's mainframe and associated intellectual property rights. IBM also welcomes the proposed resolution of the Commission's investigation of certain IBM mainframe maintenance practices," IBM said in a statement.

Mainframes remain a lucrative business for IBM. Revenues from such products increased 61% year-over-year in the most recent quarter. Interest in the technology has been renewed in part by IBM's Watson supercomputer. Watson won a series of widely publicized matches against human opponents on the TV game show "Jeopardy" earlier this year. Health insurance provider WellPoint recently said it would use a Watson-like system from IBM to analyze patient data.

IBM shares were up 1.53%, to $175.78, in morning trading Tuesday.

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