Microsoft Says Google Runs ‘Shadow Campaigns’ As Big Tech Legal Feud Heats Up (Video)

The legal feud between the two giants of the tech world deepened this week as Microsoft (MSFT) blamed Google (GOOG, GOOGLE) in running “shadow campaigns” to discredit Microsoft’s cloud computing business.

The lawsuit was filed on Monday blog post from Microsoft’s deputy general counsel Rima Alaili, who said Google quietly orchestrated and funded these “shadow campaigns” to tarnish how global competition authorities, politicians and the public view Microsoft’s practices.

According to Alaili, Google has gone to “great lengths to hide its involvement, funding and control” of a new coalition of European cloud providers formed to attack how Microsoft monetizes and tries to secure its cloud infrastructure.

A group called Open cloud coalition launched publicly on Tuesday, with Google and nine smaller cloud providers as members. The coalition’s website states that its members are “committed to building a fair and open cloud ecosystem” and can benefit by “influencing policy.”

A Google spokesperson disputed the claim that the company was operating in the shadows, saying instead that the company had been “very public” about its concerns.

At the heart of the disagreements with the two companies are Microsoft’s licensing agreements for cloud technologies.

Google complained to the European Commission that the agreements were “anti-competitive”, arguing that Microsoft was illegally using the company’s server software.Windows Server” license to force customers to stay with Microsoft for cloud computing.

Microsoft argues that its cloud licensing agreements are necessary to protect its intellectual property rights in Windows Server and that regulators should not force the company to provide the server’s IP address for free.

“When a streaming service like Netflix or Disney includes a movie on their service, they pay for the rights,” Alai said in her blog. “They don’t get a credit or discount if the subscriber owns a DVD of the same movie. Software and the cloud are no different.”

The escalating rhetoric from both companies is a sign of how much is at stake in the cloud computing market as both Google and Microsoft seek more revenue.

Google CEO Sundar Pichai highlighted growth in the cloud division during Google parent Alphabet’s earnings call on Tuesday, saying the company’s artificial intelligence portfolio is attracting new customers and leading to bigger deals.

Cloud revenue was $11.4 billion, up 35% year-over-year, beating expectations.

“This business has real momentum and the overall opportunity is growing as customers embrace gen. AI,” he said.

Google CFO Anat Ashkenazi told analysts that Google’s high revenue from cloud technology made it Alphabet’s second-biggest profit driver after Google Search.

“Obviously, as we grow the business, we have more opportunities to expand margins,” Ashkenazi added.

Google’s search business has come under intense antitrust pressure in the US and abroad. In comparison, search revenue grew 12% in the third quarter compared to the third quarter of 2024, roughly half of what Google Cloud saw.

Google’s cloud business ranks third after Amazon Web Services (AMZN) and Microsoft’s Azure, but there are signs that it could win out.

“I think when we see the results of Microsoft Azure and Amazon Web Services and even Oracle Cloud Infrastructure, you’ll see that Google Cloud has really gained some share in the cloud infrastructure market,” Paul Meeks, chief investment officer of Harvest Portfolio Management Meeks, told Yahoo Finance.

Microsoft really showed off its own cloud power on Wednesday, beating Wall Street’s third-quarter earnings expectations.

Commercial cloud revenue, which includes sales of cloud services, came in at $38.9 billion, versus $38.1 billion expected. The company’s Intelligent Cloud segment, which includes its Azure business, generated $24.1 billion in revenue for the quarter, up 20% from last year.

A feud that lasted two decades

These two tech giants have spent the last two decades battling for supremacy in various technologies online search and cloud computing to markets operating systems, games software, online advertising — and now artificial intelligenceor AI.

The feud began in the first decade after Microsoft settled a landmark antitrust case initiated by the United States Department of Justice, claiming that it beat out competitors by making its browser free and standard on its dominant Windows operating system.

And the year 2002 settlement opened the door to greater competition in the Internet browser software market created an opportunity for Google, then a startup founded by Stanford University students Sergey Brin and Larry Page to usher in a period of explosive growth in the 2000s.

Microsoft defended its reclaimed territory with a series of videos first published in 2011 in which Microsoft hit Google with parodies suggesting that Google’s rival Gmail service, Chrome browser and accompanying software lacked quality and privacy.

In 2016, the company concluded a truce with an agreement to end regulatory complaints against each other around the world as two new CEOs — Google’s Pichai and Microsoft’s Satya Nadella — took over.

Pact came to an end in 2021, when regulators in the US and the EU stepped up pressure on both companies and Microsoft complained that Google was using unfair tactics to compete in online search and advertising.

The situation got really awkward last year during a high-profile antitrust trial that pitted Google against the US Department of Justice, a case that alleged Google illegally monopolized the online search engine market and had echoes of the case the Justice Department brought against Microsoft in 1990. -th years

The most prominent witness to testify against Google was Nadella. The CEO said that Microsoft’s own search engine, Bing, failed to gain traction because Google agreed to place Google Search by default on browsers, desktop computers, and mobile devices such as Apple’s iPhone and iPad.

Nadella went on to describe the imbalance as a “vicious cycle” that he believes will intensify as AI advances.

Google lost the case after a judge ruled that its search business was an illegal monopoly. The solution is now awaiting a patching phase that could lead to the collapse of the Google empire.

Microsoft uses a similar approach in another antitrust lawsuit against Google which is still in the early stages of testing. It claims that Google’s control over online advertising technology has hurt the success of its Bing browser.

And now they also collide in the field of cloud computing. Microsoft said this week that Google’s latest cloud coalition is part of a broader set of distraction tactics designed to insulate Google from competition for advantages.

The effort, Microsoft says, is aimed at changing the regulatory landscape in Google’s favor, diverting attention away from Google’s worldwide scrutiny.

Google is “quite capable of competing directly with AWS and Microsoft,” said Microsoft’s Alaili. “It doesn’t need the competition authorities to put a thumb on the scale in its favour.”

Alexis Keenan is a legal correspondent for Yahoo Finance. Follow Alexis on X @alexiskweed.

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