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Microsoft wooed by another foreign suitor
Despite B.C. offer, company plans to stay in U.S., it says
Saturday, June 3, 2000
By DAN RICHMAN
Where does Microsoft want to go today?
Nowhere, it says. It will stay in the United States and face whatever antitrust remedy the American legal system dishes out.
But the Redmond software company, dogged by the Justice Department for more than 10 years and now threatened with corporate dismemberment, does have other choices.
Several countries, including China, Norway and Ireland, have tried to lure Microsoft across their borders. Most recently, the province of British Columbia dangled the bait, yesterday promising the beleaguered company "favorable treatment."
Tax preferences, loosened laws and generous subsidies are among the goodies the countries are dangling in front of Microsoft, a bulwark of the Northwest's economy.
Don Zadravec, a spokesman for the British Columbian government, confirmed yesterday that provincial employment and investment minister Gordon Wilson had made an offer of "favorable treatment" when speaking to the BBC Thursday.
But both Zadravec and Microsoft spokesman Jim Cullinan denied there had been any discussions concerning a Microsoft move. A report on the BBC's Web site yesterday, reporting that "the authorities in British Columbia have offered to do a deal with Microsoft," was incorrect, Zadravec said.
"We appreciate the support of our friends north of the border, and we've received similar suggestions from other countries," Cullinan said. "But Microsoft believes in the American legal system and that we'll win in the appeals courts."
The foreign suitors have a lot to offer Microsoft.
British Columbia is considered the most likely prospect, as it is the closest English-speaking alternative location to Redmond. With the border just over 100 miles to the north, the province could offer the company special loans and breaks on power costs, said Zadravec.
That's on top of incentives to high-tech companies that are already in place, such as a 10 percent corporate tax credit on research and development, indefinite personal income tax deferrals on employee stock options and exemptions from overtime requirements for high-tech companies, said Richard Chambers, a spokesman for the province's Information, Science and Technology Agency.
And "for specific companies, these can be negotiated on a unique basis," Chambers said.
Microsoft would be especially welcome in Canada to ease a brain-drain that's pulling highly trained employees into the United States, Zadravec acknowledged.
Canadian technology entrepreneurs have tended to move southward because of Canada's high personal income tax, a lack of venture-capital infrastructure, Canada's lenient immigration laws and a desire to compete in the largest technology market.
China could offer an even sweeter deal for Microsoft.
There, the developing high-tech center of Shanghai would likely engage the country's capital, Beijing, in a bidding war for Microsoft, said David Bachman, chairman of the China Studies Program at the University of Washington. Microsoft already has an arm of its research and development program in the capital.
"I would imagine China would pull out all the stops to make it attractive for Microsoft to go there," Bachman said.
Perhaps the best news of all: China has no antitrust law. The country has a 33 percent corporate income tax rate, but it might waive both corporate and individual income taxes for the company because "to get even a truncated version of Microsoft would be a real coup," Bachman said.
China might sell Microsoft land cheaply, underwrite the building of a campus, ease visa procedures, provide access to political leaders and subsidize power, water and housing, he said.
"Certainly there'd be no environmental impact statements required, and no coalition of local residents would resist any building project," Bachman said.
Drawbacks there would include a slow, underdeveloped Internet backbone, a high degree of political control over the Internet and a government that has been known to seize foreign corporations' assets. Obviously, the language barrier and cultural differences would be difficult to overcome, too.
If Microsoft moved to China, it might be known as Wei Ruan -- literally "micro" plus "soft," Bachman said.
Ireland offers generous tax incentives to software companies. Visio, now a division of Microsoft, set up a facility there in 1994, paying a 10 percent corporate tax rate.
And Norway . . . well, to some, its fjords might recall the Ballard Locks.
Microsoft would actually gain little or nothing if it left this country, said Paul Rothstein, a Washington, D.C., law professor who consults for Microsoft but spoke outside of that role yesterday.
If the company left America now, it would still be subject to the 2-year-old federal antitrust suit and to the hundreds of private suits that the big one spawned, he said. Microsoft probably could not escape a final judgment splitting the company, either, because most countries honor one another's valid legal decrees.
Carrying on a lawsuit against a foreign company might be "marginally harder -- but I doubt any company would make a decision based on that," Rothstein said.
Rothstein said Microsoft executives, known to carefully anticipate every business contingency, hypothetically might consider moving the company, or part of it, out of the country.
"But I think they have an allegiance to America and Redmond, and those aren't always 100 percent rational," he said.
During those irrational moments, though, it might be comforting for Microsoft executives to imagine the government's lawyer, Joel Klein, not having Wei Ruan to kick around anymore.
P-I reporter John Cook contributed to this report. Dan Richman can be reached at 206-448-8032 or danrichman@seattle-pi.com
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