MICROSOFT'S IPR WOES

UNCLAS ALGIERS 000190 SIPDIS SIPDIS STATE PASS TO USTR - PBURKHEAD COMMERCE FOR NMASON E.O. 12958: N/A TAGS: ECON BEXP KIPR ETRD AG SUBJECT: MICROSOFT'S IPR WOES REF: 07 ALGIERS 1581 THIS CABLE CONTAINS COMPANY PROPRIETARY INFORMATION NOT TO BE SHARED OUTSIDE USG. ¶1. (SBU) SUMMARY: During a February 19 meeting, Microsoft Algeria Director General Samir Said outlined Microsoft's priorities for Algeria and underscored the negative impact weak intellectual property rights (IPR) protection is having on Microsoft's financial bottom line and growth potential. Said estimated that Microsoft is losings tens of millions of dollars each year to software piracy in Algeria and argued that the Algerian government has not demonstrated the political will to enforce IPR. Said stated that, in addition to antipiracy efforts, Microsoft's main priorites are to continue working with the Algerian government (its largest customer in Algeria),to recruit qualified employees, and to revive partnerships with Algerian ICT companies. END SUMMARY. ¶2. (SBU) Microsoft Algeria DG Samir Said lamented that the Algerian government is not taking stronger action to prevent software piracy and argued that the situation had worsened during 2007. According to a Business Software Alliance Survey, the rate of software piracy increased slightly from 2006 to 2007, from 84 percent to 85 percent. Said stated that "losses are huge" and asserted that Microsoft is losings tens of millions of dollars each year. Said estimated that a 10 percent reduction in software piracy -- from the current estimate of 85 percent to 75 percent -- would yield an additional 25 million USD in annual profits. ¶3. (SBU) Said emphasized that Algeria is an important market for Microsoft and that there is clear potential here if the Algerian government provides greater support for IPR protection. While he noted that there is a trend towards purchasing licensed software in government ministries, licenses have only been purchased as part of new system purchases and many ministries continue to use unlicensed software on previously purchased computers. Said stated that he is not seeing any will to enforce IPR protection in terms of software licensing. He told us that none of the estimated 50 to 60 thousand home personal computers sold as part of the Algerian government's "Ousratic" initiative to expand home PC-ownership were sold with Microsoft-licensed software. Although Microsoft informed the Minister of Communications Technology of this breach, Said said that the government has not taken any action to enforce compliance. During the October visit of Microsoft CEO Steve Ballmer (reftel),the Algerian government promised to address enforcement, but Said stated he had seen no change since then. He added that he often hears the argument that Microsoft must give a "good price," but in the end licensed software will always be more expensive than the pirated version. ¶4. (SBU) Said stated that, in addition to antipiracy efforts, Microsoft Algeria's main priorities are to continue working with the Algerian government, recruit qualified employees, and revive partnerships with Algerian ICT companies. Between ministries and state-owned enterprises, the government remains Microsoft's largest customer in Algeria and Microsoft will continue to work with it despite IPR concerns. Said echoed an oft-heard complaint in saying that he is unable to find qualified employees among recent graduates. Although there are nearly 2500 graduates with degrees in ICT, according to Said, there are few who have the skills required to be competitive in the job market. Microsoft Algeria is also interested in partnering with Algerian ICT companies to help promote local software development; however, Said noted that this goal is dependent upon improved IPR protection. ¶5. (SBU) COMMENT: Serious antipiracy efforts in Algeria are critical not only for Microsoft but for Algeria's economy writ large. Although the Algerian government has stated its intent to develop the local ICT sector, rising rates of software piracy will do little to encourage the necessary investment or technology transfer. The Embassy's Special 301 Review (septel) will address the Algerian government's overall IPR protection efforts. FORD