How Microsoft beat the odds

This is an audio transcript of the FT News Briefing podcast episode: ‘How Microsoft beat the odds’

Sonja Hutson
Good morning from the Financial Times. Today is Tuesday, October 17th. And this is your FT News Briefing.

[MUSIC PLAYING]

Poland’s rightwing party is likely out after elections this weekend, and an effort to open up the border between Gaza and Egypt stalled yesterday. Plus, we look at how Microsoft beat the odds and got a major acquisition approved. I’m Sonja Hutson, in for Marc Filippino, and here’s the news you need to start your day.

[MUSIC PLAYING]

It’s looking more and more like Poland will have a change in leadership after Sunday’s parliamentary elections. The rightwing Law and Justice party, called PiS in Polish, first ruled for two years in the mid-2000s and has now been in power since 2015. But it appears the party’s coalition won’t have enough seats to govern going forward. That paves the way for the more centrist Civic Platform party to take power. It’s led by opposition leader Donald Tusk.

[Donald Tusk speaking in Polish]

Sonja Hutson
Here to talk to me about the initial results and their wider implications is the FT’s central Europe correspondent Raphael Minder. Hey, Raphael.

Raphael Minder
Hi there.

Sonja Hutson
So going into Sunday, people were calling Poland’s election the most important contest for the EU this year. Why is that? I mean, what was at stake?

Raphael Minder
Well, I think basically the starting point, which is that Poland is the largest country in central and eastern Europe. So basically, it sets the tone for that region’s relationship with the EU, which has become more important since the start of the full-scale invasion by Russia of Ukraine. But I think the other element is just what has happened under PiS rule since 2005, which is that Poland has become one of the most Eurosceptic countries in the EU, working alongside Hungary at times and opposing a lot of important EU legislation.

Sonja Hutson
OK, so the opposition leader then could end up marking a really big change for Poland. What do we know about Donald Tusk?

Raphael Minder
So the other major party in Poland is of course Civic Platform run by Donald Tusk, the most experienced politician from central and eastern Europe in terms of EU policymaking since he was the head of the European Council for five years. So his return to Warsaw is also the return of the man who knows how to negotiate in Brussels.

Sonja Hutson
What do the days and weeks ahead look like for Poland?

Raphael Minder
Well, at the moment we are, of course, awaiting still the final results. And there’s huge expectation, combined with a certain amount of anxiety, until we get confirmation of Tusk’s victory. The president of the country now has 30 days to convene parliament and is almost certainly going to give PiS, as the winner of the election, as the largest party in the new parliament, the first chance to form a government. That attempt will probably fail. And I think it’s going to be until December, at the earliest, until a new parliament gets formed.

Sonja Hutson
OK. So say Donald Tusk is able to form that parliament, what would that mean for Poland’s relationship with Europe? You’d mentioned that under PiS it hadn’t really been going all that well.

Raphael Minder
Well, I think, essentially, there’s two elements that are important. One is for Ukraine, and the second, probably much more clear cut is for the EU. So for Ukraine, the Law and Justice party had actually been one of the staunchest supporters of Ukraine since early last year. And what happened in recent months was essentially a significant U-turn, with the president comparing Ukraine to a drowning person who might end up sinking the rescuer. And the second aspect is really the importance to the EU, which goes far beyond the size of Poland. It has to do with the fact that under PiS, Warsaw has been feuding essentially with Brussels over all sorts of issues, the most prominent one being the rule of law. So a change in government could definitely mend or at least help the relationship between Brussels and Warsaw.

Sonja Hutson
Raphael Minder is the FT’s central Europe correspondent. Thanks, Raphael.

Raphael Minder
Thank you.

[MUSIC PLAYING]

Sonja Hutson
The US is leading an effort to get Israel to allow humanitarian aid into Gaza. It also wants foreign nationals to be able to cross over the border into Egypt. But the deal fell apart yesterday, and the border remained closed. Hundreds of people waited by the locked border crossing.

[Pedestrian and vehicle traffic]

The UN has been sounding the alarm over a growing humanitarian crisis in Gaza. Israel has been bombing the territory and has cut off supplies of electricity, water, fuel and goods to it. That’s in response to the brutal attack by Hamas last week. The World Health Organization said 21 hospitals in Gaza had received orders from Israeli forces to evacuate, but doing so would be a death sentence for some patients.

[MUSIC PLAYING]

Microsoft beat the odds when it pulled off a sale of the gaming company Activision Blizzard on Friday. To get it over the finish line, the company had to defeat a US government effort to block it in court and convince UK regulators to approve a transaction they had already rejected. Here to tell us how Microsoft did it is the FT’s west coast editor Richard Waters. He covers all things tech. Hey, Richard.

Richard Waters
Hi. Good to talk to you.

Sonja Hutson
You, too. So you’ve reported that this was really the culmination of two decades of a new strategy for Microsoft. What is that strategy?

Richard Waters
It all starts with Brad Smith, who came in as general counsel at Microsoft. When it goes into discussions with regulators now, it is no longer fighting to defend every part of its position, which was the old Microsoft. It’s much more willing to give ground. It makes changes to its business practices to try and head off regulatory problems before they build up. But I think, interestingly, at a much higher level, it’s set out to build trust at a government level that simply wasn’t there before. And that has meant setting out, for instance, an office at the United Nations purely to try and influence important policy discussions that have an inter-governmental and global, at a global level. And that is a massive effort at a policy and a diplomatic level that we haven’t seen in the tech industry before. And I think it’s really having an effect.

Sonja Hutson
So, Richard, how did that play out then when Microsoft was trying to get this Activision deal through?

Richard Waters
So I think the first and most important thing is there is a level of trust, a real level of trust that governments have in Microsoft now. That was not the case in the past. And if you take the European Union as an example, Microsoft was feared and distrusted in Brussels for a decade, the first decade of the century. And I think Brad Smith managed to turn that around so that when it came to trying to get support for the Activision deal, he could at least be assured of a hearing. And it doesn’t sound much, but it’s an incredibly important thing for a big company like that to be able to put its case. And that certainly isn’t something that would have happened 10, 15 years ago. So I think all that hard work really does pay off.

Sonja Hutson
So obviously, their strategy was successful here with this Activision deal. But are there drawbacks to it? I mean, what did critics say?

Richard Waters
Yeah, I think, you know, the, there are limits to the strategy that Brad Smith has put in place. Microsoft is now such a rich and powerful company. It’s the second-biggest company in cloud computing [inaudible]. And I think what we’re going to see in the future is that Microsoft will not get a free pass, not that they’ve been getting a free pass, but they will be investigated much more closely. And in many ways, the Activision deal is the thing that has woken everybody up, has reminded everyone that Microsoft really is another very powerful member of Big Tech that needs to be watched closely. It only just managed to get this deal across the line. I think it’s going to face a much tougher time in the future.

Sonja Hutson
Richard Waters is the FT’s west coast editor. He covers all things tech. Thanks, Richard.

Richard Waters
Good to talk to you.

[MUSIC PLAYING]

Sonja Hutson
Before we go, we have a correction. Yesterday’s show wrongly said that Israel’s Gaza operation in 2014 did not involve the use of ground forces. But in fact, there was a ground offensive during that time.

[MUSIC PLAYING]

You can read more on all these stories at FT.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

[MUSIC PLAYING]