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Why Israel Is Terminating Its Microsoft Software Contracts


Aug. 30 2018, Updated 1:17 p.m. ET

Israel spends $27 million on Microsoft licenses

The Israeli government plans to end some software licensing agreements with Microsoft (MSFT) at the end of the year. Israel spends about $27.0 million per year to license desktop and server software from Microsoft for its government offices, including Office and Windows software.

However, Microsoft has changed its licensing terms in ways that Israel believes would double its cost to procure desktop and server software from Microsoft. Microsoft would shift from its current perpetual licensing model to a subscription system in which the government of Israel would pay an ongoing fee for its software.

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Microsoft hiking Office software price

In July, Microsoft released a notice that it would increase the price of its next Office software product for commercial and government customers. The company stated that its new Office 2019 software, coming out later this year, would cost 10.0% more than what it currently charges for the software.

Microsoft’s revenues increased 17%

The Office software business is a component of Microsoft’s Productivity and Business Processes segment. This segment’s revenues increased 13.0% YoY (year-over-year) to $9.7 billion in the company’s fiscal fourth quarter, which ended in June. Microsoft’s overall revenues rose 17.5% YoY to $30.1 billion in that quarter.

Oracle (ORCL), IBM (IBM), SAP SE (SAP), and Adobe (ADBE) grew their respective revenues by 3.3%, 3.7%, 3.8%, and 23.9% YoY in the comparable period.


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