Microsoft to raise enterprise prices in UK after pound plunges

October 23, 2016 7:28 PM EDT

A Microsoft logo is seen next to a cloud the day after Microsoft Corp's $26.2 billion purchase of LinkedIn Corp, in Los Angeles, California, U.S. June 14, 2016. REUTERS/Lucy Nicholson


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By Kate Holton

LONDON (Reuters) - Microsoft (NASDAQ: MSFT) plans to increase prices for some enterprise services by up to 22 percent in Britain following the plunge in the pound, likely hitting thousands of companies and government departments who rely on its cloud and software products.

Microsoft said it would increase prices for its enterprise software by 13 percent and for its cloud services by 22 percent from Jan. 1 next year, becoming the latest tech company to raise fees in the wake of the vote to leave the European Union.

Britain's shock vote on June 23 triggered the biggest one-day fall in sterling against the dollar and the pound is now down 18 percent against the U.S. currency, prompting computer makers such as Apple (NASDAQ: AAPL), Dell and others to increase prices in Britain.

The Bank of England has said it expects inflation to rise steadily over the next couple of years, overshooting its target of 2 percent and eroding household living standards.

The issue hit the headlines this month when Britain's biggest supermarket, Tesco (NASDAQ: TSCO), clashed with supplier Unilever , briefly pulling popular goods such as the spread Marmite from its website.

Nestle , the Swiss maker of Kit Kat bars and Nescafe coffee, has said it is also looking at all options to deal with the steep decline in the British currency.

Long known for its Windows software, Microsoft has turned its focus to mobile and cloud computing in recent years, storing, managing and processing data for thousands of companies and public sector providers across a range of sectors.

It said it would not change the prices on consumer services and would also not change prices for existing orders under price protection deals during the term of that agreement.

"We periodically assess the impact of local pricing of our products and services to ensure there is reasonable alignment across the region and this change is an outcome of this assessment," Microsoft said on its blog.

It said the changes were similar to adjustments it had announced to pricing in Norwegian krone and Swiss franc in April.

A spokeswoman for the British Cabinet Office, which supports the overall running of government including the management of major contracts, said it worked to secure the best prices for taxpayers.

"Where we are made aware of proposed price changes for a specific supplier we will work closely with that supplier to identify ways to mitigate any increases in price," the spokeswoman said.

(Reporting by Kate Holton in London and Sangameswaran S in Bengaluru; editing by Sandra Maler and Jason Neely)



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