VZCZCXRO2537
RR RUEHTRO
DE RUEHAS #1581/01 3030607
ZNR UUUUU ZZH
R 300607Z OCT 07
FM AMEMBASSY ALGIERS
TO RUEHC/SECSTATE WASHDC 4760
INFO RUEHFR/AMEMBASSY PARIS 2384
RUEHLO/AMEMBASSY LONDON 1738
RUEHMD/AMEMBASSY MADRID 8660
RUEHRB/AMEMBASSY RABAT 1990
RUEHTU/AMEMBASSY TUNIS 6841
RUEHTRO/AMEMBASSY TRIPOLI
RUEHNK/AMEMBASSY NOUAKCHOTT 6077
RUEHNM/AMEMBASSY NIAMEY 1332
RUEHBP/AMEMBASSY BAMAKO 0280
RUEHCL/AMCONSUL CASABLANCA 3105
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 ALGIERS 001581 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EINV ETRD KIPR AG
 
SUBJECT:  (MICRO)SOFT DIPLOMACY, VERSION 1.0 
 
 
¶1. (U) SUMMARY:  Microsoft CEO Steve Ballmer paid a brief visit to 
Algeria in a trip touted as an opportunity for Microsoft to help the 
GOA expand Algeria's information and communications technology (ICT) 
sector and enhance its education system.  Ballmer said he was 
inspired by the GOA's commitment to technology development and by 
the potential for market growth in Algeria.  ICT insiders suggested 
that the CEO visited Algeria in an effort to enhance Microsoft's 
government relations, and to signal that its recently reorganized 
business unit is serious about this market.  Meanwhile, firms are 
optimistic about the ICT sector in Algeria, but are skeptical about 
whether Microsoft can effectively expand its software marketing 
here, or expect to make any progress combating piracy.  END 
SUMMARY. 
 
¶2. (U) In a whirlwind visit on October 3, Ballmer met with President 
Bouteflika and several ministers to discuss the development of the 
technology sector in Algeria, the use of IT start-up companies as a 
means to energize the Algerian economy, and access to computers in 
Algeria's schools.  Ballmer later told a group of Microsoft partner 
firms that the greatest growth potential for the ICT industry lies 
in emerging markets like Algeria, where ICT structures can be 
expanded to tap into significant populations hungry for access to 
Web-based entertainment and educational services.  (Note: 7.3 
percent of the Algerian population has access to the Internet, 
compared to a 0.2 percent penetration rate in 2000, according to 
recent data compiled by the International Telecommunication Union. 
End note.)  Ballmer said that he came to Algeria to evaluate his 
local team's recommendations for expansion, which he will consider 
in early 2008.  He told the industry group that he was "inspired by 
the president's thoughtfulness toward the future," and that he saw 
potential growth across all economic sectors. 
 
BUT STILL, WHY COME TO ALGERIA? 
------------------------------- 
 
¶3. (SBU) Microsoft recently split its regional marketing division 
and created the Microsoft Algeria business unit.  Because of the 
terrorist activity in Algeria in the 1990s, Microsoft established 
its North African headquarters in Morocco, which local IT 
representatives and former Microsoft employees say the GOA never 
forgave.  Ballmer's visit to Algeria appeared timed to show 
corporate support for the new Algerian unit's government relations 
efforts, and an attempt to relieve past tensions between the GOA and 
Microsoft. 
 
HOPE SPRINGS ETERNAL, BUT SO DO CLONES AND PIRATES 
--------------------------------------------- ----- 
 
¶4. (SBU) Industry representatives told Econoff that they were 
optimistic about the near-term future of the ICT sector in Algeria. 
Abdelaziz Ben Aissa, the general manager of a certified Microsoft 
business solutions firm, said that the GOA seems focused on ICT 
issues and opportunities are expanding.  Ben Aissa's firm provides 
support services for Northrop Grumman information systems.  He works 
extensively with the Algerian federal police, with whom he expects 
more contracts to support expanding communications and information 
systems.  Djamal Hadjout, the information services director of an 
Algerian wholesaler representing a number of leading American 
computer periphery brands, said business is generally growing and 
that retailers are finding new customers among both Algerian 
corporate and individual consumers.  He noted that American products 
continue to be associated with quality and prestige but are 
considered expensive. 
 
¶5. (U) IT representatives were at the same time skeptical that 
Microsoft will be able to raise significantly its stake in the 
Algerian consumer software market or to combat piracy effectively 
because of the relatively high price of its products and the 
continued weakening of Algerians' buying power.  They said that most 
personal computers sold to households are clones assembled in 
Algeria, and that most people buy pirated copies of operating 
systems like Windows and other software applications for as little 
as two dollars.  Further, according to recent news reports, 
electronics represents the second-largest category of goods smuggled 
into Algeria (after cigarettes), and overall customs seizures of 
contraband rose significantly throughout 2007.  Given Algeria's 
rising cost of living and high unemployment rate, the ICT 
representatives saw little hope that Microsoft will be able to 
counter these IPR challenges anytime soon.  Ballmer was asked about 
this dilemma, but gave only a general response about his company's 
 
ALGIERS 00001581  002 OF 002 
 
 
commitment to finding innovative solutions to specific markets and 
his confidence that the GOA will move in a positive direction 
regarding ICT use and development in Algeria. 
 
¶6. (SBU) COMMENT: Ballmer's visit, along with the recent creation of 
Microsoft Algeria, likely went a long way to meeting Microsoft's 
government relations goals.  Some in the business world interpreted 
President Bouteflika's overt hospitality to a corporate leader as a 
sign that the GOA is serious about its stated intent to build out 
Algeria's ICT sector, improve the country's education system through 
access to technology, and see that every Algerian family has a 
computer at home.  Nonetheless, the challenges of contraband 
hardware and pirated software remain significant as the high cost of 
living continues to influence not only consumer decisions regarding 
brand preference and when to buy, but also the choice between 
licensed, cloned or pirated goods. 
 
FORD