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E.U. Orders Microsoft To Modify Windows

Microsoft chief counsel Bradford L. Smith yesterday vowed that the company will continue to pursue an appeal, but he said it would comply with the E.U. orders. He said a version of Windows without media-playing capability would be available to computer makers next month and in retail stores in Europe by February.

Smith said the stripped-down version will not be priced lower.

_____More About Microsoft_____
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Report: Microsoft

Regulators on both sides of the Atlantic have long been concerned that Microsoft can take advantage of its Windows monopoly to squeeze out competing developers of secondary applications.

While Microsoft includes a media player in every copy of Windows it sells, for example, rival RealNetworks Inc. relies on consumers to download its software separately, or it pays computer makers to add its player to machines before they are sold.

In the United States, the Justice Department began focusing in the mid-1990s on Microsoft's inclusion of its Internet Explorer browser in Windows. Ultimately, federal courts ruled that Microsoft employed several business practices that allowed it to crush the first major consumer browser, Netscape Navigator.

But the courts stopped short of finding bundling to be illegal. One judge, in part to avoid regulating software design and at the urging of the Clinton administration Justice Department, ordered that the company be broken in two, with an operating system unit and another for other applications. But a federal appeals court overturned the breakup.

In late 2001, Microsoft and new Justice Department leadership in the Bush administration struck a deal that forced some changes to Microsoft's business practices but left the company's ability to bundle intact. Instead, the settlement allows users and computer makers to mask access to Microsoft applications without removing them.

The E.U. determined that only with the programs removed entirely would other software developers have an incentive to write new applications, knowing they would not be competing against the ubiquitous distribution of Windows. The regulators in Europe want to force Microsoft to compete with others for a place on the desktop.

Microsoft said the order was unnecessary because competition from rivals such as the Apple iTunes service is flourishing. It also protested the portion of the order that requires it to reveal more technical information to rivals. Microsoft argued that it is effectively being required to give up valuable trade secrets to competitors, although it will be able to collect royalties for the information under a licensing program.

And the company can still bundle its products in the rest of the world. But some legal experts viewed the ruling as a critical development because unbundling will now be a market reality, not just a legal concept.


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