Microsoft Hopes Its Appeal Will Blunt EU Decision

Microsoft is expected to move quickly to appeal the $613 million fine and tough sanctions leveled against it Wednesday by the European Union. The chief question now is whether Microsoft can obtain an injunction to put off the Competition Directorate decision while the case is on appeal--proceedings that could take years to resolve.

In announcing the stiff fine and sanctions for what it called Microsoft's "near monopoly," EU regulators placed tight time restrictions on Microsoft. First, the company was given 90 days to offer PC manufacturers two versions of its Windows operating system--one with Microsoft's Media Player included; another without the audio/video program. In addition, the company has 120 days to comply with an EU sanction compelling the firm to disclose Windows code that will make it easier for server manufacturers to work with Windows.

The EU's sanctions also call for the establishment of an advisory body to monitor Microsoft's future behavior.

At a press conference Wednesday, EU Competition Commissioner Mario Monti said: "I am confident that we have produced here a decision that will stand before any appeal." Microsoft is expected to file its appeal at the Court of the First Instance, in Luxembourg, within 90 days.

If the sanctions represent a defeat for Microsoft, they signify a victory for RealNetworks, which pushed the audio-video issue, and for Sun Microsystems, which pushed the server issue. Sun's 1998 complaint against Microsoft did much to get the case rolling in the EU. (See Timeline: EU's Pursuit Of Microsoft)For its part, Microsoft pointed to last week's failed settlement talks with the EU as a lost opportunity. In a statement, the firm's spokesman in Brussels, Tom Brookes, said: "Microsoft believes a settlement would have been better for European consumers." The firm had agreed to include competing versions of audio/visual software in future versions of Windows and to release additional source code for servers, according to several reports.

However, the EU and Microsoft were hung-up over Microsoft's future business practices. "We made substantial progress towards resolving the problems which have arisen in the past," said Monti when the settlement talks collapsed last week, "but we were unable to agree on commitments for future conduct."

Microsoft has sought to reach a settlement with the EU for years, but Monti always continued to raise the ante. New issues of a political nature were raised this week, as U.S. Senator Patty Murray, (D.-Wash.) labeled the EU decision "a hostile act with severe consequences for the global economy" and called on the U.S. federal government to seek "a negotiated settlement." Although her comments were issued before the decision was made public, the details of the decision had been leaked for days.

In Wednesday's press conference, Monti said he decided to limit the ruling to Europe "in deference to the competition authorities of the United States and other countries." Earlier in the week, Microsoft had been loudly complaining that the EU went too far by targeting the firm's U.S. and worldwide behavior. According to some informal estimates, the $613 million fine included worldwide calculations of Microsoft's behavior, although the details haven't been spelled out.

On Wall Street, the decision was something of a non-event, as Microsoft's stock was up marginally--it closed Tuesday at $24.15 a share and was trading Wednesday morning at $24.30. Software analyst Rick Sherlund of Goldman Sachs told a television audience Wednesday morning that the decision wasn't "terribly draconian," although he said the EU's decision to impose a monitor on Microsoft's future business practices could be troublesome. The firm has more than $50 billion in cash, so the monetary penalty isn't likely to be a difficult hurdle, he said.0