Court verdict an escape route for MS?

SEATTLE: Microsoft Corp.'s failure to clinch an 11th-hour settlement with the European Commission is part of a legal strategy that, ultimately, could mean business as usual for the world's largest software maker, legal experts said.

Although Microsoft could be fined and ordered to offer a version of its Windows operating system without the Windows Media Player when the Commission issues its decision next week, Microsoft is expected to appeal and push for a stay of any punitive measures.

European regulators wanted a binding promise from Microsoft to change the way it does business in Europe, but in talks with Competition Commissioner Mario Monti, Microsoft Chief Executive, Steve Ballmer ceded little ground, leading to a formal end to settlement talks.

"Why should they settle now, if Monti is asking too much and risk setting a precedent?" said Layne Kruse, an antitrust partner at the Houston office of Fulbright & Jaworski LLP.

Instead, Microsoft will likely tie up the case in appeals, employing a strategy similar to the one it adopted in its antitrust trial with the U.S. government, which spared the company from being split in two and resulted in relatively mild remedies aimed at increasing competition.

"Microsoft fought hard all the way (on DOJ), and ultimately settled on favorable terms," Kruse said, "They're willing to go all the way in Europe."

Part of that strategy may hinge on waiting for Europe's political climate to become more favorable to big business, much as it did in the United States in 2002 when Microsoft settled its decision under U.S. President George W. Bush's administration.

NO IMPACT FROM FINES

Any European Commission fines, which are capped at 10 percent of revenues over the past 12 months, are not likely to have an impact on Microsoft's business, since it is sitting on a cash position worth $53 billion.

"Even the maximum (fine) wouldn't have a material impact on the company's business," said Charles Di Bona, an analyst with Sanford C. Bernstein & Co.

At stake is whether Microsoft would agree to uncouple its Windows Media Player, used for playing audio and video content on personal computers and over the Internet, from Windows.

Microsoft, like many other software makers, adds improvements to its software by bundling in new features. A similar issue was at the heart of Department of Justice case over the Web browser, and whether Microsoft quashed its main competitor Netscape by including its Internet Explorer in Windows.

If Microsoft gave in to the European Commission on the Windows Media Player, it could create a precedent that could be used by opponents in Europe and in the United States in future disputes over software features.

Microsoft's Ballmer said that the two sides were "unable to agree on principles for new issues that could arise in the future.

"I hope that perhaps we can still settle the case at a later stage," he said in a statement.

Seattle-based RealNetworks Inc., which has a digital media player that competes against Microsoft and is embroiled in a private antitrust suit with its cross-town rival, voiced support for an EU decision that would give "PC makers, enterprises and consumers a choice of media players."

"It's time to restore fair competition to digital media through an effective remedy that addresses Microsoft's illegal tying," said RealNetworks spokeswoman Erika Shaffer, in a prepared statement.

© Reuters