Microsoft to strip down Windows in Europe

A European court has ruled that Microsoft must release a new version of Windows without Media Player and new server protocols, even though the company's formal appeal has yet to be heard.

Under the decision by the European Court of First Instance, Microsoft will provide a stripped-down version of the Windows code to European PC manufacturers in January and the server protocols in the near future, said Brad Smith, Microsoft's chief legal counsel, in a press conference.

Smith said the new version of Windows would be available in February through the distribution channel and to resellers in Europe.

Microsoft also was working to ensure that it complied with an order to make available for licensing select communications protocols for the Windows server.

Microsoft was required to license communications protocols for the Windows client as part of its settlement with the US government several years ago.

Despite the setback for Microsoft, the case was far from over, Smith said, noting that the company's formal appeal hadn't yet been heard.

Microsoft had two months to decide whether to appeal the ruling to the President of the European Court of First Instance, but the company first plans to study the decision before determining its course of action, he said.

"We've always been sceptical that there will be consumer demand for this additional version of Windows. The reality is this additional version we're required to make available will provide consumers with less," Smith said.

However, the company would comply, he said. "We're being ordered to make it available, and we will. If we win and withdraw product in the market, we'll assess the best way to do that. We'll see what the future brings.

In the decision, the European court recognised four substantial arguments that Microsoft had made in its defense, and there's "substantial cause for optimism that Microsoft will win at the end of the judicial day", according to Smith

The European court ordered Microsoft to pay a fine of more than US$600 million and to provide a version of Windows without Media Player after it found Microsoft liable for antitrust infractions last year. Microsoft paid the fine this year.

Smith said the software company would file more briefs by June 2005, and he expected hearings on the appeal to begin next fall.

"The litigation will continue for some extended period of time," he said. "This case may keep lawyers busy for months and some additional years before there is final resolution."

Per Werngren, CEO of IDE, a Sweden-based Microsoft reseller, held out hope that the software giant could reach a settlement with the European Commission, as it did with the US Department of Justice in 2001.

"I think it is time for them to start the negotiations again and reach a settlement, because this process might take five years to solve and European companies in the IT sector need to have this issue solved once and for all," Werngren said.

"Uncertainty is always negative, so I hope the new EU Commission and Microsoft can solve this issue soon."

Last month, Microsoft settled with two key parties in the European case: Novell and the Computer and Communications Industry Association.

After reaching cash settlements, both parties officially withdrew their support from the European case against Microsoft.

Removing the Media Player files from the Windows code will disable integration of rival, third-party media players from RealNetworks and others, according to Microsoft. One business professor that has sided with Microsoft throughout the case said the Windows remedy benefits no-one.

"Both Microsoft and consumers lose as a result of this decision," said Nicholas Economides, a professor for the Stern Business School at New York University.

"Microsoft loses because it is forced to offer a stripped-down version of Windows in addition to the full one. Consumers lose because they will pay the same price for both."