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EU: More Fines in Store for Microsoft

The European Union (search) threatened Microsoft (MSFT) with new fines on Friday if the software company doesn't make it easier for competitors to see the blueprints of its server software and less expensive for them to use it.

After hearing from Microsoft's rivals, the EU's antitrust office found that the system the company had set up to improve the interoperability between its Windows server and other software companies was insufficient.

"Based on the market tests, it doesn't seem to be working at all," said Jonathan Todd, the spokesman for the EU's antitrust office.

EU antitrust regulators fined Microsoft a record 497 million euros ($665 million) when they ruled last March that Microsoft abusively wielded its Windows software (search) monopoly and locked competitors out of the market.

They ordered remedies to give rivals better access to Windows technological information, but now say Microsoft is stalling.

Todd said competitors were having difficulty getting access to the technical information needed to make a judgment on whether to buy a license for the Windows interoperability.

Microsoft also forced its rivals to buy the full license package, he said, and did not allow companies to pick and choose what they needed. The Commission also felt the cost for the license was excessive.

Furthermore, he said open-source vendors like Linux were excluded from the process.

Microsoft spokesman Jim Desler said there have been inquiries about licensing the software blueprints, but that no company has actually requested the licenses to date. Desler also said the EU has not told Microsoft it can't charge for the licenses.

Todd said the EU could impose prohibitive fines of up to 5 percent of the company's daily global sales if it refused to cooperate better.

"The Commission remains patient but there are limits to the patience we are prepared to show," Todd said. "The ball is now in Microsoft's court and I am sure they will come back to us shortly on these issues."

For its fiscal year ending June 30, Microsoft has said it expects revenue of about $40 billion.

Analyst Matt Rosoff with independent researchers Directions on Microsoft said it isn't surprising that there is some back-and-forth between the software behemoth and European regulators over the terms of compliance. But he said a disagreement over whether Microsoft should make the code available to open-source providers could prove to be a major sticking point, since Microsoft is steadfastly against the concept of software that is freely shared.

Still, Rosoff said ultimately Microsoft may have to comply with regulators' demands.

"The EC has the power to impose a pretty big fine, and I do think that Microsoft would not like to pay that fine," Rosoff said. "Certainly shareholders would not like to see Microsoft paying that fine."

Microsoft has always said it was doing its utmost to comply with the EU ruling.

Desler confirmed that the company had received feedback from the European Commission (search) about its plans for licensing certain software blueprints. But he would not say what specific changes regulators had asked for.

Desler said Microsoft was "grateful to receive the feedback because it allows us to respond promptly and in an appropriate way."

Microsoft shares fell 7 cents, or 0.3 percent, to $24.47 Friday on the Nasdaq Stock Market (search), near the low end of their 52-week range of $24.01 to $30.20.

The EU ruling from a year ago also forces the company to offer an alternative Windows version for sale without its video and music Media Player application. Friday's criticism did not access that issue, Todd said.

Requiring Microsoft to shed Media Player from its Windows platform was seen as an attempt to strike at the commercial backbone of the company's global software empire.

The Commission has rejected one name for the stripped-down version of Microsoft Windows operating system, arguing it would be too much of a sales disincentive. It is still considering further testing for names.

Microsoft said the version without Media Player had reached manufacturers, but will not end up in computer shops until the name issue is resolved.

The EU's ruling in March went much further than Microsoft's 2002 settlement of similar charges with the U.S. Justice Department, which required only that users be allowed to hide Media Player and set another as the default.