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Week in review: Punishing Microsoft

The European Union's long-awaited antitrust ruling on Microsoft was a one-two combination that could have a widespread affect on consumers and competition.

The European Union's long-awaited antitrust ruling on Microsoft was a one-two combination that could have a widespread affect on consumers and competition.

The European Union issued its ruling against Microsoft, requiring the software giant to unbundle Media Player from Windows and pay a $613 million fine, the heaviest punishment in any European competition case to date. The ruling held that Microsoft had failed to provide to rivals information they needed in order to compete fairly in the market for server software and that the company has been offering Windows on the condition that it come bundled with Windows Media Player, stifling competition.

Microsoft now has 120 days to provide the information that rival server makers need to compete fairly, and it must continue to update this information in the future. It also has 90 days to provide a version of Windows without Media Player, although it can also continue to provide a version that includes the media software.

Microsoft Chief Executive Steve Ballmer vowed to fight the ruling, arguing that all companies, even ones with a near monopoly, have a right to improve their products. "There is an important principle at stake in this case: We believe that every company should have the ability to improve its products to meet the needs of consumers," Ballmer said.

Microsoft executives tried to make the case that the European ruling, if it comes to pass, will hurt consumers. "Even if one takes away the multimedia code and, as RealNetworks has suggested, installs their player in its place, there will remain over 20 features in the Windows operating system that will not function," Microsoft's chief lawyer Brad Smith said. "There will remain many European Web sites that will not function properly."

U.S. lawmakers also lashed out at the ruling, asking regulators in Brussels to reconsider their decision to levy an unprecedented fine of $613 million. In a letter to European Competition Commissioner Mario Monti, 10 members of the House International Relations Committee said the federal litigation against Microsoft had resolved outstanding antitrust problems and jointly cautioned that it was of the "utmost importance" that the United States continue to take the lead in overseeing American companies' business practices.

The House members pointed to a 1991 antitrust cooperation agreement, which the Clinton administration renewed in 1998. "We hope that the outcome of the commission's investigation does not devalue the U.S. Department of Justice's prior settlement with Microsoft and that it respects the principles of international cooperation set forth the in comity agreement," the letter said.

Open source everywhere
Novell is launching an open-source attack on Microsoft's desktop stronghold.

"We're focusing on building a complete Linux desktop as an alternative to what you've been using," Novell Vice Chairman Chris Stone said. "We believe that in the next 12 months, we will see the widespread adoption of Linux on the desktop."

The desktop Linux push will include software from SuSE Linux, the No. 2 Linux seller that Novell acquired in January for $210 million, and Ximian, the Linux desktop specialist that Novell acquired in August. The acquisitions marked a bold departure for Novell, which has struggled for years to wean itself from its own NetWare operating system.

Novell is also considering a move into the market for embedded computing, for devices such as cell phones and vending machines. The company is considering whether it should develop its own technology, sign a partnership with another embedded-Linux company or buy a company outright.

The open-source operating system is most popular for use on powerful networked systems, called servers, and is growing in use on desktop systems, but several companies hope that it will also spread further into the embedded realm. Linux is already used in some handheld computers, cell phones, wireless networking devices and personal video recorders.

As part of Novell's open-source push, IBM has made a promised $50 million investment in the new Linux power, tightening the companies' technology partnership. The deal will allow IBM to directly load Novell's SuSE Linux software onto its blade servers and all members of its four server lines.

At the same time, Hewlett-Packard is expanding its own Novell relationship with a push into desktop computers. HP is already permitted to load SuSE Linux onto its servers but is now extending the deal to desktop computers.

Games people play
The game market is heating up, with major tech players offering peeks at their playbooks.

Microsoft announced a new set of development standards and tools that are intended to cover both PC games and titles for the company's Xbox console. The new XNA platform is intended to make it easier for game developers to handle the technical aspects of creating games and would allow them to begin working now with the tools they'll use for next-generation titles.

XNA tools will help in the creation of games for the current Windows XP operating system for PCs and the current Xbox, Microsoft said, and will be extended in the next version of the Xbox and Longhorn, the successor to Windows XP. Many games are released for both consoles and PCs, but porting between the two is usually a time-consuming and costly process.

Meanwhile, Nokia is counting on a few upcoming games to turn around lackluster sales for its N-Gage portable game player.

Pasi Polonen, director of game publishing for the cell phone giant, blamed slow device sales on initial software selection. But Nokia is still confident in the system's prospects, he said. "We expected it to be hard. We expected it to be challenging," Polonen said. "We got all we expected, from that perspective."

Nokia launched the N-Gage last year in a high-stakes bid to claim a chunk of the portable-game industry, long dominated by Nintendo. But the device has attracted widespread criticism, since its debut, with complaints focusing on the $300 price tag and the tacolike form that makes use as a cell phone awkward.

Trouble for Apple?
Wal-Mart Stores this week formally opened its online music store, from which customers can download music at 88 cents per song. That's 11 cents less than Apple Computer charges at its iTunes music store, which has been the pacesetter on this e-commerce track.

The Wal-Mart service allows customers to play downloaded music on Windows PCs, to burn songs to a CD or to transfer music to portable devices. Usage rights are uniform across the company's catalog of music. The retailer began testing the service in December and is working in partnership with Liquid Digital Media, formerly Liquid Audio.

Apple has pushed back the international debut of its iPod Mini from April to July, citing stronger-than-expected demand in the United States and a limited supply of hard drives. The 3.6-ounce portable music player, which costs $249, began shipping in February in the United States.

Since that date, Apple has received more orders than it had planned for. The number of orders--which included more than 100,000 preorders, according to Apple--was high enough to outstrip the availability of the 4GB drive from its manufacturer. Apple says it was forced to concentrate on filling orders from the U.S. market and to wait for greater availability of the drive in order to enter the international market.

Also of note
HP sued Gateway for patent infringement as part of a stepped-up campaign to seek compensation for what it claims is its intellectual property...Ulrich Schumacher, the chief executive of German chipmaker Infineon Technologies, resigned unexpectedly amid ongoing investigations by U.S. and European regulators into price fixing in the memory market...TiVo plans to unveil a new feature this fall that will bring Web-like, interactive advertisements to TV, highlighting early efforts to reinvent television for the age of the digital video recorder...In the latest sign that a standards war is petering out, Toshiba has introduced dual-format DVD-recordable drives...Microsoft will offer live audio and video of Major League Baseball games onto PCs, heightening competition with rival RealNetworks and signaling rising costs for online video programming.