Updated from 8:18 a.m. EST

After European regulators did only the expected Wednesday morning, traders sent shares of Microsoft ( MSFT) up a fraction on moderate volume.

Long before U.S. markets opened, the European Commission hit Microsoft with a $612 million fine and ordered it to develop a version of Windows that doesn't include its media player. The Redmond, Wash., company must also release programming code that will allow Windows computers to run better with other companies' servers.

The ruling was "proportionate" and "balanced," European Union Competition Commissioner Mario Monti said at a news conference. "Dominant companies have a special responsibility to ensure that the way they do business doesn't prevent competition. We are simply ensuring that anyone who develops new software has a fair opportunity to compete in the marketplace."

Later in the day, Microsoft CEO Steve Ballmer said his company and the commission had been very close to a settlement "that would have been much better for consumers." He said Microsoft hopes that a European court will stay most of the penalties pending an appeal and added that he believes a settlement can still be reached.

While Ballmer played the good cop, expressing his respect for the commission, Microsoft's general counsel Brad Smith sounded much tougher. During a conference call with reporters, Smith said the ruling is "a step in the wrong direction" and criticized the commission for ignoring the existing agreement between Microsoft and the U.S. Department of Justice.

Under the settlement it proposed to the commission, Microsoft would have added three competing media players to Windows, thus allowing consumers a wide range of choice and giving competitors a much more level playing field, Smith said.

Removing Microsoft's media player from the operating system, the company claims, will disable 20 other features of Windows. "The code removal removing the Windows Media Player will in theory help a small number of competitors at the expense of consumers," Smith said.

In recent trading, the software giant had gained 21 cents, or just under 1%, to $24.36.

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