Updated from 9:28 a.m. EDT
The European Commission said it's giving
a final opportunity to comment before the agency concludes its antitrust probe into the company, saying additional evidence from consumers, suppliers and competitors indicates the software maker has hurt competition and restricted consumer choice.
"This evidence confirms and in many respects bolsters the Commission's earlier finding that Microsoft is leveraging its dominant position from the PC into low-end servers and that Microsoft's tying of Windows Media Player to the Windows PC operating system weakens competition on the merits, stifles product innovation, and ultimately reduces consumer choice," the EC said in a statement on its Web site.
Regulators in Europe have been investigating Microsoft for four years.
The commission said in the statement its "preliminary conclusion is that Microsoft's abuses are still ongoing." Mario Monti, Europe's competition commissioner, said regulators "are determined to ensure that the final outcome of this case is to the benefit of innovation and consumers alike."
The agency offered remedies it would like to see Microsoft put in place. In order for Microsoft's competitors in low-end servers to achieve full interoperability with Windows PCs and servers, the company "would be obliged to reveal the necessary interface information," the EC said. That way, rival vendors could "compete on a level playing field" with Microsoft.
Additionally, the EC suggested that Microsoft either untie the Windows Media Player from Windows -- requiring the company to offer a version of the operating system without the Media Player -- or provide competing media players with Windows.
Microsoft said in a statement it will not speculate on possible outcomes or suggested remedies. "Microsoft takes this investigation very seriously, and continues to work hard to maintain a dialogue that will allow positive resolution to the Commission's concerns and this new Statement of Objections," the company said.
UBS Securities analyst Heather Bellini called the statement the strongest the EC has released to date, but she said she believes the market has anticipated such an announcement for some time. Shares of Microsoft seemed largely unaffected, edging up only 9 cents to $24.75 in recent trading.
In fact, closure of the European antitrust case could have a positive byproduct: a move by Microsoft to spend more of a huge cash hoard, now approaching $50 billion. The company has cited the case as one obstacle toward spending that money.
"We continue to believe that Microsoft will likely take small steps towards increasing the dividend to reach the average S&P listed company's dividend yield of around 1.4%," Bellini wrote in her note.
The largest fine that the EC can levy against Microsoft is $3.2 billion, according to Bellini, who has a buy rating on Microsoft. But she believes a fine that big is unlikely, given the largest EC fine to date would translate into a $640 million penalty for Microsoft. (Her firm has done investment banking business for Microsoft.)