Europeans Aren't Buying Microsoft's Old Argument

In saying its media player is central to Windows, the software giant recalls the browser wars.
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Updated from 9:31 a.m. EST

When it comes to

Microsoft

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and antitrust regulations, Yogi Berra said it best: "It's deja vu all over again."

The world's largest software company is again trying to convince regulators that it isn't unfairly using its preeminent position as an operating system vendor to squeeze out applications developed by rivals. The last time this issue was raised it centered on Microsoft's Internet Explorer Web browser and the United States Department of Justice. This time it centers on the Windows Media Player and the European Commission.

Increasingly popular, media players are used to play various types of content, including music and videos, over the Internet.

As it did in the earlier case, Microsoft is arguing that the Media Player is not just another program bundled with Windows, but a part of the operating system itself. Take it out and you damage Windows, Microsoft argues.

At the moment, it doesn't look like that argument is going to fly with the European Commission. On Tuesday, a report out of Brussels by the

Financial Times

said that Microsoft's attempt to settle the suit by bundling rival products, including the

RealNetworks

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Media Player, on a CD was tentatively rejected by the regulators.

Bundling a rival media player separately would leave Microsoft with the considerable advantage of having its product on the consumer's PC without any extra installation steps.

However, both sides regard the issue as ongoing, and are still looking for a way to resolve it, the newspaper reported.

Neither Microsoft nor RealNetworks or the Commission would comment on the reports.

Separately, RealNetworks said it had signed up five telecom companies for its media player, gaining access to another 180 million subscribers. Spain's Telefonica Moviles, Italy's Wind and TIM, Britain's 02 and Sweden's TeliaSonera have chosen RealNetworks software to send video and music to mobile phones, the company said.

The two bits of news gave a big boost to shares of RealNetworks; in recent trading the stock was up $1.17, or 21%, to $6.64. Shares of Microsoft were up too, gaining 42 cents, or 1.6%, to $27.01.

Pacific Crest Securities analyst Brendan Barnicle said that while the current antitrust dispute was reminiscent of earlier battles, there's one key difference: The media player is not nearly as central to Microsoft's core franchise as was Internet Explorer. "Clearly

the media player creates business opportunities, but worst case Microsoft takes it out and still leads the market," he said.

The media player is moving to non-PC based applications that probably wouldn't be affected by an adverse decision by the Commission, he said. (Pacific Crest does not have an investment banking relationship with Microsoft or RealNetworks.)