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EU to Microsoft: Unbundle or Else

UPDATED: European regulators are warning Microsoft to remove several features from the upcoming Windows Vista operating system or face being barred from the European market.

The latest threats come a day before EU regulators meet to decide whether Microsoft is complying with a 2004 antitrust ruling.

At tomorrow's hearing, Microsoft could also face an additional $100 million fine. Next month, the software goliath plans to appeal a $613 million fine stemming from a 2004 EU decision that Microsoft violated antitrust regulations. Today's events happen as Microsoft recovers from last week's delay of Vista.

In a letter to Microsoft CEO Steve Ballmer, EU antitrust chief Neelie Kroes outlined concerns regulators have about applications bundled with Vista.

While Kroes told the Wall Street Journal she hasn't decided whether to open a new investigation into Microsoft and Vista.

EU spokesperson Jonathan Todd told internetnews.com that "it is in Microsoft's own interest to clarify these issues as soon as possible so as not to have any doubts about the legality of Vista hanging in the air."

A Microsoft spokesperson said the copmany has a responsibility to make its products better and more secure for its customers in a manner that respects all laws and competition standards.

The spokesperson added that the company is willing to discuss its plans "anytime and anyplace."

A topic in the letter, which the commission refuses to release, is the possible bundling of software and services available separately from Microsoft or other vendors, Todd said in a statement.

Internet search, digital rights management and PDF creation software are some of the features under EU scrutiny.

A group of rival companies, including IBM, Sun and Oracle, filed a February complaint with EU regulators urging European antitrust officials bar a number of features from being bundled with Windows.

The European Committee for Interoperable Systems (ECIS) said bundling of applications within Windows threatened consumer choice and competition, internetnews.com previously reported.

Microsoft has had mixed success with bundling to dominate markets. Although the inclusion of Windows Defender to guard against spyware will likely push out many security players, Internet search remains the domain of Google, according to Joe Wilcox, a JupiterResearch analyst.

For Microsoft's part, it denies it will offer a full-blown security product and Vista will provide a variety of search engines for users to choose from, according to the software company.

Despite Microsoft's protestations, "Windows is the largest software distribution platform on the platform," according to Wilcox.

Microsoft has made some concessions to Europe's previous concerns about its bundling practices.

In 2005, the company unveiled Windows XP N, a version of its operating system sans Windows Media Player (WMP).

Microsoft recently appealed a South Korean decision requiring two versions of Windows, one without WMP and Windows Messenger and one with links to third-party media and IM applications.