While promising to comply with European law and keeping the door open to future settlement, Microsoft executives dug in their heels Wednesday in response to the $613 million fine and other sanctions announced earlier in the day by the European Union. The action came after years of investigation by European regulators into Microsoft's business practices.

CEO Steve Ballmer, in a teleconference to discuss Microsoft's position, said his company felt it was on the verge of a settlement with the European Commission last week, but that the commission "decided to pursue the much riskier course of litigation." Ballmer reiterated Microsoft's position, voiced many times before, that "every company should have the ability to improve its products to meet the needs of consumers."

In announcing the fine and sanctions for what it called Microsoft's "near monopoly," EU regulators placed tight time restrictions on Microsoft. The company was given 90 days to offer PC manufacturers two versions of its Windows operating system--one with Windows Media Player included; another without the multimedia program. In addition, Microsoft has 120 days to comply with an EU sanction compelling it to disclose Windows code that will make it easier for server manufacturers to work with Windows.

The EU is also calling for the establishment of an advisory body to monitor Microsoft's future behavior. At a news conference Wednesday, EU competition commissioner Mario Monti said: "I am confident that we have produced here a decision that will stand before any appeal."

Microsoft is expected to file an appeal at the Court of the First Instance, in Luxembourg, within 90 days. Senior VP and general counsel Brad Smith, on the conference call with Ballmer, said it was "unfortunate" that the European Commission decided to impose sanctions when U.S. regulators had already studied Microsoft's business practices, resulting in the consent decree that already governs the company's actions.

"This is a case that started in the United States. Microsoft is an American company. The complainant companies are American companies. The software is designed in the United States, and the U.S. government dealt with the issues thoroughly," Smith said. "There was no need for the commission to disrupt that regime with the conflicting approach in which it's embarked today."

The European Commission's ruling signifies a victory for RealNetworks, which pushed the audio-video issue, and for Sun Microsystems, which pushed the server issue. Sun's 1998 complaint against Microsoft did much to get the case rolling in the EU.