Posted By: Margaret Pozzini

By RAF CASERT, Associated Press WriterFri Oct 13, 5:13 PM ET

BRUSSELS, Belgium - Microsoft Corp. is making several key changes to its forthcoming Windows Vista operating system in an attempt to soothe European antitrust worries, while keeping its worldwide distribution plans on schedule.
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Brad Smith, Microsoft's general counsel, said Friday the company agreed to change how people can set their preferred search service if they upgrade to Microsoft's new Internet Explorer browser. The Redmond, Wash., company also has tweaked Vista's security system to address concerns that the system was favoring Microsoft's products over competing security offerings.

In addition, the company plans to have an international standards organization review a controversial new file format that will be included in Windows and the company's Office business suite. He said that was a step toward making the format available for other companies to license.

Even with the changes, which will be included in all versions the company ships worldwide, Microsoft said it still plans deliver the long-delayed Vista to large businesses in November and consumers and small businesses in January.

The announcement follows many testy exchanges between Microsoft and European regulators, who are still embroiled in a long-running antitrust dispute over the current version of Windows.

But Smith told The Associated Press the changes announced Friday were the result of conversation, rather than litigation, between the two parties. EU antitrust chief Neelie Kroes and Steve Ballmer, Microsoft's chief executive, spoke by phone Thursday.

"When you have a constructive dialogue with people, you can actually figure out how to solve problems in a way that really wins for everybody," Smith said.

Still, he cautioned that the changes didn't guarantee the company would be free of antitrust concerns in Europe or elsewhere.

The EU antitrust office, which warned this spring it had concerns about the new Windows software, refused to back Microsoft's optimism that European concerns had been met.

"The jury is out," EU spokesman Jonathan Todd said. "It is up to Microsoft to shoulder its own responsibility to ensure full compliance with competition rules."

He said the Commission "will closely monitor the effects on the market and in particular examine any complaints."

Antitrust complaints often come up long after a product has been released, rather than in advance.

Microsoft also is hoping changes announced Friday will resolve trade worries with South Korea, where the Korea Fair Trade Commission said Microsoft abused its dominant market position by tying certain software to Windows.

The company said it will ship a version in Korea without the company's digital media player or instant messaging software, along with a full version that also will have links to competing products made by Korean vendors.

Microsoft also will ship a version of Windows in Europe without the media player.

Vista will be the first major upgrade to Microsoft's flagship operating system since Windows XP was released in 2001. It touts a sleeker look, improved security features, better protection against spyware and viruses and more intuitive search tools to help users find saved files.

The EU and Microsoft have fought for years over Windows XP, and the 25-nation bloc in 2004 levied a record $613 million fine and ordered Microsoft to hand over technical information to rivals, saying it had deliberately tried to cripple them as it won control of the market.

Over the summer, the EU fined Microsoft $357 million and threatened more penalties, saying the company failed to give rivals enough. Microsoft plans to appeal the fine.

The EU's executive Commission had already warned Microsoft it had to take care to avoid antitrust problems with Vista.

One potential area of strife is a Web search bar in Microsoft's new Internet Explorer browser; some feared it would favor Microsoft's own search engine over rivals such as Google Inc. or Yahoo Inc. (Nasdaq:YHOO - news) In response, Smith said Microsoft had added an easier way for people upgrading from the previous version of Internet Explorer to choose what search engine they prefer. The choice applies to Windows XP machines, as Vista will already ship with Internet Explorer 7.

Another concern involved Microsoft's plan to release a format for saving documents that cannot be easily modified. Called XPS, the format would compete directly with Adobe Systems Inc.'s PDF. Smith argued that submitting XPS to a standards body and allowing other companies to license it for little or no cost would reduce Microsoft's own competitive benefit from the format.

Security vendors Symantec Corp. and McAfee Inc. have accused Microsoft of abusing its monopoly in deciding which security products can run on Vista, arguing that Microsoft is deliberately withholding information needed to develop products that work on the new system.

Symantec said Friday it was heartened by the development but had not yet been contacted by Microsoft engineers with technical information the company was seeking.

"It's guarded optimism," Symantec spokesman Cris Paden said. "It looks like they're taking steps to allow customers to use whatever solutions they want, but the security industry now asks, 'When?'"

Microsoft said it had made commitments to give competing security firms a way to access more of the internal workings of Vista. The company also promised to ensure that a computer user will not have to deal with double security alerts if an alternative competing security console is installed on the computer.

Smith insisted Microsoft had specifically worked on security, the document reader and the search system to make it compatible with European law.

Todd left open whether Microsoft's Vista changes would help end years of acrimonious debate. "Quite honestly? Time will tell."

Microsoft shares rose 15 cents to close at $28.37 Friday on the Nasdaq Stock Market.

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AP Business Writers Allison Linn in Seattle and Jordan Robertson in San Jose contributed to this report.

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