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Microsoft changes deemed too soft

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SEATTLE — Microsoft Corp.'s decision to change its licensing agreements with computer manufacturers appeared to have little impact, as computer makers seemed hesitant to change their policies and critics said it does little to appease their concerns.

Analysts speculated that the move was designed to help Microsoft's image without hurting its bottom line.

"I think on the public relations front it helps them in the sense that it shows them being deferential to the court and the concerns that the court raised," said Jonathan Geurkink, an analyst with Ragen McKenzie in Seattle.

But he saw little benefit for users or competitors, and doubted that the company's concessions would hurt it financially.

Microsoft, responding to a recent court ruling that said its competitive practices broke the law, will change its licensing agreements with computer manufacturers, allowing them to remove shortcuts to Microsoft's Internet Explorer browser from the Windows computer desktop.

The company also announced Wednesday that PC manufacturers will be able to continue to add icons of other technology companies, such as RealNetworks Inc. or AOL Time Warner Inc., on the forthcoming version of Windows, called XP.

Previously, the company had sought to create a completely clean desktop for the new system, due out Oct. 25, free of both Microsoft and competitors' icons. In light of the ruling, that plan would have been illegal, because it prohibited manufacturers from adding shortcuts to competing products.

"We recognize that some provisions in our existing Windows licenses have been ruled improper by the court, so we are providing computer manufacturers greater flexibility," Microsoft chief executive Steve Ballmer said.

Microsoft's earlier licensing agreements allowed manufacturers to add icons such as the one to rival Internet browser Netscape Navigator, but prohibited them from removing Microsoft icons such as the one for Internet Explorer.

Computer manufacturers feared confusion if they had more than one browser appearing on the desktop, however; since they couldn't get rid of the Explorer browser icon, many wouldn't add the Netscape shortcut.

In its ruling last month, the U.S. Court of Appeals in Washington, D.C., found that such agreements with manufacturers broke the law.

Reserving its harshest criticism for this practice, the court said Microsoft used its power to illegally maintain a monopoly by giving preference to Microsoft products on the computer desktop, considered to be the prime real estate of new computers.

"Although Microsoft did not bar its rivals from all means of distribution, it did bar them from the cost-efficient ones," the appeals court said in its ruling.

But by agreeing to change its practices after it had already dominated the Internet browser market, two of the attorneys general who brought suit against Microsoft questioned what good the changes would do.

"I've been around this business for more years than I want to admit, and I've seen this before. When a computer does something illegal to obtain an objective, and they obtain that objective, then they don't have to do the practice anymore," said Iowa attorney general Tom Miller, who organized the suit.

Richard Blumenthal, the Connecticut attorney general, said the real test would be how the software giant responds to rivals in markets it does not yet dominate, such as e-mail or computer music and video players.

"The question is, how will they react to other products from competitors that pose a threat to Microsoft's operating system?" Blumenthal said.

Microsoft's decision to allow icons back on the XP desktop was also seen as too small a concession to significantly impact either the software giant or its competitors.

"(Microsoft) wanted to create a new clean, unmuddled start screen, so maybe it gets muddled up, but again I don't think that really hurts Microsoft in any way other than aesthetically," Geurkink said.