A European court ruled Wednesday that Microsoft must release a new version of Windows without Media Player and new server protocols, even though the company's formal appeal has yet to be heard.

Under the decision by the European Court of First Instance, Microsoft will provide the stripped-down version of the Windows code to European PC manufacturers in January and the server protocols in the near future, said Brad Smith, Microsoft's chief legal counsel, during a press conference Wednesday after the decision was made public.

Smith said the new version of Windows will be available in February through the distribution channel and to resellers in Europe.

Microsoft also is working to ensure that it complies with an order to make available for licensing select communications protocols for the Windows server. Microsoft was required to license communications protocols for the Windows client as part of its settlement with the U.S. government several years ago.

Despite the setback for Microsoft, the case is far from over, Smith said, noting that the Redmond, Wash.-based company's formal appeal hasn't been heard yet. Microsoft has two months to decide whether to appeal Wednesday's ruling to the President of the European Court of First Instance, but the company first plans to study the decision before determining its course of action, he said.

"We've always been skeptical that there will be consumer demand for this additional version of Windows. The reality is this additional version we're required to make available will provide consumers with less," Smith said. However, the company will comply, he said. "We're being ordered to make it available, and we will. If we win and withdraw product in the market, we'll assess the best way to do that. We'll see what the future brings.

In the decision, the European court recognized four substantial arguments that Microsoft had made in its defense, and there's "substantial cause for optimism that Microsoft will win at the end of the judicial day," according to Smith

The European court ordered Microsoft to pay a fine of more than $600 million and to provide a version of Windows without Media Player after it found Microsoft liable for antitrust infractions last year. Microsoft paid the fine this year.

Smith said the software company will file more briefs by June 2005, and he expects hearings on the appeal to begin next fall.

"The litigation will continue for some extended period of time," he said. "This case may keep lawyers busy for months and some additional years before there is final resolution."

Per Werngren, CEO of IDE, a Stockholm, Sweden-based Microsoft solution provider, held out hope that the software giant could reach a settlement with the European Commission, as it did with the U.S. Department of Justice in 2001.

"I think it is time for them to start the negotiations again and reach a settlement, because this process might take five years to solve and European companies in the IT sector need to have this issue solved once and for all," Werngren said. "Uncertainty is always negative, so I hope the new EU Commission and Microsoft can solve this issue soon."

Last month, Microsoft settled with two key parties in the European case: Novell and the Computer and Communications Industry Association. After reaching cash settlements, both parties officially withdrew their support from the European case against Microsoft.

Removing the Media Player files from the Windows code will disable integration of rival, third-party media players from RealNetworks and others, according to Microsoft. One business professor that has sided with Microsoft throughout the case said the Windows remedy benefits no one.

"Both Microsoft and consumers lose as a result of this decision," said Nicholas Economides, a professor for the Stern Business School at Manhattan-based New York University. "Microsoft loses because it is forced to offer a stripped-down version of Windows in addition to the full one. Consumers lose because they will pay the same price for both."