The company's shares had fallen as low as $83.50 in early trading, down more than 7% - or in valuation terms $20bn - on Friday's close.

But they then began to rally as investors snapped up the cheaper stock.

By lunchtime in New York (1700 GMT) they were trading at $87.8, down $3.75, and by the close they stood at $89.9, down just 1.8% from Friday's close.

Although the fall was slight by the end of the day, the company dominated proceedings as more than 120 million shares changed hands - about five times the average daily volume for Microsoft.

"Certainly the stock is going to take some heat," Richard Sherlund, an analyst with Goldman Sachs, said.

But several brokers said they would maintain a buy recommendation on the company, and said they believed any break-up was unlikely.

The BBC's Tanya Beckett reports on reactions to the judge's decision

US Federal Judge Thomas Penfield Jackson ruled on Friday that Microsoft had too much power through its Windows operating system and had abused that power against competitors.

But the news had little effect on the broader market.

The Dow Jones Industrial Average, which was recently amended to include high-tech stocks Microsoft and Intel, recovered after intially falling 47 points, to trade slightly higher, led by IBM.

The Nasdaq index of high-tech companies also closed higher after an intial fall - at a new record level.

Bill Gates: Looking to resolve case and "put it behind us"

But dealers were sceptical that other high-tech stocks would necessarily suffer as well.

"It would be too simplistic to say that there would be one knee-jerk and specific effect on other tech stocks because no one else does what Microsoft does," said one dealer.

Some of Microsoft's rivals, like Sun Microsystems and Oracle, were trading up.

European worries

The judge's ruling also makes it more likely that European anti-trust investigators will scrutinise Microsoft's activities more closely.

Already, regulators in France and Italy are considering consumer complaints against Microsoft, while the European Commission said it would study the ruling, and had two complaints lodged against Microsoft.

Competitors like Symbian, the alliance of Psion with Nokia and Motorola to produce software for handheld computers and next-generation mobile phones, say they are worried by Microsoft's actions in relation to its rival CE software.

"We believe there is cause for concern in Microsoft's trying to link purchases of Windows CE to the purchase of desktop devices," said Juha Christensen of Symbian.

Microsoft has been investing heavily in Europe, spending $4bn to buy stakes in European telecoms and cable TV companies like NTL in the UK and United Pan-Europe Communications in the Netherlands, which need regulatory approval.

"Microsoft will have to think very, very carefully about how it behaves in the future," said Martin Hingley of International Data Corporation.

Investors will have to weigh up the likely effect of the trial on Microsoft's business.

The judge's ruling, a finding of fact, will be followed by a verdict on whether or not the company breached anti-trust law early in the New Year.

It would only be at that stage that remedies - such as the break-up of the company - would be considered, sometime next spring.

And then, if there was not an out-of-court settlement, the appeal process could take several years.

A long-running case

The US Justice Department and 19 US states had charged Microsoft with abusing its monopoly power in order to sell more copies of its own internet browser, Internet Explorer, and damage the business prospects of the rival Netscape Navigator browser.

Microsoft argued that, although its Windows operating system runs on 90% of the world's personal computers, it did not act as a monopoly and instead benefited its customers by giving them additional features at no extra cost.