Microsoft vows to fight on

Microsoft has been found guilty of anti-competitive behaviour, but Bill Gates says he is confident that appeal courts will throw out the verdict.

Technology shares remain jittery and deep in the red.

Mr Gates, the man in charge of the world's biggest software company, told the BBC that Microsoft had a "very strong case" with "common sense at our side".

In a landmark ruling, District Court Judge Thomas Penfield Jackson found on Monday that Microsoft had broken US anti-trust law by attempting to monopolise the internet browser market.

Judge's options

Break-up - Split into three - operating systems, applications and internet content

Open source code - Competitors could add or modify Windows to use their own software

Fair pricing - Bar on discounts to firms which exclusively use its software

Baby Bills - Create several identical versions of Microsoft

The judge has not yet decided what action to take against Microsoft, but penalties could include a break-up of the company.

Judge Jackson plans a new round of hearings to decide on "remedies".

Microsoft's Windows operating system runs more than 80% of the world's personal computers.

The ruling follows the breakdown of talks aimed at reaching an out of court settlement.

Market impact

Microsoft shares fell $2.37 on Tuesday, having fallen $15 a share to $90.87 on Monday.

Many investors used the Microsoft verdict as an excuse to pull their money out of the technology sector, believing that it is overvalued.

In London and Frankfurt, the Techmark and Neuer Markt indices were down about 5%.

As investors braced themselves for the verdict on Monday, Microsoft saw $80bn wiped off its stockmarket value.

It is now worth $473bn - knocking it off the number one spot as the world's most valuable company.

'Old economy' firm General Electric has now regained the top position, followed by Cisco Systems.

Appeal

Practices banned by US anti-trust law

Monopolies "in restraint of trade"

"Predatory pricing" at below cost to drive out competitors

"Price-fixing", an agreement among several competitors to fix prices or restrict output

"Illegal business practices" including restriction on opening hours, resale price maintenance, and tie-in sales

Announcing his determination to appeal, Microsoft founder Bill Gates said: "Microsoft's past success has been built on innovation and creativity, and our future success depends on our ability to keep innovating in the fastest-moving marketplace on earth."

Legal analysts say the case could go all the way to the US Supreme Court, delaying significant changes in the market for several years.

US Attorney General Janet Reno said the consumer would ultimately benefit from the decision.

Justice Department anti-trust chief Joel Klein said the decision showed that "no company, no matter how powerful or how successful, can refuse to play by the rules".

The charge sheet

Microsoft was accused of using its domination of the operating system market to restrict competition.

The judge heard from a succession of rivals about their dealings with Microsoft, which highlighted the threats and rewards offered to boost the market position of its products.