APPEALS COURT REJECTS DELAY OF MICROSOFT CASE.

(Reuters) A federal appeals court on Friday rejected Microsoft Corp.'s bid to delay the antitrust case against the company, setting the stage for hearings as early as next month to determine what remedies will be imposed against the company.

The U.S. Court of Appeals for the District of Columbia denied Microsoft's request that the case be delayed while the software giant appeals the case to the Supreme Court.

Barring any further hitch, the case will be sent back to a lower court next Friday, where a new judge will be selected to decide what remedies should be imposed to prevent any further abuse of Microsoft's monopoly in personal computer operating systems.

The timing for moving the case could be crucial for Microsoft, which is due to roll out its new Windows XP operating system, packed with new features, in October.

The appeals court said Friday Microsoft had "misconstrued" part of its June 28 opinion that upheld many of the findings of the lower trial court judge.

The company also, "failed to demonstrate any substantial harm that would result from the reactivation of proceedings in the district court during the limited pendency of the (Supreme Court appeal)."

Microsoft stock was off $1.76, or 2.7 percent, at $62.88 in early afternoon

trading, a little more than 2.5 percent decline in the overall tech-laden Nasdaq Composite Index.

Legal analysts said the ruling clears the last major obstacle to getting the case for remedy hearings. The company could still ask the Supreme Court to stay the proceedings, but they said it was unlikely the high court would grant such a request.

Andy Strenio, a former U.S. Federal Trade Commissioner said the court dealt Microsoft a "mild rebuke" by saying the company had "misconstrued" its earlier ruling.

"This is sort of short and not sweet for Microsoft," Strenio said. "It's a slight indication from the court that Microsoft's arguments were not well received."

Friday's ruling was a victory for the U.S. Justice Department and 18 states suing Microsoft, who have argued the case should proceed quickly so remedies can be imposed and competition assured in the software industry.

Some of the states backing the case have expressed concern that Windows XP represents a troubling repeat of Microsoft's integration of its Internet Explorer browser into Windows 98, integration that the appeals court agreed helped shore up the Windows monopoly.

"We are pleased with the court's decision and we look forward to proceedings in the District Court," said Justice Department spokeswoman Gina Talamona.

A spokesman for Microsoft said the company was ready to go forward with the case and was still open to a settlement with the government.

"While we believe the process was best served through a stay, we are prepared to move ahead with getting the remaining issues in the case resolved while we await word on Supreme Court review," Microsoft spokesman Jim Desler said. "We remain committed to resolving the remaining issues in this case through settlement."

Microsoft had asked the Supreme Court to reverse an appeals court ruling the company abused its monopoly in personal computer operating systems, citing misconduct by the original lower-court judge.

The company charged the judge's rulings were compromised because he had given secret interviews to reporters before issuing them.

Had the appeals court granted Microsoft's request for a delay, the case would have gone on hold until October, when the Supreme Court is scheduled to return from recess.

Strenio, now an antitrust lawyer at the firm Powell, Goldstein, Frazier & Murphy, said Microsoft could still appeal to the Supreme Court to stay the proceedings, but the high court would probably reject the idea.

After the case is sent back to the U.S. District Court next Friday, it will be randomly assigned to one of about a dozen judges there.

Strenio predicted it would be mid-September at the earliest before the remedy hearings actually began. First the new judge would have to set a timetable for the hearings and further legal filings by both sides.