But the newspaper said the European Commission had indicated that the proposal by the US software giant did not go far enough.

And Microsoft's rivals are also suspicious of the suggestion, arguing that too few consumers use software provided on such CD-ROMs, it added.

Microsoft, which has largely settled its anti-trust problems in the United States, is accused in Europe of trying to squelch rival products to its Windows Media Player, such as RealPlayer and Apple QuickTime.

Microsoft has also been accused of trying to squeeze out other firms in the market for "low-end servers" -- computers that provide e-mail and other services to multiple users.

Under the proposed settlement, rival multimedia formats such as RealPlayer would be included on the CD-ROMs supplied with new PCs, according to the Financial Times.

In formal charges filed last August, the European Commission called for Microsoft to separate Media Player from the Windows operating system or include rival products in Windows.

The FT quoted "people close to the case" as saying the commission had rejected Microsoft's approach, but that talks were continuing.

A commission spokesman declined to comment on the report.

Brussels has finished a draft report into its anti-trust investigation of Microsoft and the results are expected in the coming months.

EU Competition Commissioner Mario Monti said last month that the EU executive was not against a settlement with Microsoft but added that "time is running short".

SPACE.WIRE