Microsoft is expressing confidence its proposed acquisition of Yahoo! Inc. won't run into anti-trust problems. But a federal judge has granted New York States request to continue overseeing Microsofts conduct to ensure fair competition.

U.S. District Judge Colleen Kollar-Kotelly ordered the oversight extension until November 12, 2009 despite the opposition of Microsoft Corp. and the United States Department of Justices Antitrust Division, both of whom opposed further oversight.

Microsoft, the world's biggest software maker, made an surprise, unsolicited $44.6 billion offer for Yahoo!, raising the stakes in its drive to challenge Google Inc.'s dominance in Internet search services and advertising.

Microsoft has so far failed to compete with Google in a market that may almost double to $80 billion by 2010. Google has grown faster than Microsoft in every quarter since Google's 2004 initial public offering as its search engine won more users and its contextual advertisements have grown at an unprecedented pace..

Perhaps even more frightening to Microsoft, Google has been rapidly deploying its Google Apps packages, which include slimmed-down online versions of Microsoft's popular word processing, spreadsheet and presentation programs.

Google Apps are offered free to consumers and at a nominal $50-per-user charge to businesses, far less than Microsoft's Office desktop programs, which cost several hundred dollars.

Reaction from Wall Street was guarded. Thomas Radinger, a fund manager at Pioneer Investments in Munich, told Bloomberg News it was "a huge gamble" and said it would take years for Microsoft to recoup its investment.

"We have been losing money. Our plan here would be to not lose money in the future," Microsoft Chief Executive Officer Steve Ballmer said on a conference call with analysts.

It would be the biggest acquisition ever in the technology sector and, Ballmer's assurances notwithstanding, would be certain to draw the attention of anti-trust regulators in the U.S. and abroad.

Anti-trust decree

Indeed, Judge Kollar-Kotelly was extending her oversight of Microsoft even as Ballmer's team was preparing to announce its surprise bid for Yahoo.

In granting the request by New York, California and nine other states for continued oversight, Kollar-Kotelly emphasized that Microsofts inability to meet its obligations and provide industry players with technology that Microsoft promised in 2001 prevented the courts decree from accomplishing its intended result -- stimulating competition in the market for personal computer operating systems.

The antitrust consent decree went into effect in November 2001, and significant terms of the five-year decree were set to expire in November 2007. New York and California led the request to extend court oversight, which arises from the 2001 findings that Microsoft committed antitrust violations.

We are very pleased that the Court recognized how important it is to keep the antitrust decree against Microsoft in place to protect consumers and promote fair competition, said New York Attorney General Andrew M. Cuomo. The oversight extension will help ensure that Microsoft fully complies with the requirements of the consent decree and helps stimulate competition in the personal computers marketplace.

Microsoft recently opposed Google's acquisition of DoubleClick, an online ad firm, claiming it will give Google too much control over the online ad market. The deal is still under review by European regulators.