SAN JOSE, Calif. (AP) -- Three years after the federal government brought antitrust charges against Microsoft Corp., the competitors who lobbied hard for a breakup say the software powerhouse is as ruthless and brash as ever.

Rivals had largely expected a decision favorable to Microsoft.

Some have already been pushing for a second antitrust lawsuit, which several state attorneys general -- upset about what many considered continued Microsoft monopolistic misbehavior -- have acknowledged mulling.

The more immediate issue for the high-tech world is the power Microsoft is wielding as it includes -- or "bundles" -- an increasing amount of features into its new operating system, Windows XP, and its nascent Internet-based initiatives .NET and Hailstorm.

By piling on features previously supplied by add-on programs made by other companies -- such as music and video player-recorders and personal security "firewalls" -- Microsoft diminishes markets for competitors and stifles innovation, its foes say.

"I think we're dealing with the most vicious competitor of the last 30 years in technology, and they're only getting stronger," said Matthew Szulik, chief executive of Red Hat Inc., a North Carolina-based seller of Linux software, a competing operating system based on is nonproprietary code.

Two of Microsoft's biggest competitors, Sun Microsystems Inc. and America Online Inc., had no immediate response to the ruling.

The decision was not expected to have any immediate effect on most rivals' business, since none was operating under the assumption that the federal appeals court would uphold U.S. District Judge Thomas Penfield Jackson's breakup order.

RealNetworks Inc., which makes Internet audio- and video-playing software, and was founded by a former Microsoft executive, is a fierce competitor for computer users' allegiance.

"We've been competing with Microsoft for five years and winning," said company spokesman Eric Liu. "We've never built our strategy around any legal or regulatory action."

Microsoft said its bundling strategies are aimed at making life easier for consumers and speeding up the development of the Web.

But other companies say Microsoft's real agenda is to insinuate itself into nearly everything on personal computers and the Internet -- and assimilate the best features of competitor's products.

Though the breakup was reversed on Thursday and punishment of Microsoft turned over to a different judge, competitors were pleased that the court confirmed an essential element of the case: that Microsoft illegally used its monopoly to gain an unfair advantage.

"Microsoft is always in a position to copy what you got, bundle it with Windows and give it away for nothing," Oracle Corp. chief executive Larry Ellison said this week. "You have got to give them credit. They'll keep bundling things with Windows and driving people out of business."

When Judge Jackson ordered Microsoft split into an operating system company and a separate software seller, some of the biggest winners figured to be AOL, Sun and Oracle, which have Internet-services plans of their own.

It also appeared to be a victory for the Linux operating system.

But where many major competitors may complain that Microsoft has not been split, others aren't intimidated.

One is SonicWALL Inc. of Sunnyvale, Calif, a maker of hardware and software "firewalls" and other anti-hacker programs. Its president, Raj Dhingra, said most businesses realize they need hardware like SonicWALL's plugged into their networks to ensure privacy.

However, he said many consumers might get a false sense of security from having less robust firewall software built into in XP.

RealNetworks has made similar claims that the individual features thrown in with Windows are not the best in their classes.

Red Hat's Szulik worries more about the products and ideas that he said may never come to fruition. Fewer and fewer people, he said, are willing to start a software company that can't win distribution through Microsoft's platforms.

"I hear about this kind of stuff all the time," said Mike Pettit, president of ProComp, a coalition of Microsoft opponents. "A company can't get the first round of financing from anyone other than their relatives once they run into that roadblock. That's frightening. ... (Microsoft has) just sucked all of the innovation from the industry."

Some venture capitalists, however, say Microsoft's Internet initiatives are creating new opportunities for developers.

"If there are people in the valley telling you that Microsoft has such a heavy hand that nothing can get out the door that's competitive, that's ludicrous," said Chuck Hirsch, who once sold a start-up he founded to Microsoft and now is a managing director at Madrona Venture Group in Seattle.

"Microsoft is clearly a very strong and smart competitor," he said. "However, even they, as great as they are across the board, can't do everything. So there are opportunities."