Microsoft chief executive Steve Ballmer and general counsel Brad Smith remained in Brussels and in contact with the EU antitrust office, sources familiar with the case said, after a surprise face-to-face session Tuesday night with EU Competition Commissioner Mario Monti.
No progress toward a settlement was announced but both sides said talks were continuing.
In a sign negotiations are intensifying, Monti canceled a scheduled afternoon appearance before a European Parliament committee, and Ballmer canceled a speech he was to give Wednesday in Las Vegas.
Monti, however, has signaled his determination to bring the 5-year-old case to a conclusion next Wednesday, and his hand was strengthened this week when advisers from the 15 EU countries unanimously backed his draft ruling against the U.S. software giant.
"We are on track for an announcement next week, which was always the plan," said Monti's spokeswoman, Amelia Torres.
EU legal experts say any settlement would have to be clinched in the next day or two if Monti sticks to that timetable, as he would have to run it by complainants and the advisory committee first.
The committee is scheduled to meet again Monday to consider the size of the fine Monti's office has said it intends to impose on Microsoft.
While that can amount to as much as 10 percent of annual worldwide revenue, the highest antitrust fine ever levied by the EU has been under 2 percent. In the Microsoft case, that would still run into the hundreds of millions of dollars.
Monti's draft decision also orders key changes to the way Microsoft does business because of its alleged "ongoing" attempts to monopolize new markets, despite the settlement reached in a similar U.S. case three years ago.
The EU is demanding Microsoft offer computer makers a discounted version of Windows without its own Media Player pre-installed so that rivals like RealNetworks Inc. have a better shot at reaching consumers.
It also wants Microsoft to release more underlying code to competitors so that their server software can interface as well with computers running Windows as Microsoft's own.
Sources familiar with the case say the Media Player issue has been the hardest to solve, raising the possibility that Microsoft could agree to settle the server side and fight the rest in court.
An EU order to "unbundle" Media Player would complicate Microsoft's business strategy of integrating new functions into Windows.
EU officials are already investigating charges that its latest desktop operating system, Windows XP, is designed to help extend Microsoft's dominance into new markets such as instant messaging and mobile phones.
Meanwhile, Microsoft allies warned the EU that going too far in undermining intellectual property rights would cost jobs in the information technology sector.
"This case has vast precedential importance and thus an agreement should be narrowly tailored to promote growth," said Hugo Lueders, European director for the U.S.-based Computing Technology Industry Association. "A result that stifles the incentives to compete will harm consumers because fewer parties will be willing to innovate."
A settlement normally involves no admission of guilt and carries less precedent-setting punch because it is not a formal administrative decision.
But legal experts note that a settlement now probably would not be formally adopted until after May 1, when new EU antitrust rules allowing for a weightier "settlement decision" go into effect.
By Paul Geitner