Chairman Bill Gates said the company planned to increase its workforce in the country "to 7,000 over the next three to four years" and boost spending on research and development.

'Blocking competition'

The antitrust ruling in South Korea followed allegations raised by internet firm Daum Communications that Microsoft was breaching antitrust rules by selling a version of Windows that included its instant messenger software.

"Windows' Media Server, Media Player and Internet Messenger services were blocking competition and leading to a monopoly in the market," said the Fair Trade Commission's chairman Kang Chul-kyu following the announcement of the ruling.

Microsoft was "raising the entry barriers to PC server and operating system makers, hurting the interest of consumers" he said.

Microsoft said it was "disappointed with the ruling" and planned to appeal against the decision, the Reuters news agency reported.

The firm is currently challenging a similar European Union ruling.

However, Reuters said Microsoft did not intend to follow through on a threat to withdraw its Windows operating system from South Korea.

RealNetworks settlement

Microsoft last month reached a separate $30m settlement with Daum Communications.

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In October, the company agreed to pay US software rival RealNetworks $761m to end an anti-competition lawsuit over computer music players.

RealNetworks had alleged that Microsoft forced PC makers to fit its rival's Windows Media Player software at the expense of its own Real Player.