Microsoft mulls cheaper OS version in China
By Zhu Boru (China Business Weekly)
Updated: 2004-07-08 14:45

During his two-day visit to China last week, Bill Gates, chairman and chief software architect of Microsoft, said: "The prices are...somewhat based on the market conditions and changes of currencies."

Microsoft has already offered Windows Starter, a version specially designed for beginner computer users, "in a couple of government, low-cost, first time user PC (personal computer) programmes" said Gates, referring to Thailand and Malaysia.

"We have that technology. I don't know...how many first time users of PC programmes in China will be appropriate...or any proposal like that," he said.

Windows Starter is positioned between Windows CE, the lowest-end version, and the higher-end Windows Home, designed for home users and is very cheap, said Gates.

The product is believed to be able to help Microsoft to curb the spread of Linux, a free open-source OS software that is becoming increasingly popular in Asia.

The shipments of PC Linux in Asia reached 448,124 copies in 2003, compared with 142,131 copies in the United States, according to research firm Gartner Inc.

Microsoft is flexible in modifying the various versions of Windows to satisfy the needs of different governments, Gates said earlier during his visit to Malaysia. He was commenting on whether Microsoft would promote the simplified, cheaper version of Windows XP in India and China.

At a Linux summit held one day before Gates' visit, the Ministry of Information Industry (MII) vowed to further promote the unified Linux development platform, launched in May, for better co-ordination among Linux developers.

International IT giants including IBM, Oracle, Dell and Hewlett-Packward have joined the alliance to promote Linux.

Changes for China

China might be the only country that is able to challenge standards such as Windows OS, Steve Ballmer, Microsoft's chief executive officer, has remarked on several occasions.

"Microsoft finds that it has to integrate its business into the China market, and some adaptations are necessary," said Jiang Qiping, general-secretary of the Information Research Centre at the Chinese Academy of Social Sciences.

And Linux is not the only trouble that Microsoft is facing.

With China expected to roll out its anti-monopoly laws soon, there is high speculation Microsoft will be sued for its Windows monopoly, according to industry sources.

Windows commands 95 per cent of China's computer desktop OS market, a report presented to the General Administration of Industry and Commerce indicates.

But despite the absolutely dominant share, Microsoft's estimated annual sales revenue was 1.633 billion yuan (US$196.74 million) in China last year, the world's second largest PC market, according to statistics released by the China Software Industry Association.

Microsoft, the world's largest software maker, is ranked only No 12 in China in terms of software revenues in the country, according to the MII.

Whereas, its annual global revenues stand at US$35 billion at present. "The disproportionate revenue is closely related to the nation's prevailing software piracy," said Jiang.

Industry sources estimate Microsoft China suffers losses of between US$200 million to US$300 million each year from pirated software products, which are typically sold at US$1 each. The authentic Windows XP Professional sells at about US$300.

"Microsoft is aware that it will lose more business opportunities if it only minds its own business regardless of the local needs,"Jiang noted.

Like many countries, China wants to foster its own software industry. For Microsoft, efforts to help Chinese software vendors grow will bring more government support in attacking software piracy, he said.

Gates said that "by providing Windows tools, training and curriculum, we make sure that China is not only going in a direction" that helps China's software industry grow using Windows, but also becomes a base of software exports to the world.

Microsoft has already invested more than 5 billion yuan (US$602 million) of a total 6.2 billion yuan (US$746 million) promised in China's IT education and training, hardware production lines and software outsourcing.

According to Gates, Microsoft has doubled its spending on research and development (R&D) in the past four years to US$6.8 billion,a majority of which goes to China.

The software giant has three R&D institutions in China, including Microsoft Research Asia, the Advanced Technology Centre for Asia and Microsoft Technical Engineering Centre. Microsoft Research Asia is the second-largest of the three.

"I have a very ambitious goal...that every Chinese student will have a Tablet computer with broadband and automatic speech recognition...10 years later," said Gates.

The Tablet PC has a touch-sensitive flat screen on which characters can be written with a special pen interface, eliminating the need for a keyboard.

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