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Thu, Jul 01, 2004 - Page 12 News List

Bill Gates on fourth visit to China as Microsoft tries to consolidate position

MARKET SHARE The software giant faces an uphill battle against Linux and Chinese rivals as it seeks to establish a grip on the technology sector

AFP , BEIJING

Chinese pirated software vendors and customers examine the pirated programs near examples of the items in Beijing yesterday. Pirated version of Microsoft's Windows software can be purchased for as little as six yuan (US$0.80). Bill Gates arrived in Beijing yesterday to open computer classrooms in schools.

PHOTO: AP

Microsoft chairman Bill Gates yesterday began his fourth visit to China in three years as the world's largest software firm ramps up efforts to consolidate its position in the huge Chinese market.

Gates is primarily in Beijing to open computer classrooms in Chinese schools but he will be conscious that competitors are moving aggressively into the Chi-nese software sector.

IBM, Sun Microsystems and Hewlett-Packard are working to put Linux, a low cost alternative to Microsoft, onto the world's PCs and the Chinese government has made clear it is keen to embrace a variety of software systems.

This includes both Linux and Windows-based platforms as it seeks to develop its domestic industry, with the pendulum swinging towards Linux because of concerns about the cost of Microsoft's products, analysts say.

Microsoft is also having to compete directly against China's homegrown software players, which while still underdeveloped have been improving their product offerings in recent months.

The government, which accounts for over 40 percent of software purchases in China, has openly declared a preference for homegrown software.

With this in mind, Microsoft has moved to consolidate its presence, and over the past four years has opened three joint ventures, unprecedented for the company anywhere in the world.

Only last weekend it penned a deal with Changhong, the country's leading home appliance manufacturer to cooperate in the multi-media area.

State media said yesterday that Microsoft was on the verge of announcing a new global partnership with a domestic IT distributor and software company, Digital China.

"Our core strategy is to implement a unified strategy, get rooted in China and grow with the local economy and software industry," Tim Chen, Microsoft vice-president and chief executive of its China, Taiwan and Hong Kong operations, told the China Daily.

He said Microsoft had the most complete organization structure in China outside the US, including joint ventures, research, support, sales and marketing facilities.

It is not just the threat from Linux and local software companies that Gates and his company needs to overcome.

Microsoft has primarily had such a hard time penetrating the Chinese market because pirated copies of its software products are widely available at prices as low of little more than US$1 a CD-ROM.

Although the company is reportedly considering price cuts for some of its fringe developer tools, Chinese customers are still expected to pay some 3,200 yuan (US$386 for a single, legitimate copy of Office, its main applications package.

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