Microsoft To Invest Heavily In China

abb_road writes "As part of Chinese President Hu Jintao's recent visit to Redmond, Microsoft is announcing plans to invest $900 million dollars directly in software and hardware companies in China. The announced goal of this investment is to reduce software piracy and establish Windows-dominance in the region; what's not clear is if they expect the reduction to come from local business pressure or more direct government intervention." From the article: "To now, Microsoft's investment efforts have made little headway in reducing piracy. The company should be booking about $1 billion on annual sales of some 20 million PCs in China, says Paul DeGroot, an analyst at consultancy Directions on Microsoft. Instead, sales there are about $100 million, he says."

Comments

One question

[Anonymous Coward]

How do you say "Business Software Alliance" in Chinese? Will they get to use tanks?

Combat piracy??

[gasmonso]

Seeing as how China is the piracy capital of the world. I doubt Microsoft can do little to stop it. Having been in China, I can say that the piracy market is impressive. Every market you go to you'll find dvds, software, and everything else on the cheap. I think the going rate for DVDs was about $1 and thats a fully labeled DVD with sleeve. Windows XP was going for a few more $. Good luck Bill, you're gonna need it!

http://religiousfreaks.com/

Re:Combat piracy??

[suv4x4]

Seeing as how China is the piracy capital of the world. I doubt Microsoft can do little to stop it. Having been in China, I can say that the piracy market is impressive. Every market you go to you'll find dvds, software, and everything else on the cheap.

Exactly the case here (Bulgaria) in 1998-2000, the piracy is ripe, and actually Microsoft is indirectly encouraging piracy (do you remember they didn't even require you to enter a serial in Windows 95?) in plenty of political and technological ways.

Then, when the market is hopelessly stuck with Windows (and to a certain degree Office) they come and harvest the crops, by launching a massive anti-piracy scheme, checks in firms for genuine software and so on niceties.

Microsoft was getting ready to go harvest in China for quite some time now, it was a known thing to come. The huge piracy in China is actually a blessing for Microsoft, and they have a well thought plan how to take advantage of it.

As a matter of fact, if every human on the planet was so honest that he'd never pirate Windows, we'd be much less dependent on it in first place, and Microsoft wouldn't sell so much. That's obvious.

Re:Combat piracy??

[$RANDOMLUSER]

I think that when you compare incomes in terms of hours-worked per bags-of-groceries, that the $1 the average Chinese is paying, that it is equivalent to the $18 the average U.S. citizen is paying.

I'm not saying that the piracy is OK, but that the amount paid isn't so cheap as it sounds to us.

Re:Combat piracy??

[misleb]

On the other hand, China is unique because they are so huge. China has the power to collectively say "Screw you. We're making our own Windows-like OS." (or maybe they'll adopt linux). Microsoft could be in for a rude awakening.

I see your point. I totally agree that, normally, piracy works in favor of Microsoft, but I think China may be an exception. It will be intersting to see what happens.

-matthew

Re:Combat piracy??

[Bob_Robertson]

How is democratic control over corporations socialism?

Main Entry: socialism
  Pronunciation: 'sO-sh&-"li-z&m
  Function: noun
  1 : any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods

Just because the politicians are elected doesn't make it any less "socialism". Either I retain the power to dispose of my property as I see fit, and face the consequences for my actions, or I do not truly own my property, my production, my labor, my life.

It's just not laissez-faire.

Exactly. The opposite of "laissez-faire" is "socialism".

I'm certainly not going to give up all my rights to a swindler in a suit because I think the government is bloated.

You've already given up all your rights to a swindler in a suit, the politicians themselves.

Abusive corporations have always depended upon government coercion for their positions to abuse. The myth that big government opposes big business is one of the most successful "Big Lies" in America, likely in the entire world.

If you're interested in how big business and big government work together to fleece you, I can suggest you wander through the articles on http://www.fff.org/ and http://www.mises.org/ , LewRockewll.com, or just for one example notice that Enron had based their entire business model on leveraging government "energy credits". Abusive big business *loves* big government, and abusive big government *loves* the campaign contributions of big business.

Bob-

Linux "salesmen"

[EraserMouseMan]

Linux needs more than activists to spread. It needs a sales force of sorts to make deals with developing nations and businesses. Linux needs business people pushing the solutions and making deals to get the product into mainstream usage.

What?

[Whiney Mac Fanboy]

what's not clear is if they expect the reduction to come from local business pressure or more direct government intervention.

Of course its going to be "more direct government intervention" - does the submitter think local businesses are going to pressure someone so they can pay a tax to a large foreign corporation?

Establishing Dominance in the USA

[yls07]

Not sure what the law is like in China, but it would reek of antitrust violations and corruption if a foreign company teamed up with George W. Bush to announce huge cash influxes combined with an articulated goal of "establishing dominance" in that country.

The article says "[t]he aim is to reduce piracy rates and establish Windows as the dominant operating system in the region," but its unclear whether that's the author editorializing or an goal that Microsoft has publicly and openly articulated.

If China doesn't care too much about competition in the political marketplace, maybe they don't care about competition in the actual marketplace as well.

Re:Establishing Dominance in the USA

[joe 155]

You must realise that the Chinese are hard-core capitalists (impressive ones at that). The government wants to make the most money, so when Bill says that he will give $900million in investment then they are very happy, the competition couldn't afford to do that (and they might not want to play ball politically anyway). Besides, if there was competion then it would probably push the price of the stuff down, which neither MS (for the direct money) or the Govt. (for the tax) wants.

Hard to see how Windows dominance will happen

[jamar0303]

As I have said before, I have seen plenty of street vendors in my area give up selling pirated Windows in favor of Linux. This generally means that uptake of Windows is low (if even $.50 is too much to pay for a copy, then how are you going to get Windows dominance in the market?)and people are getting into Linux. Again, I cannot represent all of China (or heck, even all of Shanghai) but at least a small part of China is starting to see the light of open-source (or turning away for the darkness that is Windows).

Up pops Clippy the hand Office Assistant!

[gowen]

"It looks like you're selling out your last few moral principles, in order to make a shitload of money from an oppressive totalitarian regime.
  Would you like some assistance?"

Money talks

[RingDev]

From the article on NEC being pirated: http://www.iht.com/articles/2006/04/27/business/ne c.php

"After a visit to the Microsoft headquarters in Seattle on April 18, Hu said the protection of intellectual property was crucial for China's future."

A quick visit to old Billy-boy, a squak about IP protection, and a $900m deal? Interesting.

-Rick

China 2000 = America 1800

[GalacticCmdr]

Just like the Europeans who squawked about the thieving Americans in the 1800s - so to do the American squawk about the Chinese. The Chinese will not come around until they actually have something worth protecting.

It is amazing that when you have your own oar in the water how quickly you become a player.

Personally I think that we are still 2-3 generations away from China being viewed as an adult at the big table. However, barring any really radical changes it is coming.

Re:China 2000 = America 1800

[mrchaotica]

I disagree. America took several generations to become prominent because of the slower pace of the 19th Century (due to the lack of communications and transportation technology). With the tech we have now, China can progress much faster.

For example, take the auto industry: the Japanese became big players in the US auto market about 20 years after entering it. The Koreans came a little later and did it in 10. There's speculation that, once the Chinese start selling cars here in the next year or so, that they'll be able to become as big as Toyota or Hyundai in only 5.

Linux a better business model

[peter303]

In China, businesses that try to make money off of closed software with fail due to rampant piracy. Since Linux is free anyways, services based on Linux is a better model.

Re:MSFT down 10% overnight

[omega9]

They announced earnings for the quarter and missed expectations.

Those clever Chinese

[pubjames]

Of course the Chinese are going to welcome foreign investment. But they are not naive - they will welcome Microsoft's cash and make all the right noises, and at the same time they will make sure that we carry on buying more and more of their stuff, whilst they buy fairly little of ours. This rush for western companies to establish in China has been going on for many years now, but few have achieved it. I think perhaps we are the ones being naive...

Microchina?

[Khammurabi]

As part of Chinese President Hu Jintao's recent visit to Redmond, Microsoft is announcing plans to invest $900 million dollars directly in software and hardware companies in China.

Did anyone else read this and think to themselves, "$900 million is just about what it would take to move Redmond to redland?"

1. Hire Chinese developers, check.
2. Fire American developers, check.
3. Save massively on overhead, check.
4. Profit!

The whole "China will now start to crack down on Chinese piracy" thing seems kind of a given if Microsoft becomes a Chinese company. (It also would give Microsoft the ability to bottom out the price of Windows if Linux ever becomes a larger threat.)

more than piracy

[big dumb dog]

Microsoft's investment in China and courting of the Chinese president is about more than opening up a new market or trying to stop piracy.

I believe the real issue for Microsoft is risk management. The Chinese have a huge consumer market that is just starting to transition into computers (in some areas). If these people cut their teeth on MS products like Windows, Microsoft has a better chance of retaining their place in the market.

I'm sure that Microsoft knows from several years of making inferior products that it takes quite a bit to get people to make a change in their computing environment.

On the other hand if the mass Chinese market starts off with something like Linux, substantial momentum could develop to erode their market share else ware.

Re:Clash of the Titans

[Mostly a lurker]

If Microsoft presses hard to eliminate software piracy in China, they will end up out of the race. Their products are already looked at with a jaundiced eye in government circles. Meanwhile, Chinese private businesses are very price conscious. Linux is slowly making headway, and could experience an explosion of use. The question is: will the companies offering server based applications be able to overcome the privacy concerns? If so, the economies of such solutions are likely to be irresistible and Google could end up doing very well.

Selling ideas to the Chinese

[Peter Trepan]

Salesman: Vista is much more advanced than Windows XP. It interfaces with hardware right on the motherboard that keeps you from copying things you're not supposed to copy, and...

Chinese Businessman: What the price?

Salesman: We're pricing it aggressively, with the bare bones version just under one hundred U.S. dollars.

Chinese Businessman: One hundred dollars! What else it do?

Salesman: It's like Windows XP, but it has Digital Rights Management, and look - the windows can be transparent.

Chinese Businessman: Give me a brochure that say exactly what it do, and I think about it.

Salesman: Okay, great! Here are the technical specs, and here's a pamphlet that shows you why you need the new Windows Vista.

Chinese Businessman: Okay, goodbye!

******* One Month Later *******

Chinese Businessman: Happy Panda Software is pleased to announce that "Mindows Fiesta" is now available. Home version only seventy-five cents!

Re:Clash of the Titans

[sgt_doom]

Listen, I don't mean to be hypercritical, but really: for every $1 billion spent, M$ is getting an ROI of $100 million!!!!!!

Now, this is an improvement , given their previous ROI which was probably about $100 million returned for every $10 billion to $30 billion spent.

As far as China being up for grabs, come on, hasn't anyone been reading The Economist during the last several years - China is taking everyone for their money and for a one-way ride.

Steve Jobs' dream - WITHOUT - Steve Jobs' brain......

Grain of salt for 'investment' announcements

[ivaldes3]

Take news of big 'investments' by companies like IBM, Microsoft etc with a grain of salt. They use funny money accounting to come up with these numbers. Lets say for example a $100,000 'investment' from a company like IBM. What might this mean in real terms? A $89,000 list price per CPU license for the rights to use their Domino server software and $10,000 / $250/hr staff time = 40 hours of staff time to set it up and do some minimal programming.

What would the same 'investment' mean on the street and nearly everyone else?
Exactly zero dollars for the software and much less than $250/hr for staff time and much less staff time. When companies throw Billion dollar investment announcements around in splashy PR announcements, they bear investigating what that really means.

-- IV