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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

April 17, 2006 at 5:08 PM

Microsoft’s red carpet for Hu

Microsoft is rolling out the red carpet literally and figuratively for China President Hu Jintao.

The actual red carpet, along with a small forest of potted plants and huge bouquets, appeared at the executive briefing center on campus where Hu will visit Tuesday. Black limos were already piling up outside today, and a phalanx of state patrol motorcyclists were roaring down Highway 520 in formation, apparently practicing for Hu’s motorcade.

The figurative red carpet was a press conference where PC maker Lenovo, a darling of China’s tech industry, “reaffirmed” plans to buy $1.2 billion worth of Microsoft software over the next year. Lenovo is the world’s third largest PC maker behind Dell and Hewlett-Packard, since it acquired IBM’s PC division last year.

Lenovo Chairman Yang Yuanqing announced the agreement at a ceremony with a group of Chinese government officials and Microsoft executives, including Chairman Bill Gates, Chief Executive Steve Ballmer and Tim Chen, Microsoft’s China chief executive.

The deal was characterized as an intellectual property agreement because the companies will work together to promote the use of legitimate, licensed software, as opposed to the freely pirated software widely used in China and other developing countries.

Microsoft has reached similar agreements with other PC makers, including deals recently announced with China’s other major producers, but today’s announcement means Hu will be greeted with headlines announcing that one of his country’s highest profile companies is spending a fortune on U.S. software. It also gives him a retort in case someone brings up China’s trade surplus.

Lenovo began working on its agreement to preinstall Windows on most of its computers last June, Yuanqing said, when he visited Gates and Ballmer. The deal was finalized in November, then “reaffirmed” in today’s ceremony. Lenovo has since seen the percentage of its customers choosing machines preloaded with legitimate versions of Windows XP increase to more than 70 percent, up from 10 percent before the agreement, he said.

It’s unclear how much of the $1.2 billion is new sales for Microsoft, which apparently didn’t file any reports of material financial events related to the announcement.

Nor did the companies say exactly how much of the $1.2 billion represents China sales for Lenovo, which gets most of its sales from outside its home country. It’s roughly proportional to Lenovo’s overall sales, of which about $4 billion are in China and $10 billion are elsewhere, said William Amelio, Lenovo president and chief executive.

Comments | Topics: Asia, Microsoft, Public policy


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