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

April 26, 2006 at 3:12 PM

Microsoft’s China swap

No wonder Microsoft didn’t report any material gain from the $1.4 billion worth of contracts it signed recently with Chinese PC makers — it was a wash for the company.

Microsoft was simultaneously pledging to spend $900 million on Chinese hardware and software ventures, bringing its investment there to $1.65 billion since 2002. The company and the Chinese government announced the spending today, capping last week’s visit from China President Hu Jintao.

It’s a long-term investment for Microsoft in China’s tech industry. But for now, the place seems a bit like Las Vegas: Money that happens in China, stays in China.

UPDATE: This item was based on an erroneous Bloomberg news report. It turns out Microsoft pledged to spend $700 million per year on hardware for five years and $200 million total on ventures, bringing the total to $3.7 billion over five years.

The Vegas analogy still holds, but Microsoft is placing an even bigger bet on China.

Or maybe it’s not a bet. Could it be a $3.7 billion carrot that Microsoft is dangling to get China to follow through on its promise to crack down on software piracy? If the crackdown doesn’t happen, will Microsoft turn off the spigot? Perhaps that’s the deal that Hu and Bill Gates hashed out on their walk around the Gates compound.

Comments | Topics: Asia, Microsoft

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