By Reed Stevenson and Doug Young
SEATTLE/SHANGHAI (Reuters) - Microsoft Corp. said on Tuesday it would
form two new ventures for its MSN Internet service in China, becoming
the latest player to expand in the crowded market.
The deals will allow Microsoft to offer "the full gamut of what a true
Internet portal should be" in China, said Bruce Jaffe, a Microsoft,
chief financial officer of the MSN division.
"We have been looking at China for quite some time," he said.
Microsoft already offers MSN services such as Hotmail and Messenger
services in Chinese, but the new joint venture will offer more
communication, information and content beginning this spring, the
Microsoft also said that it would buy assets from Chinese mobile phone
software provider TSSX to offer MSN-based services to China's 340
million mobile phone users.
China is the world's second-largest Internet market with 94 million
users at the end of 2004, a number expected to rise to 134 million by
the end of this year, according to official data.
Microsoft -- which already operates a China site at china.msn.com --
is a relative bit player in a market where Yahoo Inc. eBay Inc.,
Amazon.com Inc. and InterActiveCorp have made a string of acquisitions.
Google Inc. said on Wednesday it got a business license for China and
bought a China-based Web domain.
Microsoft's late entry, coupled with its strategy of working with
relatively unknown partners, means it could face a tough time gaining
traction, said one analyst who spoke on condition his name not be
"If you look at what Yahoo has done ... they had to pay quite a
significant sum of money" to acquire an existing search engine in
China, he said. "This may be a better way in China -- to take over a
key player in a particular area."
The entry into the mobile services market would put Microsoft
competition with a host of homegrown start-ups such as Sina Corp.,
Sohu.com Inc., Linktone Ltd. and Tom Online Inc.
Those companies rose to profitability -- and saw their shares soar as
well -- by offering short messaging services (SMS) over mobile
phones. but many have lately fallen out of favor amid a government-led
cleanup of the industry.
Microsoft has long seen China as a key growth market, but also a
headache because of widespread software piracy and copyright issues.
Censorship has been a major problem for many Internet players, who
voluntarily block searches and other links to sensitive subjects like
the Falun Gong spiritual movement and the 1989 crackdown on
pro-democracy protestors in Tiananmen Square.
Microsoft and Beijing have become closer in recent years, with the
Redmond, Washington-based company opening up a research lab in Beijing
Microsoft formed one of the two ventures, an MSN China joint venture,
with government-operated Shanghai Alliance Investment Ltd. (SAIL) to
develop MSN products and services more closely tied to China.
Copyright 2005 Reuters Limited.
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