New York, Feb. 11 (PTI): Microsoft’s venture into the Chinese market has hit some “monumental barriers” as the software giant has lost money for last 10 years and it does not expect to turn a profit anytime soon.
The piracy problems are so rampant that “(Microsoft chairman) Bill Gates might be retired before his company sees anything but red ink in red China,” Forbes International says in its latest issue.
Even though 60 per cent of Chinese computers run on Microsoft operating system, the magazine says, few consumers or businesses pay for it.
Forbes reports that more than 90 per cent of the application software used in China comes from illegal and pirated copies.
China had adopted its first copyright law only 13 years ago, which is rarely being enforced.
When the Chinese government is pressurised, Forbes says, it simply throws more of its weight behind Linux, the free operating system that possess worldwide threat to Windows.
It quotes Microsoft’s senior vice president and China strategist Craig Mundie as admitting that there was a “degree of naivete” in how the company entered the country. “We did it like we did in any other country.”
But China is not like any place else, the magazine says, adding Microsoft tried the “belligerent route”, using Chinese companies to stop piracy as Cisco Systems recently did. But those moves have largely backfired, making Microsoft seem like a “foreign bully”.
Now, however, the company has changed its tune, pledging $ 750 million to help China’s fledgling software industry, the magazine says.
Microsoft, the magazine says, acknowledges that it has run into losses for last 10 years, and is likely to do so for at least five more years and could wait for another decade or two for profits.
The company’s China revenue last year was only $ 85 million and the magazine says had it been paid for its share of software in brand new computers - it should have taken in nearly $ 400 million.
Mundie said it is a very long term opportunity of substantial magnitude and strategic importance. “Are we happy if we only make this money over the next 10 or 20 years' Ultimately, yes.”
The Forbes says Microsoft is “embarking” on a renewed assault on the China market. But in stark contrast to the combative style that is company’s trademark, it says, this is a “march of good public deeds, academic support, even generosity.”
Microsoft will pour $ 750 million into the land of “fake software” in the next three years and this money, to be funded through China’s powerful state planning department, is over and above $ 1 billion the company spends annually to do business and research there, Forbes reports.
Microsoft is helping build a software industry from scratch, forming joint ventures with indigenous firms, promoting basic research at Chinese universities and training students and entrepreneurs in its own state of the art development methods.
“It is all the more surprising given Microsoft’s bungling attempt to set up in China early on,” Forbes notes.