Interview: Microsoft expects robust China sales growth

SHANGHAI (Reuters) - Microsoft, stirring to life in China after years of relative quiet, expects to chalk up sales growth of more than 30 percent in China this fiscal year and hopes to launch its Xbox 360 game console there.

Microsoft saw its China revenue jump more than 30 percent in its last fiscal year ended June 30 and hoped to repeat the performance in fiscal 2006, Tim Chen, Greater China chief executive for the world's top software firm, told Reuters on Wednesday.

Microsoft has engineered a series of strategic acquisitions this year in the world's seventh-largest economy, hoping to carve out a bigger share of a US$20 billion software market that has grown at almost 40 percent annually in past years.

"Sales-wise, we're improving," Chen said in an interview on the sidelines of a business forum in Shanghai. "We had over 30 percent growth in our last fiscal year. This year, hopefully, we can maintain similar growth."

"With the improving intellectual property rights situation, I think there's going to be a lot of improvement in the next couple of years," he added, declining to specify amounts.

Piracy has been a plague for software vendors. Experts and analysts have long dubbed China the world's de facto capital of piracy, and urged Beijing to step up enforcement of intellectual property rights.

Now, Microsoft is fighting an uphill battle in China as Beijing promotes broader use of the open-source Linux operating system, a lower-cost alternative and a direct rival to the US giant's flagship Windows system.

The company is also pinning big hopes on its much-anticipated Xbox 360 console, hoping to rule the US$25 billion global video game market by knocking rival offerings such as Sony's leading Playstation and Nintendo's Gamecube, now the third-biggest seller.

Chen said he hoped to start selling the console in 2006, but stressed that the timing of its launch was not set in stone. Globally, Microsoft has said it wanted the Xbox 360 on US store shelves on November 22.


China drive

It has invested US$50 million in China so far this year, and planned to invest another US$10 million before year-end, Chen said.

That fulfils part of a pledge, made in 2002, to invest 6.2 billion yuan (US$766 million) in China -- one of the largest foreign commitments in the country's software industry at the time. Of that amount, Microsoft expects to have invested US$120 million by the end of this year.

"We expect to invest in two more ventures by the end of the year, bringing our total investment for the year to US$60 million," Chen said on the sidelines of the forum.

In May, Microsoft announced the creation of two ventures for its MSN internet service in China.

It followed a month later with the announcement of an IT development joint venture with Indian software outsourcing giant Tata Consultancy Services and several Chinese partners.

In July, it agreed to invest US$25 million in Hong Kong-listed Lang Chao International Ltd.

And most recently, the company said this week that it and International Finance Corp, the World Bank's commercial arm, would together invest US$35 million in software maker Chinasoft International Ltd.

Microsoft is competing with other software companies like Tata, Infosys Technologies and Sun Microsystems to capture the lead in China's fast growing software industry.

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