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NOVEMBER 18, 2002 ONLINE ASIA By Bruce Einhorn Asia: Microsoft's Land of Opportunity Gates & Co. sees the region as a hotbed of future growth. And it's rushing to make sure Windows, not Linux, is the OS of choice
The Beijing-based Zeng is head of China's State Development Planning Commission, not usually the sort of person the Microsoft chairman would allow to make business decisions for his software giant. Yet that's just what Gates is doing, as he and Zeng co-chair a new committee that will decide how to invest millions of dollars worth of Microsoft's money. The fact that Gates is part of this odd couple is just one indication of how important China -- and all of developing Asia -- is to Microsoft. The partnership with Zeng's SDPC is part of a record-setting commitment by Gates & Co. to invest in developing China's software industry. While he was visiting China in June, Steve Ballmer announced a plan to spend $750 million over three years in the country. GOOD DEEDS. More recently, the focus has been on Asia's other giant. Last week, Gates made a whirlwind trip to India. Speaking before star-struck politicians and reporters in the country's political and financial capitals, New Delhi and Bombay, as well as the high-tech hubs of Bangalore and Hyderabad, he unveiled plans to expand Microsoft's presence in the country. They include a new initiative to invest several hundred million more dollars in India over the next few years. Microsoft has been busy in some of Asia's smaller but more developed markets, too. Late last year it made a $500 million investment in South Korean broadband operator Korea Telecom, and Microsoft also owns a stake in a Taiwanese operator, Gigamedia. Asian companies, such as Taiwan's Acer, have played a key role in the launch of Microsoft's newest product, the Tablet PC. In order to strengthen its challenge to Nokia and other wireless powers, Microsoft is working with Chinese-based manufacturers of cell phones that run on its software. Microsoft is often vilified by its many critics as an evil empire. But the software giant says it's doing more than looking out for its own best interests -- it's also doing good works. For instance, there's Project Shiksha, part of Microsoft's Indian investments. Project Shiksha (the word means "education" in Hindi) will "accelerate computer literacy in the country to more than 80,000 school teachers and 3.5 million students across government schools in 5 years," Microsoft says. In addition, Gates announced plans by the Bill & Melinda Gates Foundation to donate big sums for anti-AIDS projects in India. GROWTH SURGE. What explains all of this attention to Asia? Certainly it's not a major source of Microsoft revenue today. The Colossus of Redmond gets just 20% of its sales from the Asia-Pacific region, and even that's slightly misleading since the numbers include Japan, a market with a very different dynamic. When you exclude Japan, Asia sales are just 10% of the total. That's largely because of widespread piracy, which makes it almost impossible for Microsoft to earn money in China, the biggest offender. Still, Microsoft thinks Asia, ex-Japan, is hot. A spokesman says growth rates there will be the highest in the world, ranging from 20% to 80%. As protections for intellectual-property rights improves in China and other parts of the region, Microsoft expects demand to surge. It predicts that Asia will surpass Europe in info-tech spending within three years. And that's why Asia also represents one of the biggest threats to Microsoft's global dominance. The appeal of low-cost Linux is especially strong in places like China and India. Some Beijing officials have been urging Chinese companies to use homegrown Linux software rather than Microsoft's. Indians are also feeling the allure of that open-source alternative to Windows. The week that Gates arrived in India, one of the country's leading business magazines described the struggle as a "war for India's software soul." That's a war Microsoft doesn't want to lose. With China and India likely to have a boom in software demand in the years ahead, it needs to work hard to make sure that Linux doesn't catch fire in the region. So, regardless of what he thinks about bothersome bureaucrats elsewhere, expect to see Bill Gates making more trips to visit and hobnob with government officials in Beijing and New Delhi.  Einhorn covers technology from Hong Kong for BusinessWeek. Follow his weekly Online Asia column, only on BusinessWeek Online Edited by Beth Belton Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | NOVEMBER |
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