US software behemoth Microsoft made its first acquisition in China and brought its MSN formally into the country, in a push to accelerate its entry into the local Chinese market.

Microsoft said yesterday that its MSN unit had formed a joint venture Shanghai MSN Network Communications Technology Co Ltd with Shanghai Alliance Investment Ltd (SAIL).

Chuan Luo, MSN regional director for China, said the joint venture will be a 50-50 entity between the two companies, but declined to reveal the investment volume of the firm.

SAIL is owned by the Shanghai municipal government and is also the partner of Microsoft's first software service joint venture in China in 2002.

Luo said that although China is the 41st market that MSN has entered, it will become an important part of MSN's global operations.

Currently, MSN provides free Hotmail e-mail and MSN Messenger services, but with the formal launch of MSN, Luo said his firm will provide much richer services including portal, MSN Messenger, Hotmail, wireless value-added services, and a search service.

Luo said MSN China expects to mainly generate revenue through online advertising and wireless value-added services.

Microsoft also made its first acquisition in China, buying research and development assets from TSSX Mobile, a mobile software developer in Shenzhen, a special economic zone in South China's Guangdong Province.

"We are committed to growing our MSN business globally and this is a great opportunity for us to work with TSSX, which is very valuable to Microsoft," said Chuck Friedman, general manager of MSN Mobile.

The technological resources of TSSX will be integrated into MSN China Mobile Development Centre.

Friedman said he believes China, with its huge success in mobile communications and related value-added services, will provide good experience for MSN's development in other parts of the world.

MSN China's Luo said his business had already won a value-added telecom service licence from the Ministry of Information Industry and is talking with Chinese mobile operators for a license to conduct mobile value-added services.

The acquisition also marks a speeding up of the US giant's entry into China.

"In addition to delivering MSN services to meet local customers' needs and interests, we are working closely with local companies as part of our ongoing commitments to contributing to the growth of the local technology industry in China," said Tim Chen, vice-president of Microsoft and CEO of its China operations.

The acquisition will add some weight to Microsoft's increasing localization, after it formed two joint ventures and built the most complete development system outside its headquarters in the United States.

The Chinese Government has been encouraging foreign software companies to engage in more co-operation with the local industry. It does not only regulate the market, but also is the biggest potential customer of companies like Microsoft, as all government agencies are required to use legal software.

Zhang Qi, a senior official in charge of the software industry with Ministry of Information Industry, said on Tuesday that although Microsoft had failed to deliver on its commitments in the past, it had done very well in 2004.

In the past year the company trained almost 100 chief information officers at State-owned enterprises in Northeastern China to help them deploy information systems.

Zhang said Microsoft also delivered its promise to train 300 CEOs of Chinese software companies last year.

(China Daily May 12, 2005)