Microsoft forms Chinese joint venture for MSN

Hoping to tap into one of the largest markets in the world for Internet and mobile phone services, Microsoft Corp. has formed a joint venture with a Chinese firm to launch MSN China and acquired assets of a local mobile software provider to offer MSN Mobile products and services in the country.

Microsoft has partnered with Shanghai Alliance Investment Ltd. (SAIL) to create the new Shanghai MSN Network Communications Technology Company Ltd., it said Wednesday. The joint venture plans to launch an MSN China portal in coming months, offering a range of content and services.

Although MSN offerings such as the Hotmail e-mail service and MSN Messenger are already available to Chinese users, the joint venture will allow Microsoft to provide more local content, according to Zhang Dongming, research director at analyst firm BDA China Ltd.

The Redmond, Washington, company also has its sights set on China's legions of mobile phone users, of which it estimates there are 340 million. It is acquiring some assets of mobile software provider TSSX. Through the transaction, Microsoft plans to deliver enhanced MSN Mobile products and services, it said.

The U.S. software maker has agreed to form a China Mobile Development Center in the southern city of Shenzhen that will include TSSX staff. The center will integrate TSSX technologies and services with MSN Mobile, allowing Microsoft to quickly expand its mobile offerings for the Chinese market, it said.

While Microsoft is making a strong push into China, it also faces some tough competition, according to Dongming. One of the country's largest mobile service providers is a company called Tencent, which also started from an online platform, Dongming said.

Tencent's Mobile QQ service allows Internet users to send SMS (short message service) text messages to mobile phones. The service is extremely popular because it requires no specific handsets and is endorsed by dominant mobile provider China Mobile, Dongming said. "Microsoft's joint venture will face a very strong, entrenched player," Dongming said.

However, Tencent's user base is predominantly young and MSN has an edge with business users in the country, she said. Tencent's attempts to target the business market have not been very successful and the segment could provide an entry point for more MSN services, she added.

Microsoft has said that it is targeting professionals in the country, and that strategy could make sense since many Chinese use MSN to keep in touch with business contacts, Dongming said.

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