UPDATE 1-Microsoft to stay its China course despite Google spat

* Says no plan to change China strategy despite Google spat

* Says to spend $500 mln in China this year on R&D
(Adds details)

By Huang Yuntao and Doug Young

BEIJING, March 5 (BestGrowthStock) – Microsoft (MSFT.O: ) said it will
stick to its development strategy for the China Internet search
market regardless of the outcome of Google’s (GOOG.O: )
high-profile spat with Beijing.

Microsoft has kept a relatively low profile in China since
Google announced its decision to potentially withdraw from the
market over censorship issues and following an attack on its
systems that it believes originated in China.

Microsoft chief executive Steve Ballmer previously said his
company had no plans to pull out of China, indicating it was
unlikely to follow Google’s lead in challenging a Chinese system
that forces Internet companies to self censor their sites on
sensitive topics. [ID:nN14165244]

“Regardless of whether or not Google stays, we will
aggressively promote our search and cloud computing (in China),”
Zhang Yaqin, chairman of Microsoft’s Asia-Pacific R&D Group, told
Reuters on Friday, on the sidelines of the opening of the
National People’s Congress, China’s parliament, in Beijing.

China was in consultation with Google to resolve their
dispute, Minister Li Yizhong from China’s Ministry of Industry
and Information Technology (MIIT) said, also on the sidelines of
the NPC.

A Google spokeswoman declined to confirm or deny that
discussions were taking place.

“We will not be commenting on any discussions with the
Chinese government,” she said in a statement.

Google launched its China search site in 2006, and complies
with local laws requiring censorship of certain content such as
pornography and sensitive subjects such as the banned Fulun Gong
spiritual movement and Tibetan independence.

Microsoft and local players, including Baidu (BIDU.O: ),
China’s search leader, and Sohu.com (SOHU.O: ), must also comply
with those laws. Google controls about 31.3 percent of the
Chinese Web search market, compared with 63.9 percent for Baidu,
according to Analysys International.

By comparison, Microsoft is a bit player in a market that was
worth 2 billion yuan ($293 million) in the third quarter, but has
high hopes there following the launch of a beta Chinese version
of its highly hyped Bing search site launched last June.

“We hope to achieve a relatively important place in the China
search market,” Zhang said. “But we must be very patient, we
still need a lot of time.”

Zhang added that other key development areas for Microsoft in
China this year would include search and advertising platform
technologies, and development of mobile platforms and cloud
computing technologies.

Microsoft considers China a vital market for its Web search
business, and is hoping to duplicate early progress for the U.S.
version of Bing in China, the world’s largest Internet market by
users with more than 350 million.

Zhang added that Microsoft planned to spend about $500
million on research and development in China this year, and
another $150 million on outsourced projects.

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UPDATE 1-Microsoft to stay its China course despite Google spat