Microsoft: We’re Not Abnormal, We’re on Sale

Posted on June 25, 2008
Filed Under China Business, China Distribution, Intellectual Property, Software Piracy |

Microsoft Corporation (Nasdaq: MSFT)’s Office 2007 will be sold at half prices in the company’s online stores and franchised stores in China from July 1, 2008.

It is the second unilateral price change of the computer technology giant after it sold Windows XP operating systems at half prices through distributors like Beijing Federal Software Co., Ltd. in the country in 2005.

This week, Microsoft reached a strategic partnership with Chinese home appliance retailer Suning Appliance Co., Ltd. (SZSE: 002024). Both sides agree to set up Windows direct stores in Suning’s 15 franchised stores scattered in eight cities. The cooperation will be extended to 100 stores within 2008. Direct stores will also be established in computer cities and supermarkets in the future. Staring from July 1, Microsoft’s distribution channels in China will sell Office 2007 at CNY 699 apiece unanimously. The product used to be sold at an official directive price of CNY 1,451.

Actually, Microsoft’s discounted products have already begun test-market in all the chain stores of Suning, as well as 3C (communication, computer and consumer electronics) channels around the country, released Xu Zhengfei, manager in charge of Suning’s public relations.

On the shopping platform of Amazon.cn, Office 2007 has begun sales. Sellers declare that the product can be installed in three computers, which is a big change for personal users compared with the past. Meanwhile, Microsoft’s newest Windows Vista Home Basic SP1 operating systems for family users are sold at only CNY 458, at a great discount on the price of CNY 2,000 when the products first came into the market.

Chinese consumers, welcoming Microsoft’s discounted promotions, hope that the prices would be further downgraded. Copyrighted Microsoft software bought through original equipment manufacturers only costs CNY 100 to CNY 200 apiece. Comparably speaking, Microsoft’s prices are still high, and cannot put an end to the rampancy of paricy in China.

Lu Tianwen, senior analyst of leading China IT market research company CCID Consulting, points out that users of Office 2003 are more than that of Office 2007 in the country, and Microsoft hopes to enlarge its market share through price cutting. Moreover, its upgrade of Office 2007 is to be released soon, and the company needs to clear stockpiles.

I don’t know if this is related to the brouhaha over the rumors that Microsoft will be sued on August 1 when the new anti-monopoly law comes into effect. Anyways, the timing is priceless.

The question is whether or not there’s a relationship between software piracy and the retail price of software. Well of course there is. Chinese consumers have been voting with their wallets because no one wants to pay through the nose for software. And I don’t think too many of them are lying awake at night hoping that Office 2007 will come down from RMB699. Not when a bootleg can be had on the street for less than RMB10.

And as for the “Windows Experience Stores” at Suning? Well for starters this whole experience store thing is getting me down. It’s one thing when it’s packed with gee-whizzery like Nokia’s, but what’s the Windows experience going to be? My guess is something like “oh, so Vista capable doesn’t mean the same thing as Vista functional?”

Microsoft would do better by actually providing something worthwhile with a license purchase, like some training manuals or limited free support or an online gaming account or something. I hate to make generalizations about China, but I will say that getting value for money is pretty high on the lists of your average Chinese shopper.