China's Founder agrees to preinstall Windows on more PCs

Microsoft and Founder have expanded a deal to preinstall Windows on Founder PCs, closing a loophole in an earlier agreement.

Founder Technology Group, China's second-largest PC maker, agreed to preinstall Windows Vista on laptop computers and commercial desktops, closing a loophole in an earlier deal with Microsoft that potentially exempted commercial PCs from agreements to preinstall Windows.

Founder and Microsoft signed a memorandum of understanding during a visit to Beijing by Steve Ballmer, Microsoft's CEO, on Wednesday. The deal, which will see Founder preinstall Vista on more laptops and commercial desktops, builds on an earlier agreement to preinstall Windows on Founder's consumer desktop line. Founder will also sell Microsoft hardware, such as mice and webcams, in 35 Chinese cities.

In a separate deal between the two companies, Founder agreed to preinstall Windows Live on its PCs for the next two years. The Windows Live deal comes as Microsoft said Tuesday that the software is no longer in beta and seeks to expand the number of people using the software.

Financial terms of the two agreements were not disclosed.

The Windows installation deal with Founder helps Microsoft in two ways. The software company has long tried to stem China's rampant piracy rates and it wants more users to adopt the latest version of Windows instead of clinging to XP. But whether the agreement yields tangible results in the fight against piracy remains to be seen.

"Piracy is obviously an ongoing and serious issue in China. The question is whether it will ever be eradicated," said Bryan Ma, director of personal systems research at IDC Asia-Pacific.

The earlier agreement to preinstall Windows on Founder PCs helped fight piracy by reducing the number of systems that are shipped without operating systems. The total number of so-called naked PCs shipped by Founder and other Chinese PC makers has fallen as the number of PCs shipped with Windows increased, from 30 percent during the fourth quarter of 2005 to about 50 percent during the second quarter of 2007, Ma said.

The big change came during early 2006, when several Chinese PC makers, including Founder and Lenovo Group, announced plans to preinstall more copies of Windows on their PCs. But that announcement, timed to coincide with a U.S. visit by Chinese President Hu Jintao, contained an important loophole: it only covered PCs sold through retail channels.

The reference to retail sales potentially excluded sales of PCs to companies, which account for around 70 percent of Founder's shipments, Ma said. The latest agreement between Founder and Microsoft appears to close this loophole and reiterate the companies' aim of reducing piracy, he said.

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