SHANGHAI – Software giant Microsoft Corp. is setting up a research and development center in Shanghai for its online MSN service, its first such center outside the United States, sources familiar with the plan said on Wednesday.
The move came after Microsoft saw setbacks in its online services in China, including the resignation of a top executive responsible for the company’s Windows Live unit in China late last year.
“It’s a clear signal that Microsoft won’t give up its online MSN service in China even though it may have some problems in its local operations,” one source, who declined to be identified told Reuters.
“Twenty million dollar is really small money to Bill Gates, but it’s important to notice that Microsoft has chosen Shanghai for its first overseas MSN R&D center,” the source added.
The R&D center, based in Shanghai’s Zizhu Science Park, where chip giant Intel Corp. already has a research office, will develop Internet software, the sources said.
The center, which will cost up to $20 million, will also have a technical support team for Microsoft’s online communication tool MSN Messenger, which has become part of everyday life for teenagers and young professionals in China.
MSN Messenger has over 20 million users in China, the world’s second-largest Web market with around 137 million users.
Microsoft could not immediately be reached for comment.
The plan to set up a MSN R&D center in China also indicates that the company is keen to take advantage of the relatively flexible working environment and large pool of engineering talent, said Doug Crets, Hong Kong-based analyst at Media Partners Asia.
“We’re seeing things being done in China that are often squelched or squandered in the U.S. or other western countries,” said Crets, referring to China’s relatively lax attitude toward intellectual property, which may allow for more experimental technology and business ventures.
“It’s like going back to the old fashioned ‘tinkering with the Web’ feeling here,” he added.
Logon to China
The investment by Microsoft, which set up a research and development center in Beijing in 1995 but as yet no R&D facility for the popular chat service MSN, may help to consolidate its leading position in China where global players are also hunting for profits.
For example, industry sources told Reuters last week that Rupert Murdoch’s News Corp. is finalizing a deal with partners, including private equity heavyweight IDG, to launch a networking Web site venture in China within a few months.
Luo Chuan, former head of Microsoft’s Windows Live unit in China and also responsible for the China site of the company’s MSN portal, resigned from Microsoft at the end of 2006.
Now, Luo is tipped to become the first chief executive for MySpace China, an online networking Web site similar to MSN.
“The MSN R&D center in Shanghai is also part of Microsoft’s efforts to become localized,” said the first technology source.
The source said MSN China is also partnering with Shanghai Media Group, one of the country’s biggest media companies, on online video and shopping business and the new MSN R&D center may develop software to provide technical support to the partnership.