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Microsoft Makes a Location Bet on China's Tropics

Stocks in this article: MSFT INTC AAPL GOOG

TAIPEI ( TheStreet) -- When Beijing people tire of the cold, dry, winter wind or spring dust storms that follow, a lot of them get on a three-hour flight to China's southernmost province of Hainan for a tropical vacation.

Most major tech companies go the other way, siting R&D centers around Beijing or its central China peer Shanghai to draw the country's top talent and stay close to clients. Intel (INTC) runs an R&D center in Shanghai, for example, and tech media said Apple (AAPL) was looking at the same city for its own. Sony Ericsson opened its center in Beijing.

The thing about Hainan is that it's generally just a tourist area. Few are its famed universities or science parks. A tech firm's clients might literally be on the beach but not in positions to make deals or test products.

Then, on April 7, Microsoft (MS) said it had picked the holidaymaker's province off the coast of Guangdong province for its first "innovation center" in China.

Microsoft signed a memorandum of cooperation with the Hainan provincial government to set up its center. Microsoft hasn't disclosed project details such as scale and cost but said it had agreed to put the thing in Hainan's "international information industrial zone." The American software giant would use it to work with the province on developing IT technology, train software talent and take another whack at China's stubborn copyright protection problem, among other things.

After reading Microsoft's statement online about the innovation center, I wondered, at first, if Bill Gates just finds Puget Sound too cold.

"The Hainan government and Microsoft China today announced comprehensive collaboration to enable Hainan in its ambition to become the 'Hawaii of China,' transform Hainan into an international tourism destination and a powerhouse of software development," Microsoft says in a news release on its Web site.

So it's going to design an operating system for daiquiri blenders and minibars? Hainan is not a powerhouse of software development. Local officials have said for years they want the province to become an international tourist destination.

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