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Why Dell Comes Out Clean While China Blacklists Apple, Microsoft

BEIJING (TheStreet) -- U.S. computer maker Dell has found a way to beat China's rap against American tech companies over alleged security risks: pre-install a Chinese operating system on most of its machines sold in China.

Privately held Dell has thus avoided the costly consequences of a Chinese government computer security campaign that spread Wednesday to include Apple (AAPL - Get Report) products. Targeted earlier were Microsoft (MSFT - Get Report) and IBM (IBM).

Allegations of data security threats prompted the central government's procurement agency to bar Apple products including iPads and MacBooks from future purchases, the Beijing News and other media reported Wednesday. The agency had no immediate comment.

In May, the government said it would stop buying computers pre-installed with Microsoft's Windows 8 operating system and told state-owned banks to phase out IBM servers. Microsoft is also the target of an ongoing anti-trust investigation by the Chinese government.

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Dell has so far avoided Beijing's wrath. And the company vastly reduced the risk of future trouble last week by announcing a partnership with China Standard Software, also known as CS2C, which sells a Linux-based operating system called Kylin and lists on the Shanghai Stock Exchange. Terms were not disclosed.

Under the deal, the companies said, Kylin will be pre-installed on Dell's Latitude notebooks, OptiPlex desktops, Precision workstations and other products sold in China. The agreement may expand in the future to include Dell's Vostro computer products.

Kylin, which means "unicorn" in Chinese, and a related version called NeoKylin are operating systems developed by software engineers at the National University of Defense Technology, an institution jointly run by the Chinese government's education and defense ministries.

Chinese stock analysts in May predicted booming demand for Kylin would follow the government's ban on Microsoft 8. Shanghai shares in CS2C soared after the ban's announcement, but the stock's value since then has flattened.

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