Windows 8 Banned in China -- Bad for Microsoft, Boon for Chinese

BEIJING (TheStreet) -- Chinese software developers expect to benefit at Microsoft's (MSFT) expense now that the Chinese government has stopped buying computers pre-installed with the Windows 8 operating system.

On the news, shares in more than two dozen Chinese software developers soared Tuesday to 10% trading-day limits on the Shanghai and Shenzhen stock exchanges.

The Windows 8 ban was spelled out in bid specifications for government computer and printer suppliers released last week but publicized by state media Tuesday.

The specs, written and released by the Central Government Procurement Center in Beijing, cover all "energy-saving" desktops, laptops and tablets purchased through government contracts.

It was unclear whether the decision might also affect computer buying rules for local governments, institutions such as schools, and state-run companies.

Government officials had hinted in recent weeks that Windows 8 might be in the cross-hairs. Microsoft's decision to cut support for its aging Windows XP system in April prompted the Ministry of Industry and Information to warn China's millions of XP users about security risks and recommend they install security software. Microsoft would rather XP users upgrade to Windows 8.

Security products for Windows XP have been released by several major Chinese Internet players in recent months including Tencent Holdings (TCEHY), search engine Baidu (BIDU), and security software developer Qihoo 360 (QIHU).

Moreover, a high-ranking information ministry official, Zhang Feng, was recently quoted in state media as saying his agency would "strengthen efforts to support our research and development of the Linux operating system and its applications."

A recent market report by Sinolink Securities said the government is eager to promote domestic computer software products as part of a national security strategy. China-made software presumably would better protect the nation's information systems, according to the report.

Many analysts say the Windows 8 ban will benefit a wide range of domestic Chinese software developers, including China's homegrown operating system developer China Software. The company's product is a Linux-based system called Kylin, whose name is derived from a Chinese word meaning "unicorn." The system was developed at the National University of Defense Technology, which is run cooperatively by the government's education and defense ministries.

Shares in China Software rose on the Shanghai Stock Exchange to the 10% daily limit within an hour of the government's late-morning Beijing time announcement, ending at 28.63 yuan a share.

Other Chinese software companies whose shares rose to trading limits included North Source, Creative Information, TongTech and AVIT.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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