China Slams Microsoft's Windows 8 -- Update

By Dow Jones Business News, 
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By Paul Mozur

BEIJING--China's powerful state-run television broadcaster criticized Microsoft Corp.'s Windows 8 operating system in a national news show on Wednesday, adding to the software maker's challenges in a traditionally tough market.

In its widely watched noon news broadcast, China Central Television aired a segment that questioned the operating system's security. It quoted people it identified as experts who said that an operating system's maker can obtain user data including phone numbers and bank-account information.

"Whoever controls the operating system can control all the data on the computers using it," it said.

It also quoted Chinese experts who argued that Microsoft cooperated with the U.S. government to carry out cyberspying. That has been a sensitive topic in China since the disclosures last year by former U.S. National Security Agency contractor Edward Snowden about U.S. cyber-monitoring efforts.

The report followed a May announcement from China's Central Government Procurement Center that the government couldn't purchase computers loaded with Windows 8.

A Microsoft spokesman declined to comment on the broadcast. He referred to a previous statement from the company's general counsel, Brad Smith, which laid out the steps Microsoft has taken to prevent government snooping and protect customer data.

The decision to ban procurement of Windows 8 came more than a month after Microsoft officially pulled the plug on providing support for its aging but widely installed Windows XP software. Still, it patched a security hole for Microsoft's Internet Explorer browser for XP users in the weeks after the announcement.

Companies like Microsoft could face further backlash in China. The U.S. and China have clashed in recent weeks after the U.S. indicted five officers in the People's Liberation Army on allegations of cyberespionage. In response, China said it would more closely scrutinize imported Internet technology for vulnerabilities it might pose to the nation's security.

China has long had the stated goal of weaning itself off foreign-produced technology. Experts say friction following Mr. Snowden's leaks has already hurt sales for companies like Cisco Systems Inc. and International Business Machines Corp.

Still, China lacks know-how in specialized areas such as software, high-end servers and certain types of mission- critical equipment, experts say. For example, if China were to switch to a homegrown operating system, it would have a hard time replacing Microsoft's Office suite of software, which is used by businesses and local governments across China.

The difficulties for Microsoft come as the company is trying to push more users in China to switch to a licensing system for Windows that operates from servers. The hope is that will help Microsoft cut down on the rampant piracy of its operating system in China.

Widespread piracy of Windows and Office software means that Microsoft earns far less in China than it does in smaller countries, even though it has a massive presence in what is the world's largest personal-computer market. In 2011, then-Chjef Executive Steve Ballmer told employees in a meeting that Microsoft's revenue in China was only 5% of what it got in the U.S. even though the PC markets were comparable in size at the time.

While its broadcasts aren't necessarily representative of the views of top leaders, CCTV wields considerable power in China. Some companies have shifted policies or recalled products following critical CCTV reports.

Write to Paul Mozur at paul.mozur@wsj.com

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  06-04-141514ET
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This article appears in: Technology

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