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Lenovo and Microsoft Extend China Bundling Deal

Lenovo announced Thursday it has signed a deal whereby the largest Chinese computer maker will continue to ship fully licensed copies of Windows and other Microsoft  products on all PCs sold inside China.

Saying it "renews the strategic cooperation between the two companies," the deal is a follow on from an earlier agreement signed in 2005, according to a Lenovo statement. That pact made the firm the first Chinese manufacturer to pre-load all of its domestically sold PCs with licensed copies of Microsoft Windows.

Reuters reported that the latest deal is worth as much as $1.3 billion over the course of the current fiscal year. Lenovo officials could not be reached in order to confirm that figure and a spokesperson referred questions to Microsoft. In an e-mail to internetnews.com, a Microsoft spokesperson wrote "We do not disclose the details of confidential agreements with our partners, and cannot comment on dollar amounts."

The issue of software piracy in Asia, particularly in China, has been a touchy one for Microsoft through the years. Senior executives, including CEO Steve Ballmer, sometimes cynically remarked to financial analysts that Microsoft's products were the most popular software in China yet yielded no revenue.

That situation has been ameliorated somewhat in recent years as Microsoft and other software publishers have negotiated with the Chinese government to help put the brakes on widespread software piracy, with some success. "In 2006, The Chinese government issued a notice calling upon China’s computer makers to pre-install legal versions of operating system software," the Microsoft spokesperson said.

“With today’s agreement, Lenovo and Microsoft not only continue their strategic business partnership, we also partner to achieve one of the most important goals of international business: the protection of intellectual property,” said the Chinese firm's statement, quoting Chen Shaopeng, senior vice president of the Lenovo Group and president of Lenovo Greater China.

Still, Lenovo's announcement comes just one day after the United States complained to the World Trade Organization that lax Chinese intellectual property laws still permit widespread counterfeiting of American products.

Additionally, the world's third-largest computer maker may have its own fine line to walk with Microsoft. For instance, Lenovo last summer began shipping one of its ThinkPad notebooks sold in the US with Linux -- Novell's SUSE Linux Enterprise Desktop 10 --rather than Windows.

While nothing has been said publicly, Microsoft in the past has sometimes demonstrated animosity, even if subtle, to PC vendors that play both sides of the street.

However, last fall, Microsoft and Novell signed a deal making the software giant more Linux friendly, particularly when it's Novell's Linux.

At least on the surface, relations between Microsoft and Lenovo have never been better. Last month, according to Lenovo's statement, the two companies agreed to create a joint research and development center in China.

Additionally, in March, Lenovo announced it will make Microsoft's Live.com portal the default home page and include the Windows Live Toolbar on all its computers worldwide.

Meanwhile, however, Linux continues to make headway in China, where it has been catching on because of its free status, though it still lags behind Windows.