Even If Google Exits China, Microsoft May Face Obstacles There

Posted by Joel

WSJ.com

Kai-Fu Lee, who’s overseen operations for both Google Inc. (GOOG) and Microsoft Corp. (MSFT) in China, posted a cryptic message on microblogging service Twitter the day after Google made its recent, startling announcement that it might exit the Chinese market: “A captain would never run away from his duty, if he knew the ship was sinking.”

It’s unclear exactly what Lee, who now runs Beijing-based investment firm Innovation Works, meant. He didn’t respond to a request for comment.

But on Thursday, Microsoft Chief Executive Steve Ballmer said during a televised interview that the Redmond, Wash.-based company would not be running anywhere, as it has no plans to follow a Google departure from one of the fastest-growing international markets.

“If you’re going to operate in China, you have abide by the laws of China,” Microsoft’s Ballmer said during his televised interview on CNBC Thursday. “We’ve been quite clear that we’re going to operate in China.” A Microsoft spokesman declined to comment further.

It’s also not clear whether Microsoft could surmount considerable obstacles and capitalize on a Google exit from China by gaining significant ground on local search leader Baidu Inc. (BIDU).

According to comScore data, Microsoft sites held about a 5% share of the Chinese search market as of November, compared with Google’s 14% share and Baidu’s 62%.

Microsoft isn’t likely to enjoy the same word-of-mouth boost that helped Google gain its significant–albeit second-place–market position in China, according to Peter Lu, an analyst with Beijing-based China IntelliConsulting. “Google is still viewed as a more technologically sophisticated Chinese search engine than Baidu,” he said.

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