Microsoft, Google duke it out for China

[Deja Q]

http://news.zdnet.com/2100-9588_22-5797231.html

On Monday, the software giant sued Kai-Fu Lee, a former vice president of search technologies and Microsoft's chief architect of business strategy in China, for an alleged breach of a noncompete and confidentiality agreement. Microsoft also sued Google, claiming it was knowingly complicit in the alleged breach when it hired Lee to head up its new Chinese research center.

Certainly, that Lee was a top developer of speech recognition and search technologies and close to Microsoft Chairman Bill Gates was enough to draw the software giant's ire. But Lee's intimate knowledge of the Chinese Internet marketplace is something both companies likely covet.

With an estimated 100 million people online, China's Internet audience is second only to that of the United States, and financial analysts believe it will surpass America's Internet population within five years. China also has 350 million mobile phone subscribers, 43 million broadband homes and 20 million online gamers--the largest gaming population in the world, according to Piper Jaffray.

China's Internet economy, which includes sales from e-commerce and advertising, also has plenty of room to grow. It's worth about only 5 percent of the U.S. Internet economy, according to analysts at Piper Jaffray. The analysts expect Chinese interactive sales, including online advertising, e-commerce, games and wireless, to be worth $1.38 billion in 2005. Next year, sales are expected to grow 37 percent to $1.9 billion.

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