Lenovo Inks $1.2 Billion Windows Deal

Software giant Microsoft and Chinese computer maker Lenovo have entered into a $1.2 billion agreement for Lenovo to pre-install Windows operating systems on its computers during the next year, including systems to be sold in China, where Lenovo is the leading computer manufacturer. Lenovo’s deal to pre-install legitimate copies of Windows on new computers is part of the two companies’ global efforts to combat software piracy.

Lenovo plans to pre-install Windows on its computers worldwide, but a considerable portion of those machines will be sold in China, where rampant software piracy has stunted development of western software enterprises like Microsoft. By ensuring new systems are sold with legitimate copies of Windows pre-installed, the companies hope to take some incentive away from pirates.

Although the overall impact of the $1.2 billion deal on Microsoft’s overall finances isn’t clear (since it would supersede existing deals between Lenovo and Microsoft: the companies describe the deal as “reaffirming” existing deals rather than establishing a new one) the amount represents about 10 percent of the annual revenue posted by Microsoft’s Windows division during its most recent fiscal year.

According to Lenovo Chairman Yang Yuanqing, speaking at a press event at Microsoft’s Redmond campus yesterday, about 70 percent of Lenovo’s Chinese customers are choosing PCs with Windows pre-installed; that number has risen from just 10 percent prior to Lenovo’s licensing agreements with Microsoft.

Microsoft has also announced recent deals with other Chinese PC makers: TCL Group has announced a $60 million Windows licensing arrangement, China’s Tsinghua Tongfang Co., (China’s third largest PC maker) said it would spend $120 million on Windows over the next three years, and last week China’s Founder Technology Group, China’s second-largest PC maker, announced a three-year, $250 million Windows licensing deal.