BIDU Baidu Inc

By Robert McMillan 

Microsoft Corp. and Chinese search giant Baidu Inc. have signed a deal to make Baidu.com the default search engine and home page for Web surfers in China who are using Microsoft's Edge browser.

The deal, announced Wednesday, is one of seven new agreements publicized this week as Microsoft seeks to make inroads into the world's second-largest economy, and as China President Xi Jinping gets set to tour Microsoft's campus in Redmond, Wash., Thursday with company CEO Satya Nadella.

There are already hundreds of millions of PCs running Windows, but because of widespread piracy, Microsoft has traditionally had difficulties extracting revenue from many of these users.

The Baidu deal is designed to help Microsoft capture more users for its new Windows 10 software. In exchange for the search placement, Baidu will make it easier for its own customers to update to Microsoft's new operating system. Internet users who search for Windows 10 on the China search engine will be greeted with a large banner advertisement on the top of their screens, which will then take users to a special Windows 10 download site, Baidu said.

Microsoft says it isn't giving up on Bing. But with a negligible market share in the country, it makes sense for the company to play down Bing to promote its more popular Windows software, said Danny Sullivan, founding editor of website Search Engine Land.

"If Google can't win the search market in China, then Microsoft can't," Mr. Sullivan said. "But there's a lot to gain by pushing the Windows adoption."

With the deal, Baidu will fortify its grip on Web search in China. More than 92% of Internet users in China turn to Baidu for search, according to the China Internet Network Information Center. Google, with 27%, is ranked fourth in the country, while Microsoft's Bing is used by less than 2%.

In the series of announcements Wednesday, Microsoft said it would also develop hybrid cloud-computing software with Unisplendour Corp. and 21Vianet Group Inc., and build out a cloud service for Xiaomi Corp., a maker of smartphones. The company also announced deals with China Electronics Technology Group Corp., Shanghai Oriental Pearl Media Co., Sichuan Provincial Government, and the Xi'xian New Area development zone.

Tensions between China and U.S. have flared up as of late, and Microsoft has been caught in the middle on several issues, from piracy to cyberspying and regulation. The company is the subject of a continuing probe by Chinese regulators over suspected monopolistic practices, and it continues to battle pirated versions of its software. In 2014, China's Central Government Procurement Center banned government agencies from purchasing computers loaded with Microsoft's Windows 8 software.

President Barack Obama last week said he would press China's leaders to prevent hackers from stealing U.S. corporate secrets. Mr. Xi is expected to meet with Mr. Obama by week's end.

Write to Robert McMillan at Robert.Mcmillan@wsj.com

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(END) Dow Jones Newswires

September 23, 2015 19:18 ET (23:18 GMT)

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