Lenovo spends $1.24bn on pre-installed Windows

Lenovo has provided a rare insight into the fees manufacturers pay to sell PCs with Windows

Microsoft will earn $1.24bn this year from sales of the Windows operating system pre-installed on PCs made by Lenovo, the world's third largest PC maker. This includes $150m in China alone, the Chinese company's chairman estimates.

Lenovo chairman Yang Yuanqing made the remarks at a conference on intellectual property rights in Beijing last week and his comments were reported by several Chinese-language news sources.

Yang's comments provide a rare insight into the fees manufacturers pay to sell PCs with Windows, information that Microsoft traditionally keeps under wraps.

Yang stressed the importance of protecting intellectual property to foster the development of China's own software industry. In China, PCs are often sold without an operating system because most Chinese consumers have low incomes and are deterred by the additional cost.

China's PC buyers are easily able to purchase pirated software, including Windows, for a few dollars at street markets throughout the country. However, in December, Lenovo began pre-installing Windows on all the own-brand PCs it sells in China, Yang said.

Lenovo shipped 13.9 million notebook and desktop PCs worldwide in 2005, up 222 per cent from 2004, and increased its market share to 6.4 per cent, Primasia Securities of Taiwan said today, citing data from US-based research firm, iSuppli. Approximately seven million of those computers were sold in China.

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Struggling Japanese electronics giant Sanyo Electric Co is preparing to raise $2.6bn from a share issue.

"This increase of capital is imperative as our company further strives to restore its financial health and drive forward with structural reforms," Sanyo said in a statement to shareholders, who approved the issue last week.

Without the move the company would have gone out of business by the end of March, according to Nomura Securities analyst Eiichi Katayama. However, he warned that the issue carries the risk of a painful fall in share price for Sanyo investors.

"In our view, although this capital increase is necessary in the short term, it means that existing shareholder value will eventually be substantially diluted," Katayama said.

The shares will be sold to a consortium of investment banks comprising Goldman Sachs Group, Daiwa Securities SMBC Group and Sumitomo Mitsui Banking Corp, which will hold 49.8 per cent of the company and take a majority of positions on Sanyo's board.

Executive director Satoshi Iue, son of the company's founder, will resign.

Sanyo makes a wide range of products, including chips and consumer electronics.

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Matsushita Electric Corp of Japan, the world's leading plasma TV manufacturer, is unable to meet surging demand, according to market data released by US research firm Display Search.

Matsushita, which sells plasma TVs under the Panasonic brand name, increased sales and maintained its position as the world's largest plasma TV maker in the fourth quarter of 2005.

But the company lost market share to rivals because its factories were already running at full capacity. In Europe, Matsushita fell behind Philips in shipments.

Despite a 28 per cent increase in sales, Matsuhita's market share slid to 26 per cent from 29.1 per cent quarter-on-quarter as rivals gained ground. LGE, Samsung and Philips all increased their market share to around 15 per cent.

Global shipments from all manufacturers rose to 2.7 million units in the fourth quarter, 44 per cent up from the previous quarter and more than double the previous year's number.

Matsushita's dominance of the market is generally attributed to its heavy investment in latest-generation plasma display panel manufacturing technology at plants in Japan.

In related news, Display Search added that plasma TV shipments to the rapidly growing Chinese market were lower than expected in the fourth quarter.