Is counterfeiting resulting in Microsoft price cuts?

Counterfeit software has led to Microsoft cutting its prices in China, it seems.

According to Tuesday's Financial Times, the Redmond giant is so keen to encourage adoption of its software in Asia and stem the astronomical rates of piracy in the continent that it will be cutting prices and offering specially developed local language tools to get developers onside.

Some software students in countries including China, Vietnam and Thailand will get tools at knock-down prices or free trial kits for a designated period of time, to encourage the spread of the Microsoft software in the region.

However, a Microsoft spokesman told silicon.com: "There are no new discounts in the Microsoft tools product line in Asia," despite Microsoft's director for Asia and greater China, Colin Png, being quoted in the FT as saying: "We are planning to almost give away the software."

It looks like a case of the devil's in the detail for Redmond. Microsoft's licensing marketing manager, Mark Buckley, said that the software company doesn't give discounts but conceded that in some cases the company provides different types of licences to "prove the value of its software".

With Microsoft essentially pricing itself out of the market in Asia – most users can't afford to buy the software from new – piracy has thrived, with a counterfeit copy of Longhorn retailing for just $1.58 in Malaysia.

With Linux's growth in China also thrown into the mix, Asia has become a key battleground for Microsoft. Recently, the software giant launched a language-specific, stripped-down version of Windows in Thailand as well as a cut-price, customised program for the Malaysian market.

Martin Gilliland, principal analyst for Gartner Asia-Pacific, said of the Malay initiative that piracy was a driving factor: "This is clearly an attempt to get people to buy legitimate copies of Windows. They have tested this strategy out in Thailand and are comfortable with the way it works... This is profit they [Microsoft] otherwise wouldn't have normally made."

With software piracy rates currently at 95 per cent in China and 70 per cent in Thailand last year, according to the International Intellectual Property Alliance, Microsoft clearly has had to make concessions to encourage users to change their ways.

Joe Wilcox, analyst at Jupiter Research, said on his website that Gates and co only have themselves to blame. "I would argue that by charging lofty US prices in foreign markets, Microsoft and some other software companies contribute to the very piracy problem they would like to stomp out," he said. "I'm convinced that more regionally appropriate software licensing fees could help curb piracy in those regions... If pricing isn't made more suitable, companies like Microsoft could face backlash."

Piracy among businesses stands at around 26 per cent, according to the Business Software Alliance.

CNET Asia's Winston Chai and ZDNet's Munir Kotadia contributed to this report.