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The Chinese Media Bashing Turns From Apple to Microsoft

By Evan Niu, CFA - Apr 9, 2013 at 7:00PM

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Microsoft's Surface warranty policies are under fire in the Middle Kingdom, but don't expect the software giant to react as quickly as Apple did when its own warranty policies were criticized.

First, there was Apple (AAPL 4.08%). Next, there was Microsoft (MSFT 2.76%). No, I'm not just talking about the initial rise of the PC decades ago; I'm referring to the Chinese media bashing tech companies over warranty practices.

For the latter half of March, state-owned CCTV in China ran a full-fledged smear campaign against the Mac maker, alleging that the company's warranty practices favored consumers in other countries and that Chinese buyers of Apple gear were being treated unfavorably, particularly when it came to iPhone replacements.

Since China is Apple's second-largest market by revenue with $26.6 billion in trailing-12-month sales, the company rightfully acted quickly, with CEO Tim Cook personally issuing an apology appealing directly to the Chinese public. In it, Cook acknowledged that there had been some miscommunication that could have contributed to the perception that Apple was being arrogant in not responding to media requests (which is really just standard practice for Apple). The apology was well received, and the Chinese media almost immediately changed its tune, praising Apple's prompt reply.

Bloomberg reports that China's state-owned radio, China National Radio, is now targeting Microsoft. The issue at the heart of the attacks again relates to warranty practices, this time for the software giant's Surface tablet. The device should be considered in the same category as notebook computers, in which case local laws require a one-year repair warranty covering the entire device along with a two-year warranty for crucial components. Microsoft currently only offers a one-year warranty for both.

A China National Radio reporter said the two stories were not related.

The big difference is that Microsoft has a lot less to lose than Apple does. Microsoft has always had difficulty in China due to rampant software piracy. Surface launched in China in October, and Microsoft's sales can't have grown that much since then (although Microsoft doesn't disclose Surface figures).

The media bashing Surface may sting Microsoft, but the Middle Kingdom isn't nearly as important to Steve Ballmer as it is to Tim Cook. Don't expect any apologies from Ballmer.

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