Two of China's largest and fastest-growing listed software firms - Kingsoft Corp Ltd and Kingdee International - have plans to raise cash, boost spending and acquire other firms to challenge the likes of Microsoft in the booming, multi-billion dollar software arena.

Kingsoft Corp Ltd will boost its research staff by a third and increase its spending by as much as five-fold this year in a bid to capture a larger share of the Internet games market - estimated to be worth $5.7 billion by 2010.

Unaffiliated Kingdee International Software Group Ltd, which designs software to help businesses run more efficiently, expects to more than double its revenues to 2 billion yuan by 2010 and spin off a fast-growing middleware division on Chinese exchanges - when the depressed market recovers.

Both firms - operating in China with competition such as Netease and Shanda (online gaming), and foreign players such as SAP and Oracle (corporate software) - are riding a hot software market growing at double digits annually alongside record-breaking economic growth.

Analysts say Chinese firms dominate, especially in highly localized online gaming, but deep-pocketed multinationals prevail in the large-corporates market - for now.

"The US economic slowdown may affect IT spending and China's exports, but domestic demand is getting stronger and stronger," said Robert Xu, founder of Kingdee, the No 2 player in enterprise software.

"Our competition with SAP and Oracle in China's high-end market is intensifying. Yet, with a good price and a localized service network, we can hurt them. And in the small- and midium-sized enterprise market, we're unimpeded."

Kingsoft's "Jinshan Ciba" is one of China's most popular word-processing and dictionary programs. But the firm, grappling with piracy, now focuses on the faster-growing online-games arena.

Reuters

(HK Edition 04/02/2008 page2)