UPDATE 1-Microsoft, Hyundai partner for in-car technology

Tue May 6, 2008 5:00am EDT

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(Adds investment value, Bill Gates' meeting with South Korean president)

SEOUL May 6 (Reuters) - Microsoft Corp (MSFT.O) and South Korea's top carmaker Hyundai Motor Co (005380.KS) have agreed to build a music and information system to debut in cars sold in North America in 2010, the companies said on Tuesday.

The companies did not reveal financial terms but South Korea's presidential Blue House said Microsoft and Hyundai Motor Group will invest $113 million and $166 million, respectively, in the "Automotive IT Innovation Center" they will set up jointly.

Microsoft Chairman Bill Gates is visiting Seoul to sign the agreement with Hyundai. Gates also met South Korean President Lee Myung-bak on Tuesday to discuss cooperation with South Korean companies.

The first product under the partnership would be a voice-controlled system linking mobile devices to car stereo systems.

Later versions are expected to include multimedia and navigation-related features, the companies said.

The deal will add a new competitor to Ford Motor Co's (F.N) Sync system, which allows a driver to use voice commands to control a system linking the car's audio system with a mobile phone and the iPod from Apple Inc (AAPL.O).

In a twist that promises to make the car-based system similar to the desktop computer market, the Hyundai data and entertainment device will be able to take on new features with software updates, the companies said.

The product deal marks a win for Microsoft, which has been working to open up the driver's seat as a new market for its software beyond its dominance in the office and living room.

The market for car-based information and data systems is expected to grow sharply in coming years, and automakers such as BMW AG (BMWG.DE) and Chrysler LLC [CBS.UL] have projects in the works to bring regular Internet access to vehicles.

For its part, Hyundai, and its affiliate brand Kia Motors Corp (000270.KS), have struggled to shake a reputation for building vehicles in the U.S. market that compete more on price than styling or technology.

Sync, which Ford developed in partnership with Microsoft, has been a surprise hit for Ford. It was introduced first on Ford's entry-level Focus sedan and has been credited with helping to lift sales of that car and to help the struggling U.S. carmaker connect with younger car buyers.

In addition to the Ford deal, Microsoft Auto also provides the software system used in Fiat FIA.MI vehicles sold in Europe and Latin America.

Separately, Microsoft also agreed on Tuesday to invest in a gaming support centre in South Korea, which will help small companies gain access to global gaming markets.

Microsoft will invest $23 million in the gaming project, according to the Blue House. It said Microsoft's investment in South Korean automotive IT, game and education industries would reach a total of $147 million in the next five years.

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