Chinese software Kings plot expansions

By Judy Hua and Vinicy Chan

HONG KONG (Reuters) - Two of China's largest and fastest-growing listed software firms, Kingsoft Corp Ltd (3888.HK: Quote, Profile, Research, Stock Buzz) and Kingdee International (0268.HK: Quote, Profile, Research, Stock Buzz), plan to raise cash, boost spending and buy firms to take on the likes of Microsoft (MSFT.O: Quote, Profile, Research, Stock Buzz) in a booming, multi-billion dollar arena.

Kingsoft Corp Ltd will boost research staff by a third and lift spending up to five-fold this year to capture a larger share of an Internet games market set to hit $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 revenues to 2 billion yuan ($285 million) by 2010 and spin off a fast-growing middleware division on Chinese exchanges -- when the depressed market recovers.

Both firms, which vie in China with local compatriots such as Netease (NTES.O: Quote, Profile, Research, Stock Buzz) and Shanda (SNDA.O: Quote, Profile, Research, Stock Buzz) (online gaming) and foreign players such as SAP (SAPG.DE: Quote, Profile, Research, Stock Buzz) and Oracle (ORCL.O: Quote, Profile, Research, Stock Buzz) (corporate software), are riding a software arena growing at double digits annually alongside record-breaking economic growth.

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

"The U.S. 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 localized service network, we can hurt them. And in the small to mid-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 a faster-growing online games arena.