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Lenovo game unit eyes fundraising, Q1 launch

* Aiming for tens of millions of dlrs for game development

* Planning for Q1 launch of its game console

* Console to be pre-installed with 30 games to thwart piracy

(Adds details, quotes)

By Kelvin Soh and David Lin

HONG KONG/SHANGHAI, Sept 16 (Reuters) - Eedoo Technology, the video gaming unit of PC maker Lenovo Group Ltd 0992.HK, is entering a second round of fundraising, its chief executive said, aiming to eventually raise tens of millions of dollars.

The game maker is also looking to launch its game console in the first quarter of next year in China, Eedoo's chief executive Jack Luo told Reuters in an interview on Thursday, pitting it against rivals such as Sony Corp 6758.T and Nintendo Co Ltd 7974.OS.

“Talks are underway with some venture capital firms and we’re getting a very good response,” Luo said. “As a Chinese company we know the market and our cultural habits better, so I’m very confident that we’ll do well.”

The seed money provided by Lenovo, parent Legend Holdings and its private equity arm Legend Capital largely went to software development, Luo said, and the second round of fundraising would also be used for research into new games.

The Ebox game console will come pre-installed with a set-top camera that enables the machine to detect a player's movements, Luo said, putting it in direct competition with Microsoft Corp's MSFT.O Xbox Kinect system due to be released later this year.

Some 40 Lenovo software engineers were spun off from the company to work for Eedoo Technology, which will be tasked with developing and marketing the game console.

“The advantage of being a Lenovo unit is that we can tap its distribution network and its good connections with suppliers and retailers,” Luo said.

Lenovo, the world’s fourth biggest PC brand, has been trying to diversify away from selling only the heavily commoditised personal computer, and in the past year has launched a smartphone in its home market and announced plans to roll out a tablet PC. [ID:nTOE66K06F]

19 MILLION FAMILIES

More than 19 million families in China will be able to afford the game console if it is sold for under 3,000 yuan, Luo said, with the size of the market likely to swell as the yuan's CNY=CFXS appreciation makes it cheaper to produce the machine.

The price of the console is also likely to be lower than similar machines that have games pre-installed and a set-top camera, Luo said, adding that the 30 games that come with the machine will make copying less worthwhile for pirates.

“Chinese consumers are different,” he said. “If you sell them just the machine they’re going to wonder why it doesn’t already come with games. Our strategy is to sell a complete product so that customers don’t need to buy a large number of add-ons.”

Many game console makers such as Sony and Microsoft typically subsidise the cost of the machine and make a profit from the games and accessories that are sold together with the unit.

But rampant piracy in China has made this business model difficult for these companies as counterfeit copies of games appear in stores even before they are officially released.

(Editing by Don Durfee and Greg Mahlich)

((kelvin.soh@thomsonreuters.com; +852 2843 6345; Reuters Messaging: kelvin.soh.reuters.com@reuters.net))

((If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com)) Keywords: LENOVO/EEDOO

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