Microsoft Corp. has agreed to pay about $12 million for nearly 1 percent stake of Sichuan Changhong Electric Co, a major Chinese TV set and electrical appliance maker, in a deal to jointly develop digital home-entertainment products.

Sigurd Leung, head of IT research at Analysys International said Microsoft's move echoed its 1999 "Venus project", an operating system that would allow Chinese electronics firms to combine a Web browser, PC and video compact disc player in a single box atop TVs. "That project eventually failed, because of low-speed Internet connections and lack of good content," Leung said.
Almost 10 years later, the market is more mature than ever and Microsoft is set to get its operating system into portable devices and home entertainment systems in order to ensure its future growth. With the web becoming an increasingly popular channel for video distribution, adding China has the world's second-largest population of Internet users and the biggest population of television viewers at 400 million, the deal could represent a very important strategic market for Microsoft.