Microsoft faces China pirate hit

Microsoft's profit may be eroded this year by a resurgence in software piracy in China, where 80% of applications are copied illegally, according to research today.

The study by researcher IDC echoes findings by Microsoft itself that the fight against piracy had suffered a setback this year.

More than half of all software sold outside western Europe and North America is an unauthorised copy, IDC said. An unexpected jump in piracy caused Windows sales to miss estimates by $300 million (£151.6 million) in the third quarter, UBS analyst Heather Bellini said in April.

Microsoft may cut its forecast for the year that started this month when it reports fourth-quarter earnings today, partly because of the piracy problem, IDC's Tony Ursillo said.

Analysts expect a 47% fourth-quarter profit rise to $4.46 billion with sales up 17% to $15.6 billion.