April 17 (Bloomberg) -- Lenovo Group Ltd., China's largest PC maker, will buy $1.2 billion of Microsoft Corp.'s Windows software over the next year as part of efforts to curb piracy of the world's most popular operating system software.

Lenovo disclosed the figure as part of a joint marketing agreement signed today at Microsoft's Redmond, Washington, headquarters. Under the agreement, the two companies said they will work together to promote the use of genuine software to customers at Lenovo's retail network of 5,000 stores in China.

Microsoft has lobbied the Chinese government to crack down on piracy, seeking higher sales in Asia to counter a slowdown in the U.S. and Europe. This month, three other Chinese PC makers said they will buy a combined $430 million on Windows licenses in response to a government mandate to install genuine operating software on PCs before the machines leave factories.

``There has been huge progress, especially recently,'' Yang Yuanqing, Lenovo's chairman, said in an interview.

Yang met with Microsoft Chairman Bill Gates and Chief Executive Officer Steve Ballmer in Redmond to sign the marketing agreement, which formalizes a relationship that began in November. At the time, Lenovo became the first Chinese PC maker to include genuine Windows operating software for all of its product lines in the Chinese market, Yang said.

Lenovo didn't specify in its statement how much of the $1.2 billion in spending would take place in China, or provide any figure for a year earlier. Yang declined to say how much Lenovo is spending per Windows license. Last year, Lenovo acquired the PC business of International Business Machines Corp., which includes the ThinkPad line.

Fighting Piracy

Microsoft said last year it got only about 1 percent of its sales from China. Sales in the PC Windows division last year grew at a rate less than half that of the overall PC market, as many new PCs are sold in parts of Asia, Eastern Europe and South America where software theft is rampant.

China has the third-highest piracy rate of any country at 90 percent, according to a 2004 survey from the Washington-based Business Software Alliance.

Earlier this month, Founder Technology Group, China's second-largest PC maker, agreed to buy $250 million of Windows software over three years. That deal came after TCL Corp., China's biggest publicly traded consumer electronics maker, agreed to buy $60 million of licenses from Microsoft and Tsinghua Tongfang Co., China's No. 3 PC maker, said it plans to pay $120 million for Windows licenses.

Microsoft's meeting with Lenovo comes before this week's U.S. visit of Chinese President Hu Jintao. Hu is scheduled to tour Microsoft's campus and dine at Gates's home tomorrow. He meets with U.S. President George W. Bush April 20.

Shares of Microsoft, the world's largest software maker, fell 23 cents to $26.84 at 5:20 p.m. New York time in Nasdaq Stock Market composite trading. They have gained 2.6 percent this year. Shares of Lenovo rose 10 cents to HK$3.05 in Hong Kong trading on April 13.

To contact the reporter on this story: Peter Robison in Seattle at robison@bloomberg.net; Connie Guglielmo in San Francisco at cguglielmo1@bloomberg.net

Last Updated: April 17, 2006 19:03 EDT