Chinese May Shut Door On Microsoft Officials Pushing Linux Country wants to keep software leader away from business market.(INTERNET & TECHNOLOGY)

Byline: MURRAY COLEMAN

Microsoft Corp.'s clash with U.S. regulators may be nearing an end. But its struggle with the Chinese government is just getting started.

Microsoft's Windows is China's dominant operating system for personal computers. But Chinese leaders are blocking Microsoft from selling software to run large networks or Web sites.

They've shut the company out of one such key deal in Beijing. And some wonder if the world's biggest software maker may struggle to get a foothold in anything other than PC systems.

"The Chinese government is concerned about relying too much on Microsoft," said Gary Chen, a market researcher at China Online Inc. in Chicago. "Windows is already dominant on the desktop for consumers. They don't want that to happen with plants and government agencies."

At the end of last year, officials in Beijing awarded a multimillion-dollar contract to six local firms. A total of seven software companies made bids. Only Microsoft's was rejected, says Louisa Liu, a Gartner Inc. analyst. "This contract is really a starting point for China to start building its own operating system that's independent of Windows," she said.

The winners were all "open source" developers. That means they let other software designers see their source codes -- the basic blueprints of programs. Open source applications are distributed freely online.