Microsoft CEO sees Web services as top R&D priority

REDMOND, Wash. - Microsoft Corp. plans to double spending on research and development at its MSN Internet unit as the company focuses on software services, CEO Steve Ballmer said yesterday.

The software maker caught investors off guard last week when it said it would sacrifice billions of dollars in profit next year to invest in new business areas.

Investors complained about the lack of clarity in Microsoft's plans to compete with online rivals Google Inc. and Yahoo Inc.

Speaking at an event to promote its online advertising efforts , Ballmer said investments in the coming fiscal year, starting July 1, are a sign of Microsoft's commitment to be a leader on the Web.

"These are certainly early days in this Internet world. I believe only two or three companies can really deliver the infrastructure that's required to keep pace with both consumer demand and advertisers' needs," Ballmer said.

Microsoft said it planned to spend $1.1 billion for research and spending at MSN in the 2007 fiscal year, up from $500 million in fiscal 2005.

The company also plans to increase capital expenditures to $500 million in fiscal 2007, from $100 million in 2005.

"We will spend as a company overall about $6.2 billion in R&D," Ballmer said without specifying a time frame.

"We've told our R&D folks that our number one priority is software as a service," said Ballmer.

computerworld.com/