Microsoft and R&D Spending

I'm far from being the world's biggest fan of Microsoft, but when shareholders are whining about R&D spending, I tend to sit up and take a bit of notice.

At $8 billion per year, Microsoft's R&D budget is enormous - especially when their revenues are $60 billion - that's about 13% of revenues. A lot by any measurement.

However, the investment community is being a bit silly here. Consider the following logic:

"During 2007, Apple spent $782 million on R&D, Oracle spent $85 million while Microsoft spent about $7.5 billion. In 2007, Apple annual revenue amounted to $24 billion and net income totaled $3.5 billion," says Montgomery. "According to 2008 annual report, Apple increased revenue to $32 billion and net income to $4.8 billion. During the same period Microsoft spent $8 billion on R&D and increased revenue from $51 billion to $60 billion. Therefore, Apple has a R&D budget that equates to approximately 10% of Microsoft’s; however, during this period Apple increased revenue by $8 billion and Microsoft increased revenue by $9 billion."

Let's get a couple of things straight here. R&D produces two things. Ideas, and product. (How much of Microsoft's $8 billion is upkeep on existing software? - who knows) However, neither of those equates to market share gains. R&D groups don't typically do a lot of marketing themselves.

Business growth is the responsibility of the marketing and sales arms of the organization - not R&D. Much of what an R&D organization does (especially in software) may not pay dividends for years - if ever. If Microsoft needs to be criticized by its shareholders, it's not on the subject of R&D spending, it's on the utterly clumsy marketing job they've done since about the mid-point of Windows XP's lifecycle.

Vista was a turkey beyond all turkeys. The packaging for it was awful - I still haven't figured out which version of Vista I would recommend for someone buying a new PC. Whoever came up with that marketing strategy should be fired - what a disaster!

Quite frankly, more recent offerings of the Office platform haven't won them any friends either. Lots of change, but nothing compelling enough to justify the cost of an upgrade; and completely new licenses are abusively expensive. Which leaves people looking at alternatives like OpenOffice.

If Microsoft has a problem, it's not R&D - it's in their marketing and image machine. Whoever's running that show just doesn't get it.

Yahoo! -> MSN?

I spotted the headline that Microsoft is offering buy Yahoo! up, and just about sprayed my monitor with coffee.

Yahoo!, as a company has been caught in the middle for quite some time - sandwiched between Microsoft (anybody else remember just how badly M$ screwed up what used to be Hotmail?) and Google, and not really making any headway on either front.

Somehow, I suspect that spending $44.6 billion to acquire Yahoo will simply enlarge the already bloated and less than functional MSN media group - and produce little of any real value to the user community.

Is Micro$oft The Next SCO?

It would appear that Microsoft thinks that the FOSS world that spawned Linux suddenly owes Micro$oft a huge amount of patent monies because so much of "Microsoft's innovations" have been "stolen".

Amazingly, Ballmer is not specific about which M$ patents have been violated (which is starting to sound amazingly like the infamous SCO Lawsuit).

While this is mostly a reiteration of various threats that M$ has made against Linux in recent years, should Microsoft actually attempt to litigate this they would turn themselves into the next SCO lawsuit. As SCO has proven, alleging infringement and actually proving it are two very different things - and so far SCO hasn't been very successful.

As for Microsoft demanding license fees for the "infringed upon patents", well, they'd have to identify who did the infringing, and then sue them in court - that could be a rather difficult proposition when FOSS developers tend to be all over the place, and not just within the United States.