by CIO Staff

Microsoft CEO Backs Decision to Boost Spending

May 31, 2006 2 mins

Microsoft Chief Executive Officer Steve Ballmer addressed an investor conference this week, and backed the software giant’s month-old decision to sink some heavy cash into research and development (R&D), in an effort to tailor its business to the ever-changing world of the Internet and better position itself for competition with such Web heavies as Google, The Wall Street Journal reports.

Ballmer told the Microsoft investors that the company will continue to boost operating expenses, including higher capital expenditures and R&D costs, according to the Journal.

“If you believe in the opportunity we believe in, you’ve got to invest behind it,” Ballmer told the conference, according to the Journal. “Being a little more generous in research and development than a little less is a smart thing to do.”

Redmond, Wash.-based Microsoft’s chief executive said it plans to develop some new offerings on its own, but it will also attempt to acquire some technology via acquisitions, the Journal reports. He named software as a service and its MSN Internet unit as investment priorities, according to the Journal.

Microsoft CEO Steve Ballmer
Microsoft’s Ballmer

Ballmer’s speech comes amid concern from Microsoft investors that the company’s spending plan may not result in the improved performance its CEO predicts. In April, the company told its investors that it planned to devote $2 billion more than was planned to bolstering its search function, as well as other Web-based offerings, during the fiscal year (FY) ending in June 2007, the Journal reports.

Capital expenditures and acquisition costs are expected to jump to roughly $2.5 billion in FY06, which closes on June 30, up from approximately $1 billion in FY05, Ballmer said, according to the Journal.

Ballmer expressed his support for the spending increase by citing the company’s healthy cash flow and past record of taking care of its investors, and he expects $10 billion to $11 billion of operating free cash flow in FY06, the Journal reports.

The company’s chief executive also reminded conference attendees that Microsoft’s dividends and stock buybacks in recent days have returned $87 billion to the pockets of shareholders in the past half-decade, according to the Journal.

For related news coverage, read Microsoft’s Windows Live OneCare Now Shipping and Ballmer: Vista Consumer Launch Could Slip Further.

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