Microsoft’s CEO tells financial analysts that when all is said and done online, Redmond will stand triumphant.
Just because MSN has been running a distant third behind Google and Yahoo in market share for search engines doesn’t mean Microsoft has given up the race.
At Microsoft’s annual financial analyst fest in Redmond, CEO Steve Ballmer emphasized the company’s burgeoning finances and commitment to research and development.
“We’ve gone from a company of $25 billion and $12 billion of operating profits to $40 billion and $19 billion of operating profit while increasing our R&D spend by almost 25 percent. I think that’s really quite an achievement, and certainly one both on the innovation front and on the growth front,” he said in the meeting.
R&D spending tends to be an area that troubled businesses trim when the going gets rough. SugarCRM CEO John Roberts noted how companies suffering from stifled creativity spend more on sales and marketing than on R&D.
Microsoft’s goals won’t be hindered by lack of financial support, according to the CEO’s remarks. While the folks from Redmond probably will not be paving Silicon Valley and turning it into a parking lot, they do aim to put their California competition well behind them.
Part of that drive will be fueled by a higher price tag on enterprise versions of Microsoft’s signature pieces of software: the Windows operating system and the Office productivity suite. That strategy began with the release of Windows XP in Home and Professional editions.
XP Professional carries a higher sticker price than XP Home, but also provides better networking support. Many home users with networks in place opted to buy the Professional version for that extra support. Mr. Ballmer discussed premium versions of Office, as well as premium client access licenses for Windows.
The search engine ad market, a large pie worth billions of dollars today, will also draw Microsoft forward into improving their search product. Mr. Ballmer sees Microsoft’s finding a place: “There will only be a handful of major players in the ad market, and you can rest assured this company will be one of them.”
Microsoft has entered many markets with existing competition, and hasn’t always entered with the strongest product. It took until version 3.02 of Internet Explorer for the company to draw level with Netscape, a company that had the browser market to itself. After version 4 of both browsers emerged, Microsoft was pulling away.
Once Microsoft gets a couple of versions of a product developed, they tend to become a threat if not the dominant player over time. Google and Yahoo may be atop the search space today. If Microsoft can improve MSN Search, that space might become a pit.
And we know Mr. Ballmer would be pleased to take a shovel and fill that pit in for good.
David Utter is a staff writer for Murdok covering technology and business. Email him here.
