Microsoft to increase R&D spend, says CEO

Microsoft will spend around US$7.5 billion ($11.53 billion) on research and development in fiscal year 2007, US$1.3 billion more than previously committed, Chief Executive Steve Ballmer said today.

Ballmer gave the estimate in response to a question at a business lunch in Madrid.

"I estimate off the top of my head that approximately half a billion of that will be spent in Europe", he said.

The figure is a significant increase on the investment Ballmer announced in May of US$6.2 billion, a figure which came as a surprise to the market.

Microsoft is under pressure to show investors it can compete with Google Inc. and Yahoo Inc. in the internet search business.

Ballmer said for years Microsoft had faced no competition to recruit staff. "Finally, we have some competition (from Google) for talent", he said.

Ballmer, who was invited to talk on the subject of business innovation, said over half the staff Microsoft hired to work in research and development in the United States were recruited from abroad and included 1,000 Russian speakers.

The company was also committed to research laboratories abroad and its centres in India and China would be particularly important for recruiting talent in the future.

On Monday, on a visit to Italy, Ballmer had said Microsoft had made changes to its new Vista operating system to meet the demands of the European Union that it be compatible with software from rival companies.

Ballmer told his Madrid audience that he was confident that Vista would be compatible with European antitrust law. Although the Commission had not yet given the final green light, he said Microsoft was comfortable about shipping Vista.

- REUTERS