Microsoft will double its spending on R&D to $9.5bn this year, $3bn more than its closest rival in the IT sector, making it the biggest R&D spender in the world, the company's chief operating told an audience at the London School of Economics today.
Kevin Turner said the world economy had been "reset" during the past 24 months. It was the first time in Microsoft's 34-year history that it had not shown double-digit growth. That had exposed "mediocrity" in the organisation, he said. "Frankly, we did not cope well with shrinking, and it is not something we plan to get good at," he said.
Turner predicted market growth would return this year, but its curve would not be hockey stick-shaped. "The worst is behind us, but we are taking a conservative outlook," he said.
Microsoft is unlikely to expand its business in China until the Chinese government takes further steps to protect intellectual property, he said.
There was "98% usage but only 10% paid" of Microsoft products in China. Microsoft would like to expand its operations there, but was hesitating until there was "more respect for intellectual property".
Profits from selling products helped to protect Microsoft's capacity to spend on innovative new products, Turner said.
Microsoft has redeveloped its entire product line to take account of and incorporate cloud computing. The new Office 2010 due to launch later this year will support web apps out of the box, he said.
Turner predicted Microsoft will sell 300 million copies of the Windows 7 operating system this year, following 90 million sales to date.
A new version of the XBox will incorporate Wii-like body controls that Turner said would revolutionise computer gaming.
Turner said he was excited about the Bing search engine, saying it was taking market share each month in a competitive market.
Referring to mobile telephony, Microsoft's least successful market, he said the launch of Windows Mobile 7 at the Mobile World Congress had been well received by critics.
It integrated cloud with mobile and "brought XBox to life". It offered new features, including a new user interface that made mobile browsing "an incredible experience", he said.
"Windows Mobile 7 is a very important release to get right," Turner said. He forgot to say how many handset makers had signed up to offer the operating system.
Lessons from the recession
Microsoft chief operating officer Kevin Turner drew seven lessons from the recession, which he shared with the audience at the London School of Economics:
- Execution is strategic. Without it you cannot do anything.
- Growth hides mediocrity. Staff and business processes are not as exposed when the company is growing as it is when it is shrinking.
- Don't put in things in good times that you will have to take out in bad times. Example: Microsoft cut its involvement with many conferences last year. No one missed them.
- Make government relations a core competency. It is not going away.
- Lower prices do not translate to higher market share, especially in markets where the customers cannot afford them in the first place.
- Find "clear moments of truth" that are non-negotiable conditions of employment. They are invaluable in getting people's minds and actions aligned and for improving execution.
- Promote personal and professional growth. It is where the next innovation will come from.