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October 17, 2006

Microsoft October spending surprise?

Posted by David Hunter at 7:22 PM ET.

Microsoft is announcing their 1st (fiscal) quarter results on October 26 and one can’t help but wonder if there are some surprises in store based on CEO Steve Ballmer’s statement today that the previous estimate for 2007 R&D spending was more than a billion dollars low:

Microsoft Corp will spend around $7.5 billion on research and development in fiscal year 2007, $1.3 billion more than previously committed, Chief Executive Steve Ballmer said on Tuesday.

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 $6.2 billion, a figure which came as a surprise to the market.

That’s a polite way of saying that it tanked the share price (see chart) which has only lately recovered during the general market run-up. Presuming that this wasn’t a misquote, there’ll likely be more fireworks next week.

Update (Oct. 18): Reuters has corrected their story “to show that the $7.5 billion forecast is a new forecast for the current (2007) fiscal year, not a revision of a previous forecast, and to add a comparison with the prior (2006) fiscal year to June 30, when spending was $6.6 billion. Removes reference in paragraph 4 to a forecast in May of $6.2 billion, which was a forecast for the 2006 fiscal year, not for fiscal year 2007. ”

The net is that Microsoft has a new estimate of R&D spending of $7.5 billion for 2007, an increase of $900 million over R&D spending for 2006.

Filed under Executives, Financial, General Business, Microsoft, Steve Ballmer

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