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Microsoft is to invest $2bn on software for small businesses in its next financial year. This is a "significant increase" on this year, but by how much the firm is not saying.

It is setting up a new business unit to address the sector. This will be headed by Orlando Alaya, described by Bloomberg as Microsoft's top salesperson.

MS is gunning for $10bn a year sales from the small biz sector, defined by the software vendor as companies with fewer than 500 workers.

But again it is not clear if this is solely from business apps such as Navision, or includes or Office productivity software and operating systems. If it includes the latter, reaching the target should be a breeze.

MS is building a substantial portfolio of software for SMEs, mostly through acquisition. The business unit is still lossmaking, but Microsoft's sheer firepower must concern the likes of Sage, Europe's foremost supplier of software for SMEs. Microsoft may have bigger fish to fry with Oracle and SAP angling for new revenue streams from medium-sized business.

According to Microsoft, the worldwide SME IT spend is $420bn annually. This will increase to $750bn by 2006. ®

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