Microsoft aims to cut $1bn from its expenses this year and even the company's famous free drinks policy might get the chop.

In an email to staff, chief executive Steve Ballmer warned that expenses have grown faster than revenue for the last three years - and this cannot continue. Free towels have gone from company locker rooms and the free soft drinks could be next. Ballmer told The Seattle Times: "We are looking to take the cost out of the delivery of soda pop. That may mean going from coolers to soda dispensers."

Much of the savings will come from better management of advertising and marketing spend but employee benefits are also being targetted. Health benefits and stock options for US employees have already been reduced.

Ballmer's mail defended the changes and said staff were still well treated: "We still have absolutely the best benefits program in the world."

He called on staff to focus on "Integrated Innovation. [This] is about a customer experience where using Microsoft products together gives you a "whole" that is greater than the sum of the parts. It is not about creating technical dependencies across groups for their own sake."

Ballmer said the company remains committed to technical innovation and is filing more than 2,000 patents a year - which is likely to increase. He also noted that the company has settled many of its legal battles. ®

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