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Ballmer bets on R&D amidst Meltdown

Talks Windows server lite and Yahoo! wooing

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Microsoft boss Steve Ballmer wants to spend research and development dollars like it was the 1930s-era Great Depression.

The volume control-impaired CEO told investors at its annual mid-year chat that Microsoft intends to stuff the company's R&D larders in anticipation for when economic conditions aren't quite so dire. But he warned the downturn will likely persist for the next several years.

Ballmer said he ordered his corporate strategy lackeys to research how other big companies weathered past US recessions and discovered a new corporate kinship in the former electronics maker, RCA.

"RCA — God rest them in peace — RCA became our role model," bellowed Ballmer. "They actually kept investing in R&D through the Depression period, and post-Depression they dominated TV technology because they were really the only guys who had invested."

Ballmer yelled that he doesn't consider today's crap economy a "recession in which you can recover," but rather an "economic reset" where lots of money leaks out and the market starts again at a lower level.

"You don't beat it," Ballmer hollered to investors. "You manage in this environment. You don't think about it as shorter term, you think about it as a rest that may take several years to fully reset. But we need to then ask the questions, 'What do we invest in? What's important? What's going to happen?'"

The tea leaves apparently tell Ballmer to invest more in improving Microsoft's online search and advertising market share.

"Some people say to me, why don't you just give up," shouted Ballmer about the company's status as a non-entity in the search business despite years of significant investment. "This is a huge opportunity. You give up, you can't et back in the game."

Ballmer added he hopes to strike up a new "reasonable conversation" with Yahoo!'s new CEO Carol Bartz to figure out how to combine forces to compete with Google.

The Microsoft chief also aims to pump more money into its forthcoming WIndows 7 operating system as well as Office 14. Ballmer, however, shrieked confirmation that Microsoft's upcoming Office package won't arrive this year without offering further explanation.

Microsoft's Windows 7 strategy will also play on the recent popularity of cheap, low-cost computing. Netbooks may bring all the boys to the yard nowadays, but most of the machines run Windows XP because Vista demands more system resources than can be spared. Ballmer whooped that he intends for a Windows 7 starter edition to be a high-margin substitute to XP if they can figure out how to make netbook users make the switch.

"We're going to have a lot more opportunities in order to think through how we get the customers to want to trade up from a lower-priced offering to a higher-priced offering, and we're certainly experimenting with that," he yelled.

Microsoft also intends to offer a low-cost, bare-bones version of Windows server.

"We don't exactly have a netbook phenomenon, but if somebody can buy a $500 server, they're a little loathed to spend $500 for the server operating system that goes with it," he trumpeted.

The audio of Ballmer's mid-year address can be found here. A transcript of the occasion is also offered at yonder link (as a .DOC file). ®

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