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Microsoft Accused of Squandering Billions On R&D
Julie188 writes "Even as Microsoft celebrates its 10,000th patent, angry shareholders are starting to speak out against what they say is the squandering of billions of dollars on pointless R&D projects. The 10,000th patent covers a technology that allows a device to associate data with objects placed on its surface, and is likely eventually to become part of the Surface table PC. But shareholders are fed up with the $8 billion annually spent. Said one, 'I believe Bill Gates is a charlatan because what he has said, implied, promised to shareholders and stakeholders and all of these visionary things that he mumbles and jumbles about and doesn't make reality of. MS is spending billions of dollars on R&D. Where is the return on investment?' In contrast, Apple had almost the same revenue gains as Microsoft while spending one-tenth as much."
When a company cannot capitalize on its R&D spending, shareholders insist on cutbacks, and the company eventually falls behind and becomes irrelevant.
Since Mr. Gates owns so much of MS, I personally doubt this will happen, but if MS concedes and then begins to cut back on R&D, I'll start to believe those that say that the days of MS are numbered.
If you can read this... 01110101 01110010 00100000 01100001 00100000 01100111 01100101 01100101 01101011
It seems that MS has managed to work itself into a stalemate. On one hand it must keep evolving and changing to attempt to be better than Linux and Apple, but on the other hand it has to keep regulations into check to not become even more monopolistic. R&D is about the only output that MS can put its profits into to keep regulators at bay and still grow its business.
Taxation is legalized theft, no more, no less.
Even as Microsoft celebrates its 10,000th patent, angry shareholders are starting to speak out against what they say is the squandering of billions of dollars on pointless R&D projects.
Investors know that sometimes things won't pay out. These are the whiny little 10%-return-no-risk assholes who sue when a CEO doesn't start layoffs ASAP to pump up the stock price.
Here's news for you: sometimes weird investments pay off in radically unforeseeable ways. If you're the kind of jackass who dismissed the idea because we already had vacuum tubes, then you're the same kind who thinks modern R&D is a waste of money.
As much as I dislove Microsoft, I'm glad they're doing this stuff. Apparently they understand the importance even if a few short term profit-takers are too stupid to see it.
Dewey, what part of this looks like authorities should be involved?
I think it crosses over to the development team. When you first hear about a new version of Windows, it generally has some features that actually sound cool.
Then management cuts the features and all that's left is the previous version of Windows with a new interface. That's where the crossover is failing.
And finally, academia and computer science research shouldn't be beholden to any corporate entity. Our institutions should be funded by the government. The ideas should be public property.
Notes From Under *nix: blas.phemo.us
Contributing to open source projects is not research; it is development focused on open-source products instead of closed-source products. Research would be developing new ways to improve operating systems, compilers, and web servers, for example, based on certain criteria (performance, security, design, etc.). For example, Plan 9 is a research project. There is plenty of research in academia and industry that are geared toward solving real-world problems. For example, many of the advances in computer hardware, such as deep pipelines and multicore processors, started out as research problems. But contributing to an open source project is different from research. I fail to see how contributing to GCC or WebKit per se solves any problems in computer science, which is the definition of research, unless those contributions are a result of research.
My understanding is that until recently one of the big purposes of MS Research was just prestige, not really product production. MSR has consistently produced a very large amount of academic research in some key areas, e.g. almost always accounting for more than 10% of the papers at SIGGRAPH, year in and year out. Microsoft management was of the opinion that having something like that was useful to their business in indirect ways, even if those SIGGRAPH papers didn't directly lead to deals with CG film companies or anything. Is that true? I have no idea; it's kind of hard to measure intangibles like whether having a prestigious research group attached to your company increased your reputation to the point where it tipped the balance on an important sale or contract.
I think they were also going for the Bell Labs model, where the research group pays for itself if it's left to its own devices and very occasionally invents/patents something big. I have no idea what MSR's patent portfolio is like from a business perspective. Have they licensed any significant percentage of it? More intangibly, what proportion of Microsoft's defensive patent portfolio originated from MSR?
And finally, one of the unofficial purposes of MSR for years was just to hire up everyone so nobody else could. Microsoft had a dominant lead in a number of areas, and one way to protect that is just to deny all your competitors access to talent. Kind of the model Google is currently using (they hardly need 20,000 employees otherwise).
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
They could refer to the company charter, which often has a phrase where the primary objective of the company is "to maximize profits and increase shareholder value". If that is the case for Microsoft (I have no reason to not think so here), the directors are violating a primary tenant of their charter if they spend money frivolously. From this it would be the basis of a lawsuit by violating the basic charter of the company and its legal right to exist.
A tech company investing in R&D, or even doing a bit of skunk works is not "frivolous". It is precisely aligned with a long view goal of maximizing profits and increasing shareholder value. The directors have a lot of leeway if this is all you have got to sue them on.
Spending money on R&D is not the same as "spending frivolously." The whole point of R&D is to experiment with new technologies, some of which pay off, some of which don't.
Kudos to Microsoft for actually investing in their future, rather than sitting on the cash pile. To hell with the whinging "investors" who expect money for free.
I do not fail; I succeed at finding out what does not work.
They've spent a LOT more than $5 billion on the Xboxen over the past decade or so. More like $25 - $30 billion, last I read. That's a truly staggering sum for a product line that's yet to earn them even a cool billion in profit over the same period.
It's even more embarrassing for Microsoft when you realize the Wii has forced them to cut the price of the Xbox 360 just to remain competitive saleswise - and they're still sliding into 2nd place in this generation for overall sales, in spite of having a year's headstart.
Even worse, Nintendo has been turning a profit on the Wii since very early on in its lifecycle. Microsoft just recently started turning any consistent profits at all on its videogame business, and last I read they're still losing money on every 360 they sell (they have to make it back on the games). In contrast, Nintendo is turning a profit both on their consoles and on the games.
In a lot of ways, I'd say Microsoft is an even bigger loser in this generation of the console wars than Sony. The PS3 is likely to have a longer lifespan in the market than the 360, giving Sony more of a chance to make money off the consoles (and games) in the long run. And by pushing Blu-Ray to some level of success at least Sony stands to make some money off that standard thanks to their enormous PS3 investment. In contrast, Microsoft has nothing to show for the whole Xbox investment besides - finally - an anemic quarterly profit for their gaming division.
Apple's making far more money off of the iPhone than Microsoft's making off of the Xbox, and it cost Apple far less money and took Apple far less time.
I think folks criticizing Microsoft for their R&D investments are on the right track. Microsoft has blown a ton of money on R&D and on trying to get into other markets besides desktop PCs, and much of it has been completely wasted. Several of their competitors have done a far better job, spending a lot less money.
Research is great, but you have to be able to translate that research into products people want to buy (that's the "development" side of R&D). Microsoft risks becoming the next Xerox - a one-trick pony who dominated one market, but who could never translate their extensive R&D efforts into successful products in different markets. Remember, it was Xerox who pretty much invented the modern graphical user interface PCs sport today, along with things like Ethernet and laser printers. Where are they now?