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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."
Why complain about what Bill Gates is saying? The last I saw he wasn't in charge any more. If you must complain about what the head of Microsoft is doing, complain about the chairs flying out of Steve Balmer's office.
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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.
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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?
This has less to do with Bill Gates mumbling and jumbling and more to do with the stock market tumbling and tumbling.
People who bite the hand that feeds them usually lick the boot that kicks them
Windows Vista?
Wisest is he who knows he does not know.
The simple answer is you can't "manage" or plan innovation. A reasonable plan would be to hire a bunch of hackers, preferably ones seen at work at 2 AM, give them each a private office and a $30,000 yearly budget for gadgetry, and a mandate to do something fun and maybe useful. And that's it.
Of course no manager would allow this, so that might explain the paucity of results.
Bell Labs, Xerox PARC, IBM's various research labs, 3M's research and others have all generated wonderful new things from their basic research. Google is just one company that encourages employees to spend a portion of their work time on personal research projects.
And now as we bemoan the "next-quarter" mentality of corporate officers and the decimation of basic research, along comes this bunch.
If corporations can't do basic research for fear of being sued, we might as well just pack up our remaining industry and ship it overseas right now.
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"You are not remembered for doing what is expected of you." - Atul Chitnis
Most of Apple's "R&D" is spent on "D"; there is very little actual research coming out of Apple, by any objective measure. Apple just takes other people's badly packaged good ideas and sticks them into shiny white plastic packages, writing patents along the way.
Unlike other big companies, Apple doesn't even give research grants to academia in any significant quantity (they just charge an arm and a leg for their machines).
If all high tech companies were as stingy as Apple, academia and computer science research would be in big trouble.
I wouldn't say their R&D budget goes into patents and lawyers. In the actual academic world, Microsoft Research is a very common institution to see on papers. They employ a lot of smart people who are coming up with a lot of good and useful ideas.
But there does seem to be a disconnect. Very little seems to crossover from their research people to the development teams.
I, for one, think all that money spent on Microsoft Bob and Microsoft Songsmith was money well spent!
I've abandoned my search for truth; now I'm just looking for some useful delusions.
Unlike Apple, MS has to invest heavy in R&D because unlike Apple, they don't opperate like a consumer hardware company. Secondly, MS is growing stagnant in the operating system market, because the OS has become ubiquitious, and they have regulators scruitinizing everything they plan to do with their OS offering. Thirdly, if MS does millions in R&D, and their competitors or FOSS can take that and produce a free or cheaper interoperable product, their consumer/desktop software lines are threatened.
MS is moving to the edge of bubble, they need to either realize that they are becoming the next IBM and begin to move away from the desktop market into server/solutions development; or begin to become more of a consumer electronics company, which would require creating "good" consumer electronics and be competitive in that market, not use it as a loss-leader to harm their competitors or further intrench their Windows position. Desktop computing in the past 3-4 years has offered very little that is groundbreaking for the average user, and the best-of-the best in '01 is still good enough for most people. PC manufacturers aren't seeing major growth, only sales in "back-to-school" periods where students become first time buyers rather than using mom & dads aging box, or replacement when existing boxes fail; which more and more consumers and companies are working to reduce.
In a strapped market, where people are much more willing part with hard earned dollars for 6 more inches on their screen with HD more than chips 400MHz faster (but feel slower on bloated software), MS needs to find a new market that they can win, and win big in; or they are going to see their share decreasing.
Forgive my spelling from time to time. I'm often posting during short breaks.
In agreement is shareholder Mike McDonald. McDonald owns 118,000 shares of Microsoft, bought in 2000 at an average price of $36 share (adjusted for splits and dividend payouts).
118K shares huh? Well, that's certainly a lot of money to me and probably most people reading this, but considering the fact that 8.89BILLION shares are outstanding, Bill Gates owns ~766MM, institutions (which are generally very passive owners) own over a billion shares, and mutual funds (mostly owned indirectly by you and me through 401k plans - also very passive owners) own a substantial amount, I'm thinking MS is not too worried about this.
Personally, I'm a little more concerned with the bank stocks I own (a small pittance of, also through my 401k) and what they're doing. If there's a fight to be picked on Wall Street these days, it's with the management at banks which is currently raping us for our money, not with a company that is unsuccessfully trying to conduct R&D.
If you dislike where MS is going so much, don't be an idiot and complain that they should stop their R&D... just sell your stock! If I've got a problem with the banks insisting on hundreds of billions of dollars AND billions in bonuses, THAT'S a problem worth complaining about.
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Back in the late 1990s and earlier Microsoft's business plan was much simpler: "Windows Everywhere" was the motto and battle cry. Once the stock peaked and Windows had long hit saturation in the big computer markets things became more complicated. That was right around Gates handed things over to Ballmer.
However, that doesn't excuse Ballmer for the massive failure of leadership and execution during his tenure.
The 8+ billion dollar Xbox fiasco.
The mind bogglingly poor execution of the search team
The total flop of the Zune
The equally mind bogglingly poor result of MSN/online
People have described Ballmer having created a "Culture of Failure" at Microsoft. A culture that embraces throwing billions of dollars at a bad project of idea over a million dollars at an equally bad project or idea.
Ballmer seems to have a business plan that is simply nothing more than to "Kick Ass".
The hit to the Windows profits have been a wake up call to everyone at Microsoft. The days of feeling like Windows and Office would be an never ending flow of cash to throw at anything and everything are over.
The cuts we've seen so far are nothing. Ballmer is still of the mindset of trying to cut as little as possible to appease the Street. Until he is gone Microsoft will continue to flounder and slide sideways to lower.
Loser products like the Zune hardware are on the way out. The Xbox fiasco is most likely next to get the axe. Search and the online services messes need to be given a short timeline to get their act together or be axed.
Microsoft has really got their shit together with the security and stability of Windows. A Microsoft with a visionary and competent leader could be a giant nightmare for Linux and Apple.
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.
From TFA:
Dude! You loaded up on the stock of a company whose products you don't even like, and watched it lose half its value without liquidating your position, and you're blaming Bill Gates for your problems???
Your god may be dead, but mine aren't!
Wow. I thought that MS's problems were because of bad management. When I read this, I realize that it goes all the way back to their shareholders.
I prefer the "u" in honour as it seems to be missing these days.
Depending on how Microsoft classifies it's workforce, this may be a simple labeling issue, Many companies call future development work R&D for tax purposes. I believe you can deduct or amortize part of your R&D budget. So, Windows 8 may very well be "R&D".
At $10,000 apiece, all MSFT has to do is sell 800,000 Surface tables and they've got their money back. I mean who doesn't want a big-ass kiosk in their home.
If their R&D has let them figure out a way to make $10,000 items which have a zero cost of goods, and don't have any marketing or support costs, they've got it made.
"National Security is the chief cause of national insecurity." - Celine's First Law
Microsoft has been shutting down their Xbox game studios over the past three years. They are now down to only three: Rare, Lionhead, and Turn 10. Along with their talk of not releasing new Xbox hardware any time soon it sounds like they are easing out of the console market.
They surely see that they went with the absolutely cheapest console hardware and still lost billions. With no consumer electronics design and manufacturing capabilities of their own there is no reason that they would do any better with yet another try at console hardware. More reliable and better built hardware is going to cost more money. And no one at Microsoft appears to be in any mood to continue spending billions on products that are doing nothing for Microsoft as a whole.
A bunch of the .NET languages, runtimes, and compiler features originated in or were developed closely with Microsoft Research, and some parts (like F#) were almost wholly developed there.
Although it's not very much liked by Slashdotters, Songsmith has also been relatively successful. Kodu is also getting a reasonable amount of press, and helping to solidify XNA's lead in the education-via-games space.
More generally, they develop prototypes of a lot of ideas that get reimplemented by the "product" side of the company. For example, MSR has been experimenting with adding machine-learning and data-mining features to MS desktop products for years, something that the product group is now starting to do with Excel. Those sorts of things are harder to quantify of course--- did the MSR experiments in that area help the product team at all? Would they have done the same anyway? Hard to say, but in general I think the advantages of having an R&D division in your company are undercounted in these "soft gains" ways, which is one reason that once companies downside their R&D divisions, the product groups stop producing as many new things as well.
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
Mod twitter funny.
You usually don't get to see this kind of schizophrenia outside of the movies. It's actually amusing to watch his paranoid delusions build on themselves, as the AC below (which is clearly twitter, again) shows.
Microsoft Research consistently accounts for approximately 15% of the papers presented at SIGGRAPH every year.
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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.
I used to say this few month ago, until I started coming across Vista computers infected with all kinds of exotic trojans and malware. The security model on Windows has gone from complete anarchy to "here's a computer - train it yourself." The burden has been shifted towards the user. That's not progress in my view.
Also, I'm not convinced about Xbox being a fiasco. Out of all the billions they have wasted, this one looks like a winner in the long run. They're one generation away from dominating the high-end console space in an event of one more Sony fuckup with PS3. You could never count Sony out when it comes to massive fuckups.
As a [remaining -- for now] Microsoft employee, I can tell you that there is lots of stuff going on here that gets cancelled. Things do not always pan out.
There are probably projects and people that could be cut. MS could probably be more efficient.
Generally, I've seen good technology and near-finished products get killed for political reasons. That work tends not to be completely lost, however. Near-produts tend to have their interesting technologies teased apart, refactored, and re-incorporated into future MS offerings.
However, much as I malign them, I trust the various managers within MSFT to make R&D and strategy decisions over some dipshit that owns 200 shares of MSFT and is irate that he's not seeing '95->'99 era stock price appreciation.
The MSFT stock has been garbage for a long time -- and I am sure I own more of it than the average complainer. Microsoft has always spent money all over the place because real progress takes investment. The company continues to be highly profitable and doesn't appear to need micromanagement from people looking to get rich via stock speculation.
I haven't carefully analyzed the ramifications, but I am at least emotionally drawn towards the idea of MSFT rebuying _all_ of its public stock and telling the market to FOAD.
Last I checked our market cap was down in the $200B range, so I don't think that's a plausible option, given our cash position.
My opinions are my own, and do not necessarily represent those of my employer.
- Parallel Extensions to .NET
- Surface
- Photosynth
- WorldWide Telescope
I don't know if Parallel Extensions is worth $8 billion, but it's a huge deal and the cornerstone of the ManyCore/Multicore work MS is doing. It's pretty freaking cool. (And the Mono folks have already implemented it...)
"The urge to fly from modern systems, instead of moving through them to even greater, fairer things is, I think, an indi
While they're being accused of squandering billions, it is quite possible that they have provided that much value to the industry as a whole. What the investors are really complaining about is their inability to produce something unique and patentable that is so compelling it sells licenses regardless of the (lack of) value elsewhere.
Investors are complaining because there's an economic downturn and they're losing money. They complain about different things with every company, but yes, they all complain.
"I zero-index my hamsters" - Willtor (147206)
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).
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They are dominating the high-end console space, with Wii dominating the low-end. The PS3 is a clear 3rd, and will probably not catch up. It might all change with the next generation, though.
It may not be popular or known to common users, but Microsoft Research is actually fairly well known for its work and yields plenty contributions to scientific publications - so it isn't like they aren't doing anything. Here are some random pages from the site.
If anything, it's surprising that more of it doesn't bubble up into consumer products. Maybe it's simply mismanaged or mistrusted by the management?
-- Sig down
I'm tired of splitting hairs to find reasons to make Microsoft look bad. This type of submission is equivalent to tabloid shit and doesn't warrant hundreds of comments, even the same comments as last time someone put Microsoft under a microscope.
Good for Apple, bad for Microsoft, let the shareholders figure it out; now throw this submission under idle and let's continue onto better spent time...
Ballmer CHAIRS the Board and he might CHAIR the BORED if he hasn't got their unprovided attention...
Previously: "Linux... Toward the Sunrise..." Now: "Linux... Toward the-- No, now, part of Every Sunrise"
It's more than one investor, as evidenced by Microsoft's decreasing stock price despite a huge stock buyback program. Lots of investors have taken their cash elsewhere.
Think what you want, but don't be surprised if Microsoft starts to rethink its R&D spending. Microsoft's stock has been flat or down even during the previous good years, and now that the economy is in the toilet its investors are going to start to wonder why they are financing so much R&D with so little to show for their investment.
An dyou think reducing R&D spending could make its stock go up? If Microsoft had low margins (like most companies have), that might make sense. But even halving R&D would not make such a large dent in their bottom line. THey get 20B out of 60B in sales. Reducing 4B out of R&D (which would be impossible, as that would not even cover maintaining existing products) would bring revenue to 22 or 23B (the difference due to taxes). Do you think that new situation, with 3B extra cash but without a future whatsoever would make the stock go up or down? When Steve Ballmer took the reins, he said "this is a different market, there are not as many opportunities for growth so we have to be more cost conscious". Since then, Google blasted off, Apple created the iPod and the iPhone, companies like Facebook sprouted out of nowhere and mobility became a market bigger than computing. Investing in R&D is what Microsoft has to do. Despite all the babble about marketing, every time they did a bad product (take Vista) they did bad, but when they created products people actually liked, they did great. It's that simple. Don't cut R&D. Cut marketing.
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?
You honestly think that 360s are outselling Wiis here? As somebody who actually works in a store selling video game consoles, I assure you that is not the case. If we could keep Wiis in stock for more than a day or two at a time I'm sure they'd sell even better, but as it is I've probably seen as many Wiis sold as PS3s and 360s combined.
Try not to take me more seriously than I take myself.
You know, I was thinking much along the same lines. Go to court and tell them, "yeah, some of the R&D won't pay off, but the ones whic do allowed us to make X, Y and Z, and earn royalties from licensing W to other." Then I remembered it's Microsoft. I can just see it,
"Your honour, ladies and gentlemen of the jury, may I draw your attention to exhibit 1: without an R&D budget we couldn't have made the Zune. Erm, ok, so its market segment imploded to nearly zero during the Christmas period, but we couldn't have made it without R&D."
"Then we have our continued investment in expanding and improving our search engine business, so maybe one day it won't get its arse handed to it by Google that hard. In fact, I can sense a Google-killer coming. Step 3 in that business plan is that either an advanced extraterestrial civilization hands over their search engine, or the whole Google has a heart attack when we're around so we can claim the kill. Then one day maybe we can sell advertisments too and actually make an income out of it. But let's not get that far ahead of us."
"We have invested heavily in developing a state of the art DRM that will allow us to own the digital media market... at a time where DRM is producing more and more of an allergic reaction in the market, and the major media labels are experimenting with dropping DRM entirely. We think that the incompatible DRM and the 'plays for sure' thing not actually playing even on previous versions of itself are what helped kill the Zune, come to think of it."
"We have invested millions in the newest version of Internet Explorer, so, umm, it could continue to slowly lose market share to Mozilla and Opera. But without R&D, we wouldn't have had the new stuff in it. Ok, so it's a toolbar and browser tabs. You don't think that Mozilla's toolbar and tabs copied themselves into our product, do you? That's what we need R&D for."
"Then it's our R&D which produced such technologies as .Net and C#. Ok, so it just made Vista more bloated and everyone uses Mono for it anyway, but we think we at least managed to piss off Sun a little. And don't pay attention to claims that it just ripped off Java. If you'll look at the next exhibit, a simple C# program and its Java equivalent... you'll notice two extra curly braces per class and a typo in a keyword... err... I mean a new highly-innovative keyword. Clearly such visionary changes wouldn't happen without billions invested in R&D."
"We have also improved our Games For Windows brand name, and strengthened recognition of that brand, via innovative improvements that our talented R&D teams have produced. For example in Fallout 3 it made the game randomly crash when starting or exitting, and needed an extra patch just to fix that. It also created a demand for hacks to remove it from the victim... err... customer's computers. I think I'm not exaggerating when I say that now everyone knows about Games For Windows. Our data mining the web with our search engine has shown that nowadays the phrase Games For Windows shows up ten times more often than a year ago, though most often after the word 'fuck' or before the word 'sucks', or within the same paragraph as the phrase, 'how do I uninstall it?' You can't buy brand recognition like that with marketing alone."
"Then thanks to years of R&D, we have produced Vista. Umm... Your honour, can you make them stop laughing so I can continue? Thanks... We call Vista a great success, because almost everyone who got it on their computer, then bought Windows XP at a premium just to get a usable computer. So we sold them two operating systems, whereas without Vista they'd have only bought one. Everyone else sued us instead. And some did both."
"And speaking of Vista, our R&D has produced anot
A polar bear is a cartesian bear after a coordinate transform.