The news last month that Microsoft was issuing its first large-scale layoffs was a clear sign that the economic downturn is being felt even in Redmond, Wash. In a conference call with financial analysts Tuesday, CEO Steve Ballmer made it clear that the software giant doesn’t expect things to improve anytime soon.
The global economy, Ballmer suggested, is going through an “economic reset,” in which financial resources are removed from the system, the economy finds a new level, “and then productivity and sort of innovation can then again drive economic growth.”
“I don’t think,” Ballmer said, “and certainly the earnings reports we see from everybody, I don’t think anybody is able to cut costs fast enough in any industry to maintain the profits of yesteryear. So you’ve got to ask, what does the business reset look like that goes along with the economic reset?”
The Importance of R&D
Ballmer told analysts that as part of its effort to understand the current economic climate, Microsoft asked some of its employees to read various company annual reports from 1927 through 1938. The goal, he said, was to find out who had done a good job handling the Great Depression.
“RCA, god rest them in peace, RCA become our role model,” Ballmer said. “They actually kept investing in R&D through the Depression period, and in the post-Depression they dominated TV technology because they were really the only guys who had invested.”
During his presentation, Ballmer listed the company’s various R&D initiatives. Among other things, he said, Microsoft is committing $7.6 billion in R&D funds to Office, the company’s flagship productivity suite. However, Ballmer added, the next version of the program, Office 14, will not be available this year as expected, but will be “generally available” in 2010.
OS Market Share Challenges
Ballmer framed much of his strategy analysis on Microsoft’s relative…