Microsoft Spends Freely...

Microsoft might be sitting on over $40 billion in unused cash, but Wall Street wants the boys from Redmond to justify every penny it spends -- this is sure to be a hot topic at this Thursday's meeting of financial analysts.

I hate it when Wall Street tries to tell successful companies what to do. In the '80s Wall Street dictated Ashton-Tate's database strategy, driving the company straight in the ground faster than a ValueJet DC-9.

If Microsoft wants to spend an extra $2.7 billion this year fighting Google and get its Web services house in order, I say go for it, Wall Street be darned!

...While Profits Crumble
This quarter Microsoft profits fell to a paltry $2.8 billion (that alone would cover a full year's worth of increased spending), due in large part to some monster legal expenses. The real story here is that Microsoft, at over $40 billion a year in revenue, is a mature company with its days of explosive growth well behind it. In fact, Microsoft can now only grow by taking markets away from others, and Windows third parties are most at risk.

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Thought you were doing Redmond a favor by building sophisticated systems management tools? Thanks, but we'll take that market over now! On the positive side, there's a whole range of new products -- Vista, Longhorn, Office 2007 and Exchange 2007 -- that are crying out for third-party help. I'm wishing these companies well.

Google Keeps A Rollin'
While Redmond slumped to only $2.8 billion in profit, Google surged to $721 million -- more than twice the profits of the same quarter last year. And much of this comes at the expense of Yahoo!, which is slipping badly (when was the last time you "Yahoo!-ed" something?). Google may be hot, but it ain't Microsoft yet!

About the Author

Doug Barney is editor in chief of Redmond magazine and the VP, editorial director of Redmond Media Group.

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