Microsoft and strange investment plans

The software giant bought the advertising company, poured too much imagination into the Xbox and Web services . No one knows, Microsoft is raising a secret "conspiracy".

Steve Ballmer, chief executive of Microsoft, said that Microsoft has "made rapid progress" in searching and advertising online in the past two years.Source: AP

As soon as investors in Microsoft began to "digest" the company's sluggish growth and expansion, they received a series of shocks. The first is Microsoft 's financial results coincide with expectations, and then the budget plan is extremely bold and must be said to be unusually generous.

Too many goals

In fiscal year 2007, Microsoft, under CEO Steve Ballmer, will invest more than Wall Street's forecast to $ 2 billion. "We decided to invest aggressively in some areas," said CFO Chris Liddell.

The areas that Mr. Liddell refers to are: 1. increasing the output of Xbox 360 game consoles; 2. pouring more money into the Windows Live service is in its infancy to provide Web-based software applications and 3. Continue acquiring and acquiring other companies.

The idea is that, but many investors still have to scratch their heads, wondering why and how Microsoft 's additional investments are so much more dominant. "It's as if they're building a Google or Yahoo in mind!", Goldman Sachs & Co analyst Rick Sherlund said.

The first is MSN

Yesterday, Microsoft CEO Steve Ballmer announced details of the budget supplement plan to create momentum for the Internet service business.

The amount of up to 1.1 billion USD will be spent on MSN in the upcoming fiscal year, mainly for research and development, has made investors shocked. This can be considered a "jump" of money compared to the figure of 700 million this year, and $ 500 million compared to last year. And yet, MSN also intends to spend up to 500 million USD as capital expense in fiscal year 2007, 5 times higher than 2005.

" We have told our R&D staff that Web services are the number one priority ," Ballmer said. He promised that Microsoft would spend as much money as any advertising giant. " I believe that only (luckily) two or three firms can provide a strong enough infrastructure to race, " Ballmer is confident.

Too economical explanation

Mr. Liddell insisted that Microsoft did not hide anything from this strange investment plan, but investors were not satisfied with that answer. Microsoft's stock price has dropped by 6.3%, to $ 25.57 at the end of the session.

Analysts are dissatisfied with the lack of serious information. " Where does the money go? Nobody knows the answer, " said another analyst. " It's like money poured into a black hole ."

What is behind this angry reaction? At least, part of the reason is that analysts and investors have long considered Microsoft a "value ladder" rather than a source of earnings from stocks. Therefore, they would rather accept slow growth than stocks that rise but are not stable.

Over time, Windows release sales growth is somewhat lethargic, mainly because most of Windows revenue comes from computer manufacturers - which buy operating systems at wholesale prices and in large quantities. .

Massive acquisition

A well-anticipated move from Microsoft was the acquisition of Massive Inc, a company specializing in advertising in video games. Of course, Massive technology will be reused by Microsoft in its other online products.

The acquisition of small companies by Microsoft instead of investing in the beginning for new business units is no stranger to technology. This time, the goal is nothing else, to revive the online advertising department and increase its competitiveness before rival Google.

Talk about Massive again. For a long time, ads have appeared in video games but mostly in static advertising. These ads once installed on the game are considered "unmovable", cannot be changed.

However, Massive's technology allowed advertisers to insert games and game consoles with completely fresh ads via an Internet connection. In games that incorporate Massive technology, advertisers can change the content of their ads as they wish: today introduces the upcoming movie, and tomorrow advertises a new soda. Moreover, they can also integrate ads in different geographical areas.

In its release, Microsoft said it hoped to integrate these features into its existing products, most importantly MSN online. Certainly, Massive's technology will also be part of Microsoft's upcoming AdCenter advertising tool.

Trump card AdCenter

Steve Ballmer on MSN's icon.Source: AP

Recently, Microsoft has also performed the show AdCenter, the tool is being used by the company for 100% of search advertising contracts in the US at the moment. Earlier, Microsoft had to rely on paid search technology from Yahoo and in fact, Yahoo's search engine is still being used by Microsoft in many international markets.

Yesterday, the Wall Street Journal reported shocking news that many officials inside Microsoft wanted the software giant to buy Yahoo shares and join forces against Google.

Commenting on this article, Ballmer said that over the years, the relationship between Microsoft and Yahoo is complex, both cooperative and competitive, "both a friend and an enemy", however, he completes Full-mouthed about the scenario the Wall Street Journal drew.

Yusuf Mehdi, senior vice president for Microsoft's advertising strategy, also announced the future version of AdCenter - which can handle both contextual and paid search ads. Mehdi said Microsoft intends to test a limited contextual advertising tool this summer.

In addition, Mehdi also introduced two projects from Microsoft Research, where more than 50 of its experts are diligently researching new advertising technologies. A project tries to predict user demographic parameters based on the context of a website. The other project is to deal with users who tend to fast-forward through ads with mini-ads of 5 seconds. Whenever the main ad is fast rewinded, the mini ad will appear and the user "does not run".

Search is also the ultimate priority

Two years after admitting Microsoft failed to develop its own search engine, yesterday, Steve Ballmer proudly boasted that the Giant has achieved a lot of "progress" in the battle against Google and Yahoo. .

In a relatively short period of time, Microsoft has achieved remarkable achievements in two key areas of creating search engines and its own online advertising platform. But Ballmer admits there is still a lot of work to do with Microsoft, and that "The price that Microsoft started earlier ".

More than anyone else, Microsoft understands the price of "slow buffalo drinking water". Until recently, the company began using its technology in 100% of search contracts in the US and significantly smaller market share than both Google and Yahoo (Google 49%, Yahoo 22.5% and MSN 11%). .

Even President Bill Gates must admit that Google has "done a miraculous and excellent job" while building search engines and Web advertising platform. However, Gates still tried to salvage that Microsoft 's effort was "strong". - " I think this is one of the rare times when we are underestimated ," Gates said.

Big ambition

Source: AFP

Attracting users to use their search engine more, thereby attracting more advertising - that is the route that Microsoft can deploy and succeed with the new adCenter online advertising platform. However, Ballmer said that search engines are only "a small part".

The software giant's real ambition is to allow advertisers to . all Microsoft products, from television to online games. Therefore, Ballmer believes that if it pulls many users to the MSN portal, its IM and instant messaging service, the new success is truly remarkable.

It can be said that the fastest and most competitive growth area today is Web services, where applications such as email, photo sharing and software suites like Office can be accessed. network.

While Google has been successful in this area, Microsoft has mainly released software under traditional CDs. But Ballmer is still very AQ considering that Microsoft is not lagging behind its rivals, because they have a high level of technology and a loyal customer base.

The remaining difficulty is how Ballmer convinced investors to be as optimistic as he is.

Thien Y ( CNET synthesis, BusinessWeek, AP, AFP, Reuters )