Microsoft To Boost R&D Budget, Focus On PC Initiative

Microsoft plans to increase its R&D spending by more than 20% this year, investing the greatest percentage in a PC initiative that would enable people to enter data in new ways and report problems to Microsoft, according to chairman Bill Gates.

Gates told financial analysts during a meeting Thursday that the company plans to spend $5.3 billion in fiscal 2002, which began July 1. In 2001, Microsoft spent $4.38 billion on R&D. "We're not scaling back our R&D ambition at all," Gates said.

The next versions of Office and Windows--subsequent to the recently released Office XP and this fall's Windows XP--will include improved features Microsoft calls Office Update and Windows Update. The software today lets users download drivers and bug fixes from Microsoft's Web site. Upcoming versions of the operating system and productivity suite will let users report crashes and other problems to Microsoft from their desktop PC, using features that Gates calls a "red button" and "yellow button," for problems of varying severity. Updates will be "dramatically more central to the user experience than ever before," he says.

Other aspects of the user-interface initiative, which Gates calls "Always Works," aim to build into Windows and productivity applications new ways of pointing to and annotating text. As LCD display prices fall, Microsoft plans to eventually replace the computer mouse with large screens that let users point to and manipulate text with a digital pen. Pointing, along with refined speech recognition, will complement keyboard input, Gates says. It will take two to three releases for Microsoft to introduce all its planned features.

"Always Works" could also ensure that PCs and handheld computers continually back up and synchronize data. Gates says the WiFi standard (previously called 802.11) for wireless communication among devices will become pervasive in homes, and low-power versions of WiFi chipsets will emerge. But stubbornly low household penetration rates of broadband connectivity will hold back consumer wireless computing and home PC networking, according to Gates. Microsoft's answer: a strategy that relies "aggressively" on caching data on local disks, whose prices continue to fall.

Other products will carry premium prices. Gates says Microsoft will require PC makers releasing Windows XP-driven Tablet PCs--a new Microsoft product expected this fall--to include a "high-quality" digital converter of pen strokes (applied to the screen) into handwriting. One measure: A computer mouse typically reads input at about 40 samples per second; the Tablet PC's pen reads about 133 samples per second. Tablet PCs will cost a bit more than comparably powered notebook computers, Gates says, but the high-quality component requirement "will get the whole idea of reading and annotating off to a strong start."

In a demonstration, Microsoft Group VP Jeff Raikes showed an instant-messaging app the company is developing that lets users transmit wireless messages that combine text and simple diagrams drawn with the Tablet PC's digital pen.