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July 24 2003: Microsoft has a plan to weather this time of slow growth - investing $7 billion in research and development, and expanding its workforce by up to 5,000 people. The company's overall strategy is "integrated innovation" - adding more features and services directly to the operating system. "It shouldn't be necessary for people to buy additional products for their secure infrastructures" said Bill Gates. Microsoft will pursue the secure market aggressively. Furthermore, the company is considering charging for upgrades to the operating system, currently provided free.
- source: New York Times

[COMMENT: Their positioning is faultless. They're doing what we always advise: when times are slow, work on internal development.

It goes much further than this, this is a good ploy for them: rather than race to market with the next generation operating system, the much vaunted Longhorn - only to receive mediocre consumer adoption in a down market - they're using the time spent waiting for economic recovery to develop more product, to eliminate the need for third party software being installed on their operating system. Stretching this period gives more time for XP to make some money also.

This is not a plan to make the best of a bad job, this slowdown is a gift to Microsoft that enables them perhaps to pull ahead of the competition. Longhorn was originally scheduled to release in 2004, now it's pushed to 2005, Jupiter Research believes it won't ship until 2006, and by then a fairly watertight suite of matching applications for the new operating system will be ready.

Soon we'll have chips with built-in security, supposedly hacker-proof. Microsoft will supply similarly secured operating systems. The security industry is one of the few areas currently booming. The likely scenario is that Microsoft will supply its own software inseparably entwined with its operating system, deeply bunkered inside its firewall; it will charge for upgrades (making its development shortcomings a profit center as it has always felt it had the right to do); and our guess is it will offer no guarantees (possibly void warranty etc) if you install third-party software with which it doesn't have a profitable arrangement.

Hard at work on its own search technology to compete with Google and Yahoo, Microsoft with its new secure operating systems will capture millions of Internet users into its own services, and keep them there without competition, serving up its version of the Web according to its own agendas and merchandising imperatives. If you want a different experience from the (blech) Microsoft experience - you'll have to buy a different computer. Interesting times ahead.]

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