No matter what company officials have done since the Microsoft third-quarter earnings call in April, they havent been able to undo the damage that was done by refusing to detail the way in which they planned to spend $2.6 billion in planned capital expenditures next year.
On May 31, the company decided to pull out its big guns, sending Microsoft CEO Steve Ballmer and Chief Financial Officer Chris Liddell to Wall Street in an attempt to assuage analysts concerns. Ballmer explained Microsofts decision to bet on long-term new businesses to analysts at the Sanford C. Bernstein Strategic Decisions Conference in New York.
Like Chief Advertising Strategist Yusuf Mehdi and Co-President of Microsofts Platforms Division Kevin Johnson—both of whom have made recent Wall Street appearances to defend Microsofts spending plans—Ballmer reiterated that Microsoft is planning to invest in its core businesses, new markets and software as a service in the coming years. MSN/Windows Live spending will account for about $500 million of Microsofts expenditures in the coming year, officials have said recently.
Ballmer told attendees to expect Microsoft to continue its stepped-up investment pace over the next couple of years. While its operating expenses "may moderate somewhat," Ballmer said, they still will increase for the foreseeable future. Meanwhile, Microsofts stock compensation costs will level off, he added.
Ballmer also addressed head-on the criticism shared by many Wall Street analysts that Microsoft is continuing to hold onto too much cash.
"We have a first-class problem. We have a lot of cash," Ballmer told analysts. But because Microsofts management and board "prefers things other than financial risks," Microsoft plans to continue to hold onto its $35 billion in cash reserves, Ballmer said.