Before cutbacks, R&D soared in Microsoft Entertainment Division |
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Before cutbacks, R&D soared in Microsoft Entertainment Division
Microsoft was pouring research-and-development funds into its Entertainment and Devices Division at an accelerated pace in the months prior to announcing last week's layoffs, according to the company's latest regulatory filing. The numbers may explain why that division appears to have been hit hardest by the cutbacks. They also show how abrupt the company's financial pullback has been.
The division -- which includes Xbox, Zune and Windows Mobile -- reported an increase of 37 percent, or $251 million, in R&D spending in the six months ended Dec. 31, the first half of Microsoft's fiscal year. That translated into $929 million for the first half of the year. It made the division one of the biggest consumers of R&D funds inside the company, well ahead of the flagship Windows Client division and second only to the stalwart Server & Tools unit.
At the same time, Entertainment & Devices remained a relatively small contributor to Microsoft's bottom line, bringing in a mere $329 million in operating profits over those six months, compared to the more than $6.2 billion brought in by the Windows division in that period.
As noted last week, Microsoft's games unit appears to be bearing the brunt of the initial wave of layoffs. Over the weekend, VentureBeat added to the evidence with a report that Chris Early, GM of Games for Windows Live, is among the people leaving the company.
In the division's defense, a good portion of the growth appears related to acquisitions, including Microsoft's purchase of Danger Inc., the company behind T-Mobile's Sidekick device. Microsoft's 10-Q attributes the increase in R&D spending in the second half primarily to "increased headcount-related expenses associated with the Windows Mobile device platform, driven by recent acquisitions."
But no matter the cause, when you look at the numbers, it's no wonder that Microsoft targeted E&D for a good portion of the initial cutbacks.
About Todd Bishop
Todd Bishop is co-founder and managing editor of TechFlash. He has covered Microsoft and the technology industry for more than five years, most recently as a daily newspaper reporter and blogger based in Seattle.
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