Activist: Microsoft R&D Hasn't Delivered

What is also remarkable about Microsoft's spending on R&D is the cumulative total racked up over the years. In the last 10 years, Microsoft has invested $62 billion in the R&D area. Microsoft could have bought back nearly 40% of its stock with that amount; it could have beefed up its dividend; it could have made a string of acquisitions which presumably would have continued to grow its top and bottom lines more than what it has achieved organically.

It's hard to know exactly what Microsoft has delivered for its R&D investment; it doesn't break out the numbers according to its five business segments. However, the two smallest business segments -- Entertainment & Devices, which includes the Xbox, Zune, and Windows Mobile software groups, and Online Services, which includes Search, and the Microsoft MSN, Hotmail, and Messenger properties - likely have taken the lion's share of the investment. Combined, these two divisions have delivered $71 billion in revenue for Microsoft over those 10 years and $15 billion in losses.

So, what Microsoft's $62 billion R&D investment has led to a $15 billion loss for at least those two businesses in 10 years.

Ballmer has argued that Wall Street investors are too focused on the short-term. One large Microsoft investor told me recently that Ballmer had complained loudly to him about the short-sightedness of investors who called on the company four years ago to do a large stock buyback and pay out a dividend with the excess cash on Microsoft's pristine Microsoft balance sheet.