Microsoft continues its highly profitable business by investing heavily in research across many opportunity areas.

Given is scale and the multiple challengers it faces across its portfolio, Microsoft is maintaining a strong performance. With profit margins over 30% and sustained double-digit growth in revenues and income, the company is putting around $9bn a year into research. With an average of 3000 patents a year reflecting the innovation pipeline, this software giant shows few signs of really loosing out anytime soon. Yes it faces growing competition from the likes of Google in its core office applications area and Apple’s influence in the operating system space is growing in line with Mac sales. But with a dominant position in such highly lucrative areas as Office, Windows and Internet Explorer, this Seattle money machine is working very well thank you. Although its forays into search with Bing and its mobile partnership with Nokia are yet to pay dividends, many of the results from the company’s research activities are having significant impact.

In the wake of X-Box, the most notable of the recent high profile internal innovations has been Kinect. In November, the company launched Kinect for Xbox 360 – awarded the label of “the fastest-selling consumer electronics device” in history by Guinness World Records. In addition, updates of core platforms such as Windows 7, Office 2010 and Sharepoint have continued to drive sales: At the end of 2011, more than 400 million Windows 7 licenses and 100 million Office 2010 licenses had been purchased by businesses and consumers. More significant in terms of long terms shifts has been Microsoft’s move to the Cloud with the launch of Office 365 – a subscription based service designed to maintain the company’s market leadership as more of its customers seek to move core IT activities to external hosting. Also, helping to keep this huge organisation playing in the key growth areas, the introduction of new Windows based phones by a host of partners such as Samsung and, most importantly for Microsoft, Nokia is strategically key as it competes with Google’s Android and Apple’s IPhone OS. While this has not yet gone as well as planned and Microsoft’s Bing search engine is still a junior player to Google, with the core money making machines of Office and Windows being supplemented by success with Kinect, the ability of Microsoft to, for now, remain a leader in the software community is clear to many.

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