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October 2, 2008 10:06 PM PDT
Microsoft unveils plan for three labs in Europe
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Microsoft said Thursday that it would set up research centers in Britain, France, and Germany to improve its Internet search technology, describing the move as a vote of confidence in the European economy and in the company's ability to close the gap with Google.
The chief executive, Steve Ballmer, said at a news conference that the three "centers of excellence"--near Paris, in London, and in Munich--would employ several hundred people.
He declined to say how much the company would invest. But Microsoft, which has fought pitched battles with European regulators over its Windows operating system, said it was making a major financial commitment at a time when many companies were nervous about spending.
"Investing in anything at this time can be a tough sell," Ballmer said. "But when economic times are tough, we have to keep our faith in the promise that technology holds to transform the future."
Microsoft has been pushing to improve its ability to run Internet searches and to attract the advertising revenue that comes with them, after its failed bid to acquire Yahoo. Instead, Yahoo struck a deal with the market leader, Google, to share some search capabilities. "We are the challenger, not the leader, in search," Ballmer said. "But search is in its infancy, and there is so much room for innovation."
Google accounts for nearly 80 percent of Internet searches in Europe, according to the research company ComScore; its share is slightly more than 60 percent in the United States.
Microsoft has barely 1 percent of the European search market, according to ComScore, and in some countries it even trails local search engines.
In addition to working on improvements to Microsoft?s existing search technology, Mr. Ballmer said, the European centers would focus on new types of searches, including queries from mobile devices and searches involving pictures and video.
Yahoo, which has also struggled with the search market in Europe, is stepping up its efforts to compete as well. Last month the company announced a research and development complex in Grenoble, France.
Google, which has a large engineering center in Zurich and a substantial presence in several European countries, is also trying to improve search in Europe. Still, its dominance is not universal. In countries like Russia and the Czech Republic, it has trailed local players.
Meanwhile, European governments are supporting separate efforts to develop search technology, including a project in France called Quaero, and one in Germany called Theseus.
Spending on Internet search ads will generate $28.3 billion worldwide this year, 57 percent of the total spending on Internet advertising, according to eMarketer, a research company.
Ballmer was joined at the news conference by the French finance minister, Christine Lagarde, who took a break from discussions with President Nicolas Sarkozy of France and other European officials about the financial crisis to hail Microsoft's plans.
Microsoft's investment in France, Germany, and Britain will receive tax breaks, Lagarde said, as France and other European governments move to strengthen the technology sector under a plan drawn up at a meeting in Lisbon eight years ago.
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