Microsoft in 2007 spent around $1.9bn R&D on Artificial Intelligence, which represents 25% of their total R&D spend.
Having lost to Google in the Web 2.0 Ad War, Microsoft is focused on winning Web 4.0 ‘AI Complementing Humans’ and Web 5.0 ‘AI Supplanting Humans’. They have a formidable Web 3.0 Cloud Computing Infrastructure, but lack 21st Century Applications. They cannot afford to cannibalise their core revenue stream from software licences and therefore need to find new Cloud Apps.
Microsoft is likely to spend US$30bn to $US$40bn on AI R&D during 2009 – 2018. Plus they will acquire niche AI players during this period for another $10bn to $20bn with an expectation of paying premium prices for AI innovation from 3rd parties as other Cloud Players muscle into AI.
No wonder Microsoft pulled away from the Yahoo deal. The Microsoft Cloud strategy is clear – its AI, AI, AI!
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