London — Software behemoth Microsoft Corp., last week said that it plans to open three “Search Technology Centers in Europe,” aimed at assisting its Live Search, as it steps up efforts to catch market leader Google Inc. and Yahoo! in the field of Internet searching, Microsoft chief executive Steve Ballmer said at the end of last week, in the midst of a five-city European tour.
The “centers of excellence,” with facilities in London, Paris, and Munich, will be committed to developing new Internet search technologies, is the latest sign that the software vendor is making Internet search a top priority.
Ever since Microsoft’s numerous unsuccessful attempts to acquire search Company Yahoo! Inc., the software giant has been increasingly pushing to improve its ability to conduct Internet searches and to attract the advertising revenue that comes with them. 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.” “For companies like Microsoft search is the key for unlocking huge new opportunities in advertising,” he said.
“The aim is to tap into local expertise and fuel local innovation with job opportunities that will help reinvent the European consumer online and search experience,” the company said in a statement.
Microsoft summarized the move as a sign of encouragement in the European economy and in the company’s ability to close the gap with Google.
The decision follows Microsoft’s $1.2bn cash acquisition of Norwegian enterprise search firm Fast Search & Transfer earlier this year, a buy that will make Norway one of Microsoft’s principal centers for enterprise search R&D, Ballmer said.
Speaking at an event in Paris, Ballmer said its aim is to assist the company establish a bigger footprint in the lucrative search market while diversifying its geographic base. “To compete in a global, innovation-driven economy, we need to draw on the world’s smartest, most creative minds. Increasingly, we are finding that talent here in Europe," Ballmer said.
Microsoft added its budget for research and development in Europe, which currently stands at $600 million a year, would increase, though Ballmer did not specify how much the group would invest in the research centers announced today, but said that “over the next few years we expect to employ several hundred people, software developers, in these centers in Europe.”
“Investing in anything at this time can be a tough sell,” added Ballmer. “But when economic times are tough, we have to keep our faith in the promise that technology holds to transform the future.”
Speaking along with Ballmer, French Finance Minister Christine Lagarde said the new French facility, to be based in Issy-les-Moulineaux, near Paris, would be up and running by around March 2009.
“This is good news for the European Union, which decided long ago, with the Lisbon strategy, to do go down the road of the knowledge-based economy,” said Lagarde, in a statement provided by Microsoft.
Lagarde added that Microsoft would benefit from a tax credit scheme aimed at encouraging R&D investment. For every 100 euros invested by the U.S. group, it would get 30 euros back from the French state.
The Search Technology Center will be led by Jordi Ribas, previously general manager of Microsoft’s Connected TV business group.
The centre joins Microsoft’s more than 40 other R&D centers, including labs in Cambridge, Dublin, Copenhagen and Oslo. Microsoft already has 2,000 researchers and engineers in Europe, taking the top spot in regions outside the United States, a little ahead of China and with India at number three, the company said. Microsoft is soon to complete a $500m European data centre in Dublin.
Furthermore to making improvements to Microsoft’s existing search technology, Ballmer said, the European research centers would focus on new kinds of searches, including queries from mobile devices and searches involving pictures and video.
Microsoft needs to head out with whatever it can to catch Google in the Internet search market. Currently, Google holds about 60% of the market, compared with Microsoft’s 9% share.
Recently, Microsoft turned its focus on mass acquisitions in an effort to catch up. Through the first nine months of 2008 the company committed more than $1.5 billion to acquiring search, or search-driven businesses — including a $1.3 billion buyout of enterprise specialist Fast Search & Transfer in April.
In an interview with Reuters, Jean-Philippe Courtois, President of Microsoft International — operations outside the U.S. and Canada — said the $2 billion worth of acquisitions of Internet-based companies in Europe over the past 12 months were complete or nearing completion.
“We keep looking at a lot of great start-up companies in Europe and other parts of the world and I am sure there will be some more to come in the next 12 months,” Courtois said.
Ballmer’s European trip includes stops in Denmark, France, Norway, Portugal and the UK.