Microsoft to drop back on spending growth

CEO Steve Ballmer tells analysts that 2008 increase will be smaller and says some of their Windows revenue forecasts are too optimistic.

Microsoft plans to increase its operating expenses next year, but it won't reach the $2.7 billion increase inked in for 2007, CEO Steve Ballmer told financial analysts on Thursday.

"I wouldn't expect a huge drop. Just a small drop is what you should have in mind," Ballmer said at a meeting with investors and financial analysts in New York.

He also cautioned that some analysts may be forecasting too much revenue growth in the Windows business associated with the launch of Vista . He noted that although Microsoft expects growth, more of it will come from consumers and in emerging markets--places where it gets less revenue.

"We're driving it hard, but I think some people have gotten a little overexcited," Ballmer said at the event, which was also broadcast over the Internet.

The company expects to see some gains by reducing piracy rates with Vista, but Ballmer said that the added revenue won't be that large when compared with the overall size of the Windows business.

Microsoft plans to give detailed guidance for its coming 2008 fiscal year at its April earnings conference call. It reported quarterly earnings in January that were ahead of what many analysts had predicted.

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