New routes to profit for Microsoft, IBM

Making money the old-fashioned way in the technology business, by selling hardware, software and networking gear, isn't the only way to make a profit. Just take a look at what some of the world's largest tech makers are up to.

Microsoft on Monday said it has begun to license out technology developed in its research labs to other companies.

The move makes sense: Microsoft spends in excess of $6 billion annually on R&D and can't possibly commercialize every idea its researchers devise.

IBM has already learned how to profit from its engineer's know-how. The company patented more than 3,000 inventions last year, more than any other company, and generated more than $1 billion through patent licensing.

But IBM has calculated that by sharing some key technologies--that is, for free--the payoffs can be even greater, according to a New York Times report. The move was initiated by chief executive Sam Palmisano roughly a year ago. IBM reasons that granting use of some patented technology many companies will benefit. "Anything that enhances interoperability has to be open," according to Irving Wladawsky-Berger, a vice president and technology strategist at IBM.

But IBM's patent strategy isn't entirely altrustic: "IBM is taking a different path, though it, too, is driven by self-interest and competitive advantage. Even as it preaches greater openness and collaboration, the company is also intent on extending its use of patents in its big technology services business," the Times reports.

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About the author

    Mike Ricciuti joined CNET in 1996. He is now CNET News' Boston-based executive editor and east coast bureau chief, serving as department editor for business technology and software covered by CNET News, Reviews, and Download.com. E-mail Mike.

     

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