Microsoft Trimmed Zune/Xbox/WinMo Division Because Its R&D Costs Were High

Microsoft cut the Entertainment & Devices division's budget because the group's R&D costs had skyrocketed in the preceding months—to twice as much as the Windows group, said TechFlash. Will this hurt the group's great products?

Our friend Todd Bishop over at TechFlash did some number crunching, and found that Robbie Bach's E&D division was an easy target for the slice, because its head was sticking up so much higher than the rest. From the end of 2007 to the end of 2008, R&D spending had increased 37%, by far the most. The total R&D cost for half a year approached $1 billion, whereas Windows R&D only bumped up to less than $500 million. Although Windows made 18 times the profit.

The acquisition of Danger (inventors of the Sidekick) was one legitimate reason for the soar, and a reason why even after cutting, we still might see some slick Windows Mobile 6.5 action, which you can learn about here and here. But we hope that the development of Zune and Xbox, two of Microsoft's best products in recent years, does not suffer while they're still improving.

Bishop notes the sudden battery of budget cuts directed to E&D—and particularly layoffs to the games staff—indicates that Microsoft was probably caught off guard by the sudden economic downturn. Check out TechFlash for pretty charts and big hairy numbers. [TechFlash]