Microsoft settles on sites for search centers in Europe

Branches to be set up in London, Munich, outside Paris

PARIS -- Faced with the question of whether to build its European search technology center in France, Germany or the U.K., Microsoft Corp.'s answer is "all three," CEO Steve Ballmer said during an event in Paris on Thursday.

Microsoft had been hinting since earlier this year that it would pick one of the three countries to build a research center to develop new search technologies.

However, Ballmer said the company will conduct the research in London, Munich and on the outskirts of Paris so as to be closer to customers and to attract the best staff.

Ballmer was coy about how much the company will spend on the new search centers, saying only that it will recruit several hundred engineers to work in them.

That will boost significantly the number of researchers the company employs in Europe. Today it has 2,000 research staff in 40 offices across 19 of the European Union member states, said Jean-Philippe Courtois, president of Microsoft International. That makes it the company's largest concentration of researchers outside the U.S., narrowly ahead of China, where Microsoft opened its first international search technology center over two years ago.

The company already has some search development activities in Europe, following its acquisitions of Norwegian enterprise search company Fast Search & Transfer ASA for $1.2 billion in January, and of comparison shopping service Ciao for $486 million in August.

Since Microsoft abandoned a plan to acquire Yahoo Inc. for around $45 billion to boost its share of the search advertising market, it has been looking for other ways to attract more users to its search sites. Its strategies include smaller acquisitions, investing in technology research and even paying users to visit its sites, through programs such as Live Search cash-back or this week's new launch, a customer loyalty program called SearchPerks.

Christine Lagarde, French minister for the economy, industry and employment, also spoke at the event. Ballmer made a point of mentioning that she rearranged her schedule to attend. She said the company would benefit from tax breaks of between 30% and 50% on its R&D investments in France.

"The tax credit is nice," Ballmer said, but Microsoft would have invested in Europe even without it.

"We're investing so we can deliver to European consumers the best search experience we know how," he said.

Jordi Ribas, formerly general manager of Microsoft's Connected TV business group, will lead the decentralized search technology center. This year, he aims to concentrate on recruiting the top two levels of management, many of them internally, and already has his first catch: Andreas Bode, an expert in machine learning who will return to his native Germany from Microsoft's research lab in Redmond, Wash.

After that, Ribas will start on the recruitment of several hundred researchers over the next three to five years.

Roughly one-third of the research effort will be devoted to improving the user experience and the global relevancy of search results, with two-thirds of the work devoted to optimizing search for local linguistic and cultural issues, Ribas said. That balance may change, as may staff numbers in the three offices.

"It's not clear yet whether there will be more people in France, in the U.K. or in Germany," he said.

Copyright © 2008 IDG Communications, Inc.

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