Microsoft is constantly claiming that is it one of the top companies worldwide when it comes down to coughing up money in order to drive innovation. And the Redmond company is certainly putting its money where its mouth is. According to its Annual Report on Form 10-K, the software giant has spent a pretty penny on research and development in the past fiscal year. Between July 2007 and the end of June 2008, the budget allocated to R&D at Microsoft went 1 billion over the amount spent in the 2007 fiscal year, namely more than $8 billion.

"During fiscal years 2008, 2007, and 2006, research and development expense was $8.2 billion, $7.1 billion, and $6.6 billion, respectively. These amounts represented 14%, 14%, and 15%, respectively, of revenue in each of those years. We plan to continue to make significant investments in a broad range of research and product development efforts," Microsoft explained.

In the 2008 FY, Microsoft accounted for a total revenue of $60.42 billion, with an operating income of just $22.49 billion. Back in mid-July 2008, the company credited Windows Vista, which sold over 180 million licenses, the 2007 Office System (with 120 million licenses) and Xbox 360 consoles as the main sources of revenue. In this regard, Microsoft is taking the money generated by its flagship products and pouring it into R&D, committed to drive innovation, especially at a very high price.

"We continue to invest in research and development in existing and new lines of business, including online solutions, business solutions, mobile computing, communication, entertainment, and other areas that we believe may contribute to our long-term growth. We also invest in research and development of advanced technologies for future software products. We believe that delivering innovative and high-value solutions through our integrated platform is the key to meeting customer needs and to our future growth," reads an excerpt out of the company's annual 10-K filing.

Microsoft is also little shy about licensing technology from third-parties, but the company is keen on maintaining complete technical control over its software and hardware products. And nowhere is Microsoft's drive of innovation more visible than in the giant's consistent patent portfolio, making it one of the worldwide leaders in intellectual property dowries.