Last week's earnings report from Microsoft shows that the company cut its research and development budget for the first time in five years. Microsoft has been cutting costs lately, including efforts such as cutting 1400 jobs in January .

In its last fiscal year, Microsoft spent $8.7 billion on R&D - about three percent less than in the previous fiscal year. At the same time, its sales budget rose by about the same percentage, reaching $13.2 billion in order to cover new product launches such as Windows 7 and Bing , their new search engine product.

According to Microsoft, the decrease represents "a decrease in third-party development and programming costs and increased capitalization of certain software development costs" as well as savings from lowered headcount.

Cost cutting measures like this helped Microsoft finish its fiscal year with revenues up by 22 percent for the quarter and a 7 percent increase for the year, beating analyst predictions. All five of its major divisions reported increased revenue, although some groups within the company, such as the one responsible for Microsoft's Kin mobile phone initiative , which was discontinued soon after an extremely mediocre reception at launch. The increase is a marked change from last year, when the company posted an annual revenue decrease for the first time since its founding in 1975.