Microsoft starts selling technology to start-ups

AMSTERDAM (Reuters) - Microsoft Corp. (MSFT.O: Quote, Profile, Research) said on Tuesday it has joined research-intensive organizations to sell its non-core technology to start-up companies in an attempt to earn money from discoveries that would otherwise gather dust.
The world's largest software maker said it was already working with government agencies in Ireland and Finland to reach young companies that may be interested in technology from Microsoft's multi-billion dollar research arm.
"We provided three Irish companies with source code to test and subsequently licensed it to one, Softedge Systems. Since then we've taken another three technologies to Entreprise Ireland and expect at least another two deals before July," said David Harnett, senior director at Microsoft IP Ventures.
Enterprise Ireland is a government-backed incubator program for start-up companies. Microsoft is also working with a similar organization in Finland called Sitra.
Microsoft said it was also in touch with government institutions in Malaysia, Hong Kong and Singapore and has listed available technologies at www.microsoftipventures.com.
Dublin-based Softedge was provided with imaging technology that can identify objects in pictures and digitally remove them, a technology developed in Microsoft's Beijing lab.
Microsoft's research and development budget is around $1.5 billion per quarter but the software firm reckons that many of its inventions are more interesting for other companies than Microsoft itself.
If Microsoft itself is not interested in a particular technology it may sell the invention to a start-up company in return for an equity stake in that firm. It recently signed such a deal with an unidentified start-up in the San Francisco area, and Microsoft said details would be published in March.
It is not unusual for big technology companies to invest in start-ups that may provide interesting innovations for their business, but it is less common for such companies to sell non-core technology to unrelated start-ups in order to maximize returns on research dollars.
"We believe we're the first software company to do this," said Harnett.
Dutch electronics group Philips (PHG.AS: Quote, Profile, Research) set up an incubator program for internally developed technology two years ago to save discoveries that would otherwise get lost.
"Non-core inventions may get lost. This is a way to generate value," said Philips spokesman Hans Driessen.

Universities, including Stanford in Silicon Valley and Oxford in Britain, have had more experience in turning academic research into independent companies, because they have few other options to turn their discoveries into a profit.

Microsoft said not all technology will be sold exclusively to start-ups. In some cases it will just be licensed to companies. Licensing is a mainstream business activity for most technology companies that can yield hundreds of millions of euros every year. Examples include CD and DVD technology.