Here is a good piece about research at Microsoft.
"Despite all this freedom," I say, "of course you limit your research to things that might be commercially advantageous for Microsoft, right? Like you're not doing research in chemistry, I assume." He pauses. "Well," he responds, "you'd be surprised sometimes at what's going on." (For what Rashid claims is a full list–it certainly is daunting–of all the group's projects see research.microsoft.com.)
It didn't take long before we got to the big beef most people have with Microsoft research–it doesn't seem to come up with much. At this Rashid laughs. "We have researchers here who have done work in teleportation and things like that," he says. "Say in 20 or 30 years Microsoft invents the teleporter. Given the reputation we have, the headline would be, 'Microsoft Copies Again!'" He's a smart guy, but the way to make this point is not with teleportation. He goes on: "People just don't pay attention. For instance, Windows Media audio came out of the research group."
I've read about this before, and it sounds like they are doing some real far out stuff. Some good ideas have come out of Redmond, but I'm skeptical of saying that Microsoft has an innovative culture – not because I know that much about it, but because there are other companies (Apple, Xerox) that have created many more new technologies. From the outside, it seems that Microsoft's research isn't focused enough on the near-term, and breakthroughs that have come out of their labs hardly seem revolutionary. Maybe their long-term focus will pay off with a radical breakthrough that will really change the world. That would be great, but there is also a business case to be made for pushing the boundaries of near-term technological advances.