Microsoft plans to spend US$7.5 billion (£4bn) in research and development (R&D) in fiscal 2007, a figure that increases the R&D spending analysts and industry-watchers previously expected from the company, chief executive Steve Ballmer said Tuesday.

Ballmer made the comments at a luncheon event in Madrid, a Microsoft spokeswoman confirmed late Tuesday. She added that the latest R&D figure, though higher than one previously given by Ballmer, is in line with predictions from Wall Street analysts.

Earlier this year, Ballmer said that Microsoft would spend $6.2 billion in R&D, but the company did not put any guarantees or caps on that investment.

Ballmer and other executives have said the company is determined to catch up and even surpass rivals Google and Yahoo in online advertising revenues. Executives have said a good chunk of the investment will go into building out Microsoft's online services, branded Windows Live, and content on Microsoft's MSN site.

Other recent new product investments for the company have been in the online digital media market. Microsoft has said it will launch a rival to Apple's iPod, the Zune media player, in November, teaming it with an online music sales and subscription service called Zune Marketplace. Microsoft also plans to release media player accessories.

Microsoft is scheduled to report its first-quarter earnings for fiscal 2007 on Thursday, 26 October 2006.