Steve Ballmer sent staff a reassuring email on Friday, after watching the company's share price take its biggest dive in a year. Microsoft shares fell from over $27 on Thursday to just over $24 on Friday - a year low.
Ballmer reiterated his belief that increasing capital spending by $2bn was necessary and useful.
He said spending on Xbox manufacturing was higher than expected, as well as spending on getting ready for Vista and Office 2007.
He said Microsoft was facing "new competitors, faster moving markets and new customer demands".
The email to staff, which also appeared on Bloomberg, did little to reassure the markets, although MS shares held steady on Monday. More from Seattle PI here.
In other news, Microsoft is paying $70m to end cases brought by several cities in California wanting refunds because Microsoft overcharged them for software.
Cities including Los Angeles, San Francisco, Santa Clara, and San Mateo are getting the money in vouchers which can be traded in for various computer products, not just Microsoft gear. ®