No matter what company officials have done since the Microsoft third-quarter earnings call in April, they haven't been able to undo the damage that was done by refusing to detail the way in which they planned to spend $2.6 billion in planned capital expenditures next year.

On May 31, the company decided to pull out its big guns, sending Microsoft CEO Steve Ballmer and Chief Financial Officer Chris Liddell to Wall Street in an attempt to assuage analysts' concerns. Ballmer explained Microsoft's decision to bet on long-term new businesses to analysts at the Sanford C. Bernstein Strategic Decisions Conference in New York on Wednesday morning.

Like Chief Advertising Strategist Yusuf Mehdi and Co-President of Microsoft's Platforms Division Kevin Johnson – both of whom have made recent Wall Street appearances to defend Microsoft's spending plans – Ballmer reiterated that Microsoft is planning to invest in its core businesses, new markets and software as a service in the coming years. MSN/Windows Live spending will account for about $500 million of Microsoft's expenditures in the coming year, officials have said recently.

Ballmer told attendees to expect Microsoft to continue its stepped-up investment pace over the next couple of years. While its operating expenses "may moderate somewhat," Ballmer said, they still will increase for the foreseeable future. Meanwhile, Microsoft's stock compensation costs will level off, he added.

Ballmer also addressed head-on the criticism shared by many Wall Street analysts that Microsoft is continuing to hold onto too much cash.

"We have a first-class problem. We have a lot of cash," Ballmer told analysts. But because Microsoft's management and board "prefers things other than financial risks," Microsoft plans to continue to hold onto its $35 billion in cash reserves, Ballmer said.

But Microsoft isn't being stingy, Ballmer claimed, noting that since the company's fiscal 2001," Microsoft had returned $87 billion to its shareholders.

In explaining why Microsoft is gearing up to spend big in the next few years, Ballmer said that Microsoft's management, including Chairman Bill Gates, recently drew up a list of as many as 70 new technologies that could figure in Microsoft's plans in the next 10 years. He cited as one example digital reading and writing.

"To believe in the opportunities we believe in, you have to invest," Ballmer said. You need to make "big, bold bets."

"Twelve months ago, we were talking about innovative integration," Ballmer quipped. "But now we're talking about innovate to integrate."

Ballmer noted that Microsoft's cost structure is changing, given that revenue growth and margins on products like Xbox gaming consoles are different from "good old Windows." And Microsoft Consulting Services, another area Microsoft is growing rapidly, is one where cost of goods sold is much higher than software.

Ballmer noted that Microsoft's core businesses, such as Windows, Office and SQL Server, took years to deliver payback. While Microsoft plans to continue to nurture those businesses, it also will be looking to new big, adjacent and speculative markets for new acquisitions and investments, he said.

Among the "adjacent" markets the company is actively pursuing are security, management tools, storage management, development tools, business intelligence, enterprise search, unified communications and VoIP, he said. Among the "speculative" markets the company is investigating are healthcare, education and "e-science"/technical computing, he said. He cited Office Live, Microsoft's forthcoming Office software-service add-ons that are currently in beta, as an example of an investment that will take a few years to come to fruition but that could have substantial longer term payback.

Ballmer had little to say on Microsoft's competition with Google or its rollout plans for Windows Vista during his remarks on Wednesday. He deflected questions on both topics.

"People just don't understand how much great stuff we have coming," Ballmer concluded. "We need to better tell the story and to ship the stuff."