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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

April 5, 2007 at 9:39 AM

Microsoft’s Bellevue expansion: The key question

Microsoft is announcing today that it will expand its presence in Bellevue, apparently by leasing additional space from developer Schnitzer Northwest.

That’s nice for Bellevue, but I wonder if that means Microsoft will cut back on its expansion plans in Redmond. (See the updates below).

Leasing space in Bellevue is less of a long-term commitment to the region than adding new buildings to the headquarters campus.

It’s also less newsworthy if the company is merely leasing another block of space. The company already leases chunks of buildings all over the place and shifts them around as space needs change. That’s why it’s a bigger deal for the region and its future growth when the company buys or builds more space of its own.

The lease plan could also signal that Microsoft is taking steps to appease Wall Street, which is furious that the stock hasn’t had the expected Vista pop. Investors have been focusing on the spending plans of Google. Could Microsoft be tapering back expenses?

Maybe Microsoft’s opting to lease, instead of build, so it can devote its resources to data centers and other artillery needed in the war on Google.

Or maybe I’m barking up the wrong tree and they’ll announce something completely different this morning.

As for the Bellevue plan, I wonder if they’ll be talking about the offices of the SMB group, the former Great Plains/Navision unit that’s now called Small and Midmarket Solutions.

I met with VPs in the group a few weeks ago and they were already talking about their offices in Bellevue.

Bottom line: Let’s see if they’re talking about new Microsoft growth, or merely shifting things around and changing previously announced expansion plans. Issaquah can tell you how that feels.

UPDATE: The company said the Bellevue space is in addition to the construction in Redmond. We’ll have more details on what’s happening with headcount later, but here’s Ben’s first take.

UPDATE 2: Okay, I have clarification. The Bellevue leases will create enough room to accomodate an additional 4,000 employees. That’s in addition to the Redmond project, which is creating space for up to 12,000 more employees.

Altogether the projects are creating additional space that could accommodate 16,000 employees by 2009. However, that does not mean the company is planning to add that many more employees, spokesman Lou Gellos said.

“That is not new hires,” he said. “It’s a combination of planning for what new hires come and more importantly relieving some of the space crunch.”

That means occupants of those new offices will include employees who are now doubled up – even tripled up – at Microsoft’s current facilities.

Microsoft will simultaneously cut back on other leases it has in the area and consolidate at the Schnitzer buildings.

So it’s nice for Bellevue, nice for employees getting new digs and especially nice for Schnitzer.

But I’m still a little concerned that Microsoft’s preparing for the next wave of growth with leases instead of buildings. Maybe it’s for accounting purposes, but leases aren’t as permanent.

Comments | Topics: Microsoft

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