Microsoft CEO Steve Ballmer told an audience in Spain that the company will spend $7.5 billion on research and development in the current fiscal year, Reuters reported.

And, according to Bloomberg, Ballmer said: "I would estimate off the top of my head approximately half a billion of that will be spent in Europe.''

The R&D figure represents about a $1 billion increase over the $6.58 billion Microsoft spent in the 2006 fiscal year ended June 30.

In April, Microsoft projected R&D spending that turned out to be about $2.7 billion above expectations at the time. That caught investors by surprise and sent Microsoft shares on their biggest one-day dive in half a decade. The company's shares have since recovered and are up about 9 percent on the year.

Ballmer discussed the company's R&D spending in answer to a question at a business lunch in Madrid, Reuters said. Microsoft shares finished the day down a penny at $28.44 after trading as low as $28.17 earlier Tuesday.