As Microsoft's shares plummeted last week, CEO Steve Ballmer issued a memo to employees to provide "some context" for the increased spending forecast that caused the negative response on Wall Street. At one point, he called it "a lesson that the entire leadership team at Microsoft will learn from."

Bloomberg News initially reported on the memo this morning, and I was able to get a copy, as well. Read on for a section of the memo in which Ballmer explains the spending plan and addresses the stock market's reaction:

Throughout our history, Microsoft has won by making big, bold bets. We've always taken a long-term approach, striving to solve the hardest problems in computing and working to realize huge new opportunities in vast new markets through investments in innovation across the broad spectrum of human endeavor.

I believe that now is not the time to scale back the scope of our ambition or the scale of our investment. While our opportunities are greater than ever, we also face new competitors, faster-moving markets and new customer demands.

So what accounts for the negative reaction that we've seen from analysts and investors?

To ensure that we win where we see opportunities and can respond with speed when the marketplace changes, we made the decision to ramp up investments during Q3 in a number of key areas. In addition, the cost of producing Xbox 360 consoles was higher than expected, while at the same time we decided to manufacture and sell as many consoles as possible to build on our lead in the race to be number one in the video game business.

These investments will continue. As a result, we also provided guidance for Q4 of this fiscal year and for FY07 that indicates our willingness to be aggressive when making investments where they are strategic for future growth.

The bottom-line result of these investments created a shift in our near-term profitability that was a surprise. The change in our stock price reflects this.

But I've never been more confident that we are making the right investments. In addition to adding a third manufacturing facility to enable us to meet market demand for Xbox 360, we are investing heavily in our services strategy; in our readiness programs for the launch of Windows Vista, Office 2007 and other products in the pipeline; and in a number of other areas where we see opportunities for rapid growth. We've accelerated the pace of our hiring and increased spending to ensure that we continue to bring the world's brightest minds to Microsoft.

When you look across the array of businesses we are building, it is clear that we are in a position that no other company can match. We have made and we continue to make the investments needed to ensure strong growth for our core businesses, while delivering the innovation that is essential to establishing a leadership position where we see opportunities in businesses such as entertainment, mobile devices, search and software-based Internet services.