Microsoft streamlines divisions to compete better

Reed Stevenson

SEATTLE: Microsoft Corp. streamlined its businesses into three divisions on Tuesday to compete more effectively against Google Inc., Oracle Corp. and the Linux operating system.

The three divisions are aligned along Microsoft's core Windows product and its MSN Internet arm that is going head-to-head with Web search leader Google, a business division that will focus on Office and other business software products, and a division that will include the company's Xbox, consumer and device businesses. Each is headed by its own president.

The newly formed Platform Products and Services division will be led by co-presidents Jim Allchin and Kevin Johnson, who most recently served as Microsoft's top sales executive. Allchin, a 15-year company veteran, will retire at the end of 2006, Microsoft said.

Jeff Raikes, currently in charge of the division that includes Office and other business software products, will become president of the Business Division.

Robbie Bach, responsible for launching the Microsoft's Xbox video game business, will become president of the Entertainment and Devices division that will also include the company's cell phone software business.

None of the executives was available for comment.

The changes come as Redmond, Washington-based Microsoft faces threats from competitors that are delivering software-based services over the Web, such as Google. Longtime business software rival Oracle has been on an acquisition spree while Linux remains a threat in the server software market.

"Our goal in making these changes is to enable Microsoft to achieve greater agility in managing the incredible growth ahead and executing our software-based services strategy," Microsoft Chief Executive Steve Ballmer wrote in a company-wide e-mail.

Microsoft's seven divisions, which Ballmer implemented in 2002 to bring more transparency to the company's financial reporting, will be consolidated into the three new groups. Microsoft said, however, that it would continue to report financial results for the product-focused seven businesses.

MORE IN STORE?

The changes reflect an effort by Ballmer to put in more professional managers in top positions as Microsoft evolves into a large, mature company with nearly 60,000 employees, said Matt Rosoff, an analyst at independent research firm Directions on Microsoft based in Kirkland, Washington.

"There's room for improvement in areas such as clear product roadmaps and delivering timely updates," especially in the Windows division, Rosoff said.

As software becomes more complex to deliver and deploy, Microsoft is shifting toward delivering product updates and software-based services over the Web.

"I think they thought of putting in a more sales-oriented person (Johnson) who talks to customers all the time and really knows what they're asking for," Rosoff said.

Microsoft is preparing to launch the latest upgrade to Windows, Windows Vista, next year, five years after the release of the current version, Windows XP.

More personnel changes in lower ranks were likely to happen as the impact of the restructuring trickles through the company, Rosoff said. Directions on Microsoft is well-known for decoding Microsoft's internal structure and publishing an organization chart of the company.

Eric Rudder, a senior vice president with an engineering background, will now report to Microsoft Chairman Bill Gates in a role focused on "advanced development efforts as well as overall technical strategy," Microsoft said.

Ray Ozzie, who recently joined Microsoft through its acquisition of Groove Networks, will continue to be Chief Technology Officer and be responsible for Microsoft's software-based services strategy across the three groups.