Microsoft's restructuring signals urgency
ANALYSIS: Microsoft's restructuring signals urgency
Byron Acohido, USA TODAY 12:12 p.m. EDT July 11, 2013
Divisional hierarchy devised by Bill Gates gets tossed
Company desperate to gain ground in Internet services and
mobile devices
Will reshuffling home-grown executives bring cohesiveness
to Microsoft's corporate strategy?
Stay tuned. That's the big unanswered question following
CEO Steve Ballmer's widely anticipated announcement today overhauling senior
management at the world's largest software company.
"We are rallying behind a single strategy as one
company — not a collection of divisional strategies," Ballmer wrote in a
companywide memo. "Although we will deliver multiple devices and services
to execute and monetize the strategy, the single core strategy will drive us to
set shared goals for everything we do. We will see our product line
holistically, not as a set of islands."
That message is not new — but the urgency has
intensified. Ballmer has been trying to reposition Microsoft as a "devices
and services" company, not just a software business.
That's because Microsoft continues to rake in huge
profits from software licenses sold to businesses for its Windows PC and server
operating system, and Office software suite. But it is losing ground in cool
alternatives centered around Internet cloud services and mobile devices, where
Amazon, Google and Apple dominate.
"Microsoft is sweating its lost market share,"
says Karl Volkman, CTO at consultancy SRV Network. "Microsoft does own the
business computing environment. However, since personal computers are no longer
the gadget of choice for the consumer market, Microsoft is floundering
there."
Ballmer today in effect jettisoned the longstanding
divisional hierarchy that took shape under his mentor, company co-founder Bill
Gates. Certain business functions, including finance, marketing and business
development, will move out of separate divisions and into their own company
wide groups with overarching senior execs.
Terry Myerson, who now heads up Windows Phone, will be
the executive vice president for operating system engineering, overseeing
Windows, Windows Phone and the Xbox operating system.
Satya Nadella, chief of Microsoft's server and tools
group, has been named executive vice president for cloud and enterprise
engineering, adding oversight of the company's data center network, known as
Global Foundation Services, to his responsibilities.
Julie Larson-Green, head of Windows engineering, will
rise to executive vice president of devices and studio engineering, including
the Microsoft Surface tablet, the Xbox hardware and mice and keyboards.
And Qi Lu, chief of Bing and online services, will become
executive vice president of apps and services engineering, adding most of
Microsoft Office plus Skype, the Lync communications service and the Yammer
business social network.
Notably, Kurt DelBene, president of the Microsoft Office
Division, will be retiring, and Rick Rashid, the longtime Microsoft Research
chief, will "move into a new role driving core OS innovation in our
operating systems group," according to Ballmer's memo.
And last week, Xbox chief, Don Mattrick, announced his
departure to become CEO of game maker Zynga.
Bill Smead, CEO of Smead Capital Management, notes that
the company's share price in the early 2000s was around, $53. In trading today
it rose about 1% to the $35 range following Ballmer's announcement. Last year,
Smead Capital divested a large block of Microsoft shares, which it had held for
years.
"Vision has been missing and no amount of
reshuffling can make up for a lack of vision," says Smead. "Without a
vision and a cause, reshuffling just buys time."
Rob Helm, managing vice president of research at
independent tech research firm Directions on Microsoft, says the key to
overhaul is whether Ballmer also modifies executive compensation to match the
emphasis on delivering cohesive products.
Despite good technical reviews for Windows Phone 8 and
the Surface Pro tablet, Microsoft's key new products haven't caught fire like
hardware and apps from Apple and Google. One reason is that it remains
difficult for a consumer or company technician to actually network those
devices together with other Microsoft's services.
"Basically, they're turning the company's top
leaders loose of everything except their technical responsibilities so they presumably
will be a lot more focused on getting ahead of the competition, and making the
company's software services work better together," says Helm.
"Microsoft really does want to deliver an Apple-like end-to-end
experience, but they're still a long way from it."
Al Hilwa, a software industry analyst at IDC, says
Ballmer is striving to reduce internal friction. On paper, at least, Microsoft
will move ahead with a single operating system division, meaning engineers and
product managers for Xbox, Windows Phone and the Surface Pro will collaborate
more effectively.
"This is about facing threats from competitors who
have fewer internal divisions and more focused efforts," Hilwa says.
"We saw minor reorganizations in Apple and Google in recent months, but
Microsoft has more divisions and moving parts and has not reorganized
significantly for many years."
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