Belluzzo Out of Microsoft

Industry partners and Microsoft Corp. insiders were not surprised by the announcement last week of the planned departure of President and Chief Operating Officer Rick Belluzzo, who will leave the software company as part of a restructuring.

Belluzzo, a former executive at two hardware companies, Silicon Graphics Inc. and Hewlett-Packard Co., was considered an odd choice when Microsoft CEO Steve Ballmer brought him on board in the fall of 1999.

"In his public appearances, it was apparent that he didnt know much [about software]," said a source close to Microsoft who requested anonymity. "The feeling was that he was a close personal friend of Ballmers and that Ballmer had let that influence him."

Belluzzos departure is part of a restructuring that partitions Microsoft into seven groups: Windows Client, Knowledge Worker, Server & Tools, Business Solutions, CE/Mobility, MSN and Home & Entertainment.

Officials said last week that Belluzzo will leave his posts May 1, "although he will continue to work at the company through September to ensure a smooth transition."

Microsoft insiders said that since Ballmer took the CEO reins from Chairman and Chief Software Architect Bill Gates in February last year, it has become apparent that there were two Microsofts: Gates "technogeeks" and Ballmers Harvard MBA management types. "More and more, Microsoft is Steves show. Look at all the housecleaning that has occurred under his reign as CEO," a source said.

Microsoft insiders said Belluzzo was held responsible for the fact that the rollout of Microsofts first hosted Web services, called .Net My Services, was delayed as executives scrambled to find a workable business model for them.

The lack of confidence in Belluzzos abilities was further evident when the responsibility for MSN and the wireless groups was shifted from him and as Ballmer insisted on more accountability for each group at its immediate leadership level, sources said.

Microsoft has no plans to hire a replacement for Belluzzo for either position, according to a spokeswoman.

Dwight Davis, an analyst for Summit Strategies Inc., in Seattle, said Belluzzo has been overshadowed by Gates and Ballmer. "It was also never clear to me exactly what his role as president was in addition to his function as COO," Davis said. "There certainly may be some merit to his desire to lead a company. He certainly didnt do so at Microsoft, and there was little likelihood of that changing any time soon."

Additional reporting by Mary Jo Foley, Baseline