Microsoft Realigns Units, Focus

Five years after a federal judge tried and failed to force Microsoft to split into several pieces, the company has decided to do the job itself-though the pieces will remain under the same roof.

Five years after a federal judge tried and failed to force Microsoft Corp. to split into several pieces, the company has decided to do the job itself—though the pieces will remain under the same roof.

Microsoft last week announced a major reorganization into three divisions designed to streamline decision making and speed to market. The Redmond, Wash., company will realign several existing units into three core divisions—Platform Products & Services, Business, and Entertainment & Devices—that better represent Microsofts goals, said Microsoft CEO Steve Ballmer.

Despite the reorganization, Microsofts appeal to its developer base is unlikely to change, as the company views developers as a key constituency. However, some industry observers say that the new emphasis placed on the MSN online service is an indication that Microsoft officials have significant plans to use MSN as a development platform.

"This means MSN gets a bigger role," said Joe Wilcox, a Washington-based analyst with Jupitermedia Corp.s JupiterResearch. "It looks like Microsoft is taking Google [Inc.], [Inc.] and all those guys talking about Web 2.0 very seriously. I see MSN emerging as another development platform with a significant emphasis on services. And by aligning it with Windows, there will be services aligned with the core asset and protecting it."

One key developer-related change will be that Eric Rudder, Microsofts senior vice president of Servers and Tools, will now be working directly for Bill Gates, company chairman and chief software architect. Officials said Rudder will focus on some of Microsofts leading advanced development efforts as well as overall strategy. Rudder will assume his new role following the launch of Visual Studio 2005 and SQL Server 2005 in November.

Some observers wondered about the logic of the changes. "The overall plan makes sense, as does [Ray] Ozzies role. [But] I am still digesting why MSN would be part of the Platform group and not the Entertainment division. I can think of some good reasons for it but can also come up with strong counterarguments," said Andrew Brust, chief of new technology at Citigate Hudson, in New York. "I also hope that these new delineations will not impede the developer group from working closely with the MBS [Microsoft Business Solutions] and Office teams. Any dilution there would be most unfortunate, especially with Oracle [Corp.] becoming such a formidable CRM [customer relationship management] and ERP [enterprise resource planning] player."

/zimages/2/28571.gifClick here to read about Ray Ozzies expanded role in Redmond.

Longtime Microsoft watchers say that the companys moves show that market forces, not regulators, should dictate strategy changes.

"New competitors like Google and Yahoo [Inc.] are doing what regulators couldnt and shouldnt," said Jonathan Zuck, president of the Washington-based Association for Competitive Technology, an organization that lobbied for Microsoft in the trial.

Under the reorganization, the new Microsoft Platform Products & Services Division will be led by Kevin Johnson and Jim Allchin as co-presidents; Jeff Raikes will be president of the Microsoft Business Division; and Robbie Bach will be president of the Microsoft Entertainment & Devices Division.

Microsoft also announced that Allchin, former group vice president of platforms, will retire at the end of next year, after Windows Vista ships, and that Ozzie, one of the companys chief technology officers, will assume responsibility for helping drive the companys software-based services strategy and execution across all three divisions.

"Competition is getting tough, and Microsoft is evolving to become more nimble," Zuck said. "Its doing what good companies do: evolve to meet new challenges."

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