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July 11, 2013 at 6:20 AM

Microsoft announces sweeping reorganization [updated]

CEO Steve Ballmer (Photo from Microsoft)

CEO Steve Ballmer (Photo from Microsoft)

Update 12:56 p.m.:

In a conference call with reporters and analysts, Microsoft leaders offered more insight into the restructuring. Here are some highlights;

CEO Steve Ballmer said “we have no plans for layoffs” in the restructuring.

CFO Amy Hood said the new structure should not lead people to think that there will be less financial accountability. She said the company’s fourth quarter and fiscal year earnings report next week will follow the old financial reporting structure.

But then, moving foward, “as we go through the reorganization and realignment, we’ll investigate any needed changes over time,” Hood said.

From earlier:

In a sweeping reorganization designed to further Microsoft’s transformation into a devices-and-services company, CEO Steve Ballmer today realigned the company according to function, cutting in half the number of product divisions and centralizing other services such as marketing, finance and business development.

The company will now be organized around the functions of: engineering (including supply chain and datacenters), marketing, business development and evangelism, advanced strategy and research, finance, human resources, legal, and COO areas (including field, support, commercial operations and IT).

Within engineering, the four groups are: Operating Systems, Applications and Services, Cloud and Enterprise, Devices and Studios.

Missing from the list of senior leaders in the new world order is Office President Kurt DelBene, who will be retiring, Ballmer said in an email he sent to employees this morning.

A notable addition to the team is Mark Penn, former Clinton advisor who joined Microsoft in 2012 to work on strategic and special projects (such as the “Scroogled” ad campaign against Google).

Ballmer said the reorganization will help the company “innovate with greater speed, efficiency and capability” and “will enable us to execute even better on our strategy to deliver a family of devices and services that best empower people for the activities they value most and the enterprise extensions and services that are most valuable to business.”

The changes, which take effect immediately, are also designed to foster more collaboration — something Ballmer emphasized with the subject of his email: “One Microsoft.”

Here’s who’s going to be doing what. (The title of “president” will no longer be used for division heads. Instead, nearly all of the senior leadership team will hold the title of “executive vice president.”)

Julie Larson-Green, now executive vice president of Devices and Studios

Julie Larson-Green, now executive vice president of Devices and Studios

In the engineering groups:

  • Julie Larson-Green, formerly corporate vice president  of Windows engineering, is now executive vice president of  Devices and Studios. This group will handle all of Microsoft’s hardware development and supply chain, from Xbox to Surface to keyboards and mice. Larson-Green will also be in charge of all the studio experiences including games, music, video and other entertainment.
  • Qi Lu, now executive vice president of Applications and Services

    Qi Lu, now executive vice president of Applications and Services

  • Qi Lu, formerly president of Online Services division, is now executive vice president of Applications and Services. This group will handle Office, Lync, SharePoint, Skype, Yammer, Bing and MSN. It is charged with providing apps and services in core technologies in productivity, communication and search.

    Terry Myerson, now executive vice president of Operating Systems

    Terry Myerson, now executive vice president of Operating Systems

  • Terry Myerson, formerly corporate vice president of Windows Phone division, is now executive vice president of Operating Systems. That includes Windows, Windows Phone and Xbox — all the operating systems for consoles, mobile devices, PCs and back-end systems. It also includes the core cloud services for each of the operating systems.

    Satya Nadella, now executive vice president of Cloud and Enterprise

    Satya Nadella, now executive vice president of Cloud and Enterprise

  • Satya Nadella, formerly president of Server & Tools business, is now executive vice president of Cloud and Enterprise. This group will lead development of back-end and enterprise IT technologies such as SQL Server, Windows Azure and System Center. It will also lead datacenter development, construction and operation.

In the other groups (what Ballmer refers to as “disciplines”):

  • Tony Bates, formerly president of Skype, is now executive vice president of  business development and evangelism. He will focus on corporate strategy, Microsoft’s key partnerships (including those with Nokia, Yahoo and PC and device manufacturers), and reaching out to developers. His group will also work on business development efforts that were previously the work of the product divisions.
  • Lisa Brummel, executive vice president, continues to lead human resources.
  • Amy Hood, executive vice president, continues to be chief financial officer. She will also centralize all product group finance organizations.
  • Mark Penn, formerly corporate vice president in charge of strategic and special projects, is now executive vice president of advertising and strategy. He will “take a broad view of marketing strategy,” Ballmer said in his email, and, along with Tami Reller, lead the newly centralized advertising and media functions.
  • Tami Reller, former Windows chief marketing officer and chief financial officer, is now executive vice president of marketing. She will lead all marketing and will co-lead advertising and media with Penn.
  • Eric Rudder, fomer chief technical strategy officer, is now executive vice president of advanced strategy and research. He will lead Microsoft Research, as well as trustworthy computing.
  • Brad Smith continues as executive vice president and general counsel.
  • Kirill Tatarinov, former president of Microsoft Business Solutions, is now executive vice president of Microsoft Business Solutions. This small division has mainly been responsible for Dynamics, Microsoft’s customer relationship management and enterprise resource planning offerings. Tatarinov will continue to run Dynamics as is, and “we will keep Dynamics separate as it continues to need special focus and represents significant opportunity,” Ballmer said in his email, adding that Tatarinov’s product leaders will be dotted line reports to Lu, while his marketing leader will a dotted line report to Reller and his sales leader a dotted line report to the COO group.
  • Kevin Turner will continue as chief operating officer, focusing on worldwide sales, field marketing, services, support, and stores as well as IT, licensing and commercial operations.

Also, Rick Rashid, current head of Microsoft Research, will move into a new role “driving core OS innovation in our operating systems group,” Ballmer said in the email.

Craig Mundie, senior advisor to the CEO, will be working on a special project for Ballmer through the end of this year, and in 2014 will work as a consultant until his previously announced retirement at the end of that year.

Ballmer, in his email, also outlined how people in the company are expected to work together in this new structure:

Process wise, each major initiative of the company (product or high-value scenario) will have a team that spans groups to ensure we succeed against our goals. Our strategy will drive what initiatives we agree and commit to at my staff meetings. Most disciplines and product groups will have a core that delivers key technology or services and then a piece that lines up with the initiatives. Each major initiative will have a champion who will be a direct report to me or one of my direct reports. The champion will organize to drive a cross-company team for success, but my whole staff will have commitment to the initiative’s success.

Microsoft shares rose this morning after the announcement. It was trading mid-morning at $35.42, up 72 cents.

This post will be updated with more information as the day unfolds.

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