Microsoft changes to address issues

Share with others:


Print Email Read Later

NEW YORK -- Microsoft Corp. is reshuffling its business in an attempt to promote faster innovation and a sharper focus on devices and services. The move by the world's largest software maker comes amid lukewarm response to the latest version of its flagship Windows operating system and a steady decline in demand for PCs as people turn to tablets and other mobile gadgets.

CEO Steve Ballmer said in a memo to employees Thursday that the changes mean the company is "rallying behind a single strategy" and organizing by function. While it has been widely anticipated, it's too early to tell how well the reorganization will help Microsoft compete with more nimble rivals like Apple and Google.

"You don't make massive, sweeping changes like this unless something is wrong," said Colin Gillis, an analyst at BGC Financial, pointing to Wednesday's reports of declining PC shipments around the world.

Worldwide shipments of personal computers fell 11 percent in the April-June period, according to data from research firms Gartner and IDC. Gartner Inc. said the PC industry is now experiencing the longest decline in its history, as shipments dropped for the fifth consecutive quarter. Analysts have blamed a massive consumer migration to tablets and other mobile devices for the falloff. But many observers also believe Microsoft's Windows 8 operating system --which comes installed on most new PCs-- has turned consumers off.

The company's new divisions include engineering, marketing and business development. Microsoft named veteran executive Julie Larson-Green head of its devices and studios engineering group, overseeing hardware development, games, music and entertainment. She had been promoted in November to lead all Windows software and hardware engineering after Steven Sinofsky, the president of its Windows and Windows Live operations, left the company shortly after the launch of Windows 8.

Terry Myerson will lead Microsoft's operating systems and engineering group, namely Windows. Qi Lu will head applications and services.

Mr. Ballmer stressed the company's focus on "one Microsoft" in his memo. He said Microsoft will move forward operating as a cohesive company rather than a "collection of divisional strategies."

"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," Mr. Ballmer wrote.

The shake-up is being driven by competitive pressures as two of Microsoft's once much-smaller rivals, Apple and Google, have emerged as the technology trendsetters. In a world that increasingly revolves around mobile devices and Internet services, Microsoft has been scrambling to adapt to the upheaval. The company wants to ensure its relevance in the future while protecting the personal computer franchise that has always generated most of its revenue.

The reorganization could be Mr. Ballmer's attempt at placating shareholders with a dramatic overhaul that appears to borrow elements of Apple's and Google's set-ups. The winnowing of Microsoft's disparate divisions suggests the company is trying to make its products work together more seamlessly, much like Apple has been doing since the late Steve Jobs returned as that company's CEO in the late 1990s.

At the same time, Mr. Ballmer appears determined to eliminate bureaucracy in hopes of making Microsoft operate more like a nimble startup able to quickly innovate -- a goal that Google CEO Larry Page set out to achieve when he took over leadership of that company two years ago.

Janney Capital Markets analyst Yun Kim said the reorganization helps align Microsoft's various divisions around its devices and services strategy, but he added that he's taking a "wait and see" approach.

BGC Financial's Gillis noted that major reorganizations "can serve as a negative distraction for months before potentially offering benefits."

Microsoft shares rose 98 cents, or 2.8 percent, to $35.69.

interact


Advertisement
Advertisement
Advertisement

You have 2 remaining free articles this month

Try unlimited digital access

If you are an existing subscriber,
link your account for free access. Start here

You’ve reached the limit of free articles this month.

To continue unlimited reading

If you are an existing subscriber,
link your account for free access. Start here