July 12, 2013 in Business

Microsoft initiates reboot

Software giant undergoing major reorganization
Michael Liedtke Associated Press
 
Associated Press photo

Microsoft CEO Steve Ballmer is reshuffling the company to promote faster innovation and sharpen focus.
(Full-size photo)

SAN FRANCISCO – Microsoft Corp. has decided its entire business needs a new operating system.

CEO Steve Ballmer is restructuring the company to cope with a quickening pace of technological change that has left the world’s largest software maker a step behind its two biggest rivals, Apple and Google.

In an effort to catch up, Microsoft is dismantling an organizational structure that separated the company into sometimes disjointed divisions and hatching a more cohesive product line-up. The new setup revolves around software, devices and services connecting those devices to applications stored in remote data centers – a concept that has become known as “cloud computing.”

The move comes amid a lukewarm response to the latest version of Microsoft’s flagship Windows operating system and a steady decline in demand for personal computers as people increasingly rely on more convenient smartphones and tablets.

If things pan out the way Ballmer envisions, the shake-up announced Thursday will foster more rapid innovation and sharpen the company’s focus on countering the threat posed by mobile devices running on software made by Apple and Google while laptop and desktop computers powered by Windows lose their luster. He is hoping a more closely-knit organization making the software and services that run smartphones, tablets, the Xbox video game console and, yes, PCs will re-establish Microsoft’s reputation as “a company that helps people get stuff done.”

“We are ready to take Microsoft in bold new directions,” Ballmer told analysts and reporters during a conference call.

Ballmer, 57, can’t afford to lose his way now. If he does, Microsoft could be even further eclipsed by rivals. That, in turn, could disillusion investors already exasperated with the lackluster performance of Microsoft’s stock since Ballmer succeeded his close friend, company co-founder Bill Gates, as CEO 13 years ago.

During Ballmer’s reign, Microsoft’s stock has slipped by nearly 40 percent even as the company’s annual revenue has roughly quadrupled from $20 billion to nearly $80 billion. The bellwether Standard & Poor’s 500 has climbed by 14 percent during the same time while Apple’s stock price is nearly 17 times higher.

BGC Financial analyst Colin Gillis views the changes as Ballmer’s tacit acknowledgement that Microsoft had become bogged down in bureaucracy and second-guessing – and an admission that there was too much internal strife as various factions formed to protect their turf.

Most of Microsoft’s key executives will remain in positions of power at the Redmond, Wash., company although with new roles and more defined responsibilities. The company’s new divisions include engineering, marketing and business development.

Terry Myerson, who had been overseeing Windows Phone, will lead Microsoft’s operating systems and engineering group, namely Windows. Qi Lu, who had been overseeing Bing, will head applications and services.

Microsoft named veteran executive Julie Larson-Green head of its devices and studios engineering group, which will be in charge of 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.

Microsoft hopes to mimic the success of its rivals in a world that increasingly revolves around mobile devices and Internet services.

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