Microsoft shifts focus from Windows to productivity products, cloud

SEATTLE – Microsoft is undergoing a massive reorganization of its engineering teams, the company announced Thursday, one of the largest restructurings since CEO Satya Nadella took the helm four years ago.

The shifts will de-emphasize the company’s flagship operating software, Windows, and put the spotlight on its growing businesses: Office productivity software, cloud technology and artificial intelligence.

Windows devices chief and longtime Microsoft executive Terry Myerson will leave the company as part of the moves. Myerson, who joined Microsoft after it bought his internet startup in 1996, will stay on for a few months to help with the transition.

Reorganizations are common within Microsoft’s huge ranks, but this may be the largest under Nadella. His shift in priorities mirrors the company’s financial results: Its Azure cloud-computing division grew 98 percent during the second quarter, and Office 365 revenue increased 41 percent.

Windows, on the other hand, saw minimal increases. The division – which, for accounting purposes, also includes Xbox and Surface revenue – grew just 2 percent during the most recent quarter.

The reorg will create two new engineering teams, largely pieced together from what is now the Windows and Devices division headed by Myerson.

Rajesh Jha, who now leads parts of the Office team, will oversee a group focused on devices, as well as on the expansion of software such as Windows and Office to follow users wherever they go. As connected devices make their way further into homes and work, Microsoft plans to be there.

Jha has been at the company for 28 years and led much of the team that is credited with the success of the Office 365 cloud subscription service.

Cloud boss Scott Guthrie will helm a second engineering group focused on cloud and AI technology. That includes Azure, where boss Jason Zander has been promoted to executive vice president.

Guthrie’s team will also oversee Windows Server and mixed reality, including Hololens.

The reorg puts front-and-center two of Microsoft’s most successful businesses in recent years. Microsoft’s cloud computing division, Azure, has proved one of its fastest growing businesses, and its Office 365 subscription service is racking up users quicker than many expected.

A third engineering group focusing on AI and research, led by Harry Shum will remain, though some pieces have been siphoned to Guthrie’s newly created team.

Microsoft stock was up $2.22, or 2.5% at $91.61 in early afternoon trading Thursday in New York.

The reorganization puts front-and-center two of Microsoft’s most successful businesses in recent years. Microsoft’s cloud computing division, Azure, has been one of its fastest growing businesses, and its Office 365 subscription service is attracting users quicker than many expected.