Microsoft announces major reorganization, trying to become more nimble

Microsoft will divide itself into three business divisions, each with its own president, trying to make its operational units more autonomous and its overall business more agile as it competes with the likes of Google and other smaller rivals.

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The changes, announced Tuesday morning, also include the planned retirement of top Windows executive Jim Allchin, who oversees the company's most profitable product as platforms group vice president. Allchin will retire after the release of Windows Vista, the next version of the PC operating system, at the end of 2006, the company said.

In addition, the company said it would give a broader role across the three business units to Ray Ozzie, the software pioneer who joined Microsoft as a chief technical officer as part of its acquisition of Groove Networks.

Steve Ballmer, Microsoft's chief executive, said Allchin's decision to retire was the "precipitating event" that led to the structural changes. But he cited the broader need to make the changes regardless of Allchin's move.

"We can move certain decisions which would have had to bubble all the way to me," Ballmer said in an interview with the Seattle Post-Intelligencer. "We're putting leaders in place who can drive those closer to the action in many cases."

The company, which marks its 30th anniversary this year, has been criticized by some employees and others as becoming too interdependent and bureaucratic as it has matured and grown larger. Microsoft currently employs nearly 60,000 people worldwide, including 29,000 people in the Seattle region.

The changes separate the company into the new Platform Products & Services Division, to include Windows, server products and MSN; the Microsoft Business Division, including the company's Office and business software groups; and a Microsoft Entertainment & Devices Division, comprising the current Mobile and Embedded Devices and Home and Entertainment divisions, including the Xbox video-game console.

President of the Microsoft Business Division will be Jeff Raikes, who has overseen Office and related areas as group vice president of the company's Information Worker division. Allchin and Microsoft sales chief Kevin Johnson will lead the Platform Products & Services Division as co-presidents until Allchin retires. Robbie Bach, currently senior vice president and chief Xbox officer, has been named president of Microsoft Entertainment & Devices Division

Ballmer said no layoffs are planned as part of the changes. He and Bill Gates, the company's chairman and chief software architect, will retain their current positions and roles, the Microsoft chief executive said.

In an e-mail to his team, Allchin said an unspecified "medical event" two-and-a-half years ago caused him "to take a step back and evaluate all my priorities." He added: "I am fine now, but I made a decision then to retire at the end of 2006."

"I know this announcement today may come as a surprise to some of you," Allchin wrote in the message. "Please put it in the right perspective though -- it's the right way to plan for succession. I'm not going away for quite some time. My intensity will not abate."

P-I reporter Todd Bishop can be reached at 206-448-8221 or toddbishop@seattlepi.com.

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