Office, Windows Server chief Jeff Raikes to retire from Microsoft

Longtime senior exec will leave in September; vendor names Jupiter COO to replace him

Microsoft Corp. announced Thursday that Jeff Raikes, a longtime senior executive who currently is in charge of Office, Windows Server, SQL Server and other key products, will retire from the company in September.

Raikes, 49, will be replaced as president of Microsoft's business division by Stephen Elop, formerly chief operating officer at networking vendor Juniper Networks Inc. Microsoft said that Elop, 44, is scheduled to join the company at the end of the month and take over responsibility for Office, the Microsoft Business Solutions line of applications and the vendor's unified communications technologies.

Until his retirement becomes official, Raikes will continue to be a member of Microsoft's senior leadership team, the company said. A 26-year veteran at Microsoft, he has been most closely associated with its information worker unit, which includes the hugely profitable Office franchise.

Jeff Raikes

Jeff Raikes That unit now is part of the business division, which was expanded last year to include the unified communications operation and Microsoft's server and tools group, which is responsible for developing Windows Server, SQL Server, Visual Studio and other products.

Microsoft said that as part of Raikes' retirement, the latter group will be moved back out of the business division. Bob Muglia, senior vice president of the server and tools group, will begin reporting directly to CEO Steve Ballmer.

Raikes became president of the business division in September 2005 as part of a massive reorganization in which Microsoft shrank the number of its operating divisions from seven to three. That made Raikes one of a handful of potential successors to Ballmer, and his position within Microsoft seemed to be strengthened by the further reorganization moves involving the business division last year.

During Raikes' tenure as head of that division, its annual revenue has nearly doubled to more than $16 billion, according to the press release announcing his planned retirement.

That makes the impending departure of Raikes even more of a surprise, according to Rob Helm, an analyst at Directions on Microsoft in Kirkland, Wash.

"I didn't see this coming," Helm said via e-mail. "Jeff Raikes was No. 1 on my list of future CEOs for Microsoft."

"But it's not a bad time," Helm continued. "Raikes' division is in good shape, and the company's shareholders are happy. And Stephen Elop himself looks like CEO caliber, and comes from a competitor that Microsoft respects."

Today's announcement didn't specify why Raikes will be leaving the company. “Since 1981, I’ve had an incredible journey here at Microsoft," he said in a statement. "Given the success of our business and the depth of leadership we have in place today, the time is right for me to leave the MBD business in the capable hands of our new generation of leaders."

Ballmer said in a statement that Raikes has had an "incredible impact" during his career at Microsoft. Raikes and his management team at the business division "have delivered terrific results while reshaping and expanding the portfolio of our business-related products and services," Ballmer added.

Although Office has long been one of Microsoft's most profitable products, it does face both short- and longer-term challenges. For instance, Office 2007, while selling well, has yet to see its native document format, Office Open XML, gain acceptance as an ISO standard. Meanwhile, the rival Open Document Format for Office Applications used in open-source alternatives such as and IBM's Symphony has received the ISO's stamp of approval.

Office also faces new competition because of the emergence of less expensive Web-based applications such as Google Docs and ThinkFree. In addition, Microsoft is still trying to prove the soundness of its Software+Services strategy vs. the software-as-a-service offerings of other vendors.

Raikes will leave Microsoft extremely well compensated. According to a stock ownership change form that he submitted to the U.S. Securities and Exchange Commission last September, Raikes owned 5,422,313 shares of the software vendor's stock. That would be worth more than $186 million at Microsoft's current trading price.

Elop, a native of Canada, joined Jupiter as COO last January. Before that, he was president of field operations at Adobe Systems Inc. during 2005 and 2006. He joined Adobe following its acquisition of Macromedia Inc., where he was president and CEO.

Gregg Keizer contributed to this story.

Copyright © 2008 IDG Communications, Inc.

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