Update: Microsoft reorganizes; Allchin to retire in 2006

The company will now have three divisions, each with its own president

Microsoft Corp. today unveiled a major realignment of its company structure into three new divisions, each of which will have its own president.

The software company also announced that Jim Allchin, currently group vice president of platforms, plans to retire at the end of 2006, following the launch of the next version of the Windows operating system, Windows Vista.

The three new divisions at Microsoft will be the Microsoft Platform Products & Services Division, which will be led by Kevin Johnson and Allchin as co-presidents; the Microsoft Business Division, with Jeff Raikes as president; and the Microsoft Entertainment & Devices Division, with Robbie Bach as president, according to a Microsoft statement.

Johnson is currently group vice president for worldwide sales, marketing and services, and he will be solely responsible for the Platform Products & Services Division after Allchin retires, according to Microsoft. Raikes presently holds the title of group vice president for information worker business, and Bach is currently senior vice president for the Home and Entertainment Division and chief Xbox officer at Microsoft.

In addition, Lotus Notes creator and Groove Networks Inc. founder Ray Ozzie, currently Microsoft's chief technology officer, will take responsibility for driving Microsoft's software-based services strategy as well as execution across the three new divisions, according to Microsoft.

Eric Rudder, senior vice president of servers and tools at Microsoft, will also be taking on a new role. He will work directly for Bill Gates, Microsoft's founder, chairman and chief software architect, focusing on the company's advanced development efforts as well as overall technical strategy. Rudder will transition into his new role after the launches of Visual Studio 2005 and SQL Server 2005, which are scheduled to take place Nov. 7.

In a statement, Microsoft CEO Steve Ballmer said the restructuring will help the company be more agile in the marketplace, to provide not only software but an expansion of Microsoft's services strategy.

"These changes are designed to align our business groups in a way that will enhance decision-making and speed of execution, as well as help us continue to deliver the types of products and services our customers want most," he said. "We see a new era of opportunity to provide greater value to our customers by weaving both software and services into forms that suit their needs."

Al Gillen, an analyst at IDC, said such reorganizations are a periodic, recurring event at Microsoft -- not unlike what happens at other corporations. He speculated that Rudder's shift to work directly with Gates on development efforts and overall technical strategy could be setting up a long-term ascension plan.

"My guess is that Bill Gates isn't going anywhere any time soon," Gillen said. "But it behooves any company to have a succession plan. That's not unusual at all."

Another twist that caught Gillen's attention was the linkage of MSN with the Windows client, server and tools groups that will fall under Johnson's Microsoft Platform Products & Services Division.

"That's probably where the action is. This is Microsoft gearing up to be better positioned against Google and Yahoo ... long term," Gillen said.

He said that while Google's and Yahoo's play is primarily in the consumer space today, "there's nothing to say a good environment that continues to provide more and more services could not someday compete on the desktop. Instead of Gmail, there could be Gmail and Goffice some day."

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