Update: Microsoft reorganizes; Allchin to retire in 2006

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

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A corporate user might start using the rival program in a PDA while on the road, and the technology could gradually creep into the organization, Gillen said. "One day the IT department wakes up and finds that half the sales force is using Goffice," he said.

Ted Schadler, an analyst at Forrester Research Inc., called the Microsoft reorganization a good move, saying it will help address problems of complexity in the company's sales organization and product development groups.

"When Ballmer organized the company into seven business groups, it was organized around products," Schadler said. "Organizing around products is fine if the products don't have the same customer. When the products have the same customer, it creates problems. Whose sales organization is it? Is it Windows Server? Tools? Client? They have shared sales responsibility."

Making decisions about the development of products also becomes difficult because of the interdependencies within the product groups, Schadler added. And because of the shared sales force, resources and product revenues, it's hard to know who is responsible for the success of each of the individual businesses, he said.

"When you're organized around markets, it's much easier to hold executives accountable," Schadler said.

One financial analyst, who asked not to be named, said he thought it was strange for Microsoft to appoint its former sales chief, Johnson, to head the new Platform Products & Services Division. But, he added, "I think a lot of times in those divisions, it's not necessarily the technologists they need, it's the leaders. They need to make sure things are executing. Kevin Johnson has executed in the field."

Rob Enderle, principal analyst at Enderle Group in San Jose, said the reorganization "solves a number of problems" for the company. He said Microsoft has been "dysfunctional of late" and "unable to get people to cooperate. They just haven't been working together."

Enderle added that Allchin's departure was expected to happen after the release of Windows Vista late next year. "That's why so much effort was put in to that product," he said.

Computerworld's Carol Sliwa contributed to this report.

Copyright © 2005 IDG Communications, Inc.

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