Kara Swisher

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“One Microsoft”: Ballmer Finally Announces “Far-Reaching Realignment” Around Devices and Services

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Asa Mathat/AllThingsD.com

Microsoft announced today what CEO Steve Ballmer is calling a “far-reaching realignment of the company that will enable us to innovate with greater speed, efficiency and capability in a fast changing world.”

In a memo to employees titled, “One Microsoft,” Ballmer wrote, “we are rallying behind a single strategy as one company — not a collection of divisional strategies” and that the changes “will enable us to execute even better on our strategy to deliver a family of devices and services that best empower people for the activities they value most and the enterprise extensions and services that are most valuable to business.”

In another strategy memo, titled “Transforming Our Company,” Ballmer noted, “as the times change, so must our company.”

Indeed, as AllThingsD reported several weeks ago, the Redmond, Wash., software giant has launched a drastic restructuring, one that this site said it would do today.

Ballmer’s memo, as well as the strategy memo that the company also released, was heavy with talk of “vision,” “potential” and “coherence.” It also said Microsoft’s “strategy will focus on creating a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value most.”

In practice, that means a major shift in management, including eliminating all of the company’s many unit president titles, changing them all to executive vice presidents, and requiring more collaboration across the new divisions. “We will see our product line holistically, not as a set of islands,” wrote Ballmer. “All parts of the company will share and contribute to the success of core offerings, like Windows, Windows Phone, Xbox, Surface, Office 365 and our EA offer, Bing, Skype, Dynamics, Azure and our servers.”

Ballmer outlined new organization by functions: Engineering, Marketing, Business Development and Evangelism, Advanced Strategy and Research, Finance, HR, Legal, and COO.

The four engineering units — Operating Systems, Applications and Services, Cloud and Enterprise, and Devices and Studios — are key parts of the new set-up and are headed by a group of current top execs, in the configuration that AllThingsD has described in its previous reports.

Specifically, Windows Phone head Terry Myerson will head OS, which includes the flagship Windows, as well as Xbox software and systems; Windows co-head Julie Larson-Green will be in charge of all hardware development, including Surface and Xbox, as well as all games, music, video and other entertainment; Online Services head Qi Lu will run a range of productivity, communication and search apps and services; and Servers and Tools head Satya Nadella will be in charge of cloud, including data center, database and enterprise IT and development tools.

Perhaps the most interesting appointment is that of Skype president Tony Bates, who will lead the Business Development and Evangelism group, focusing on business development, corporate strategy and on key partnerships with companies like Yahoo and Nokia, as well as evangelism of Microsoft products and developer outreach.

In addition, current Business Solutions head Kirill Tatarinov will continue to run a similar unit, now called Dynamics, although his product, marketing and sales functions will be centralized; CTO Eric Rudder will lead an Advanced Strategy and Research group; Windows co-head Tami Reller will head all marketing across the country and work with marketing strategy leader Mark Penn on centralized advertising and media functions; COO Kevin Turner will continue to lead worldwide sales, as well as other areas, as before; CFO Amy Hood will be in charge of newly centralized finance orgs; and both legal head Brad Smith and HR head Lisa Brummel will remain in their same jobs.

Microsoft Office president Kurt DelBene will retire, while senior advisor Craig Mundie is stepping down from the senior leadership team to do an unspecified special project for Ballmer. In an important move, Microsoft Research head Rick Rashid will have a new role related to OS innovation.

Ballmer said the new structure will depend on a very coordinated process across Microsoft, perhaps the most difficult — and worrisome — aspect of the new org, given Microsoft’s siloed history and legendary politics.

“Collaborative doesn’t just mean ‘easy to get along with,’” wrote Ballmer. “Collaboration means the ability to coordinate effectively, within and among teams, to get results, build better products faster, and drive customer and shareholder value.”

“Unity” is now Ballmer’s war cry, which he has called: “One Microsoft all the time.”

In that, in the strategy statement, he sounded more like the leader of a highly integrated company like Apple:

“We will strive for a single experience for everything in a person’s life that matters. One experience, one company, one set of learnings, one set of apps, and one personal library of entertainment, photos and information everywhere. One store for everything. Microsoft has the clear opportunity to offer consumers a unified experience across all aspects of their life, whether the screen is a small wearable, a phone, a tablet, an 85-inch display or other screens and devices we have not yet even imagined.”

Ballmer, who will address the company’s employees at a Town Hall meeting at 10 am PT today, concluded in his letter to employees: “Let’s go.”

Another interesting part of the restructuring is the help and advice that Ballmer has gotten from longtime colleague Alan Mulally, CEO of Ford. Insiders said Ballmer has told them he has tapped the much-respected exec, who has been adept at turnarounds at big organizations, for ideas about how to structure Microsoft for the years ahead.

Lastly, all this change will eventually mean a new financial reporting structure, said several sources. And Microsoft has indeed been contemplating mashing up all the divisions — which had previously reported their financial performance separately — into a different version of its current P&L. This would be a big deal to Wall Street and investors if it happened, since it could shield the company from complaints about its money-losing units, like Bing search, which are still integral to the company. It could also make its finances less transparent. But any such changes, sources cautioned, could take some time, and could require regulatory approvals.

But it would also give even more control over the company to Ballmer, who does not seem to have answered the increasingly interesting question of who will eventually replace him. The new reorg does not seem to point to any one person as a clear heir apparent.

Yet, that is.


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