Getting Ready for Yahoo? Microsoft Reshuffles Execs in Key Areas

Microsoft has announced one of its most sweeping executive reorganizations in years, promoting 14 and announcing the departure of three. Many of the changes are aimed at the online and mobile units, where the overlap with potential acquisition target Yahoo is the greatest.

Some of the changes had been rumored earlier in the week and the first shoe to drop was disclosed early Thursday when Vodafone announced it had hired away the longtime head of Microsoft’s mobile business, Pieter Knook, to run its new mobile Web venture.

Later in the day, Microsoft disclosed the rest of the changes, saying the new organizational appointments “match leadership talent to expanding business priorities.”

Growing the Leadership Team

“Along with attracting world-class talent from outside the company, one of my top priorities is growing Microsoft’s existing leadership team,” said CEO Steve Ballmer. “Each of these executives will play a critical role in leading Microsoft into the future.”

Common threads among those promoted, Ballmer added, include their ability to “think strategically on a global scale” and “their significant contributions to the company.”

As expected, Microsoft named Andy Lees to take over Knook’s role in the mobile unit. Lees had been in charge of the server and tools marketing and solutions group.

In addition to Knook, Microsoft confirmed two other top executives are leaving the company. Michael Sievert, the corporate vice president responsible for Windows product marketing — and the person charged with the launch of Windows Vista last year — is exiting Microsoft immediately. Sievert is leaving, Microsoft said, to “pursue other interests,” which reportedly include possibly starting his own business.

Also leaving his position — though not immediately — is Steve Berkowitz, the onetime CEO of search engine Ask.com. Berkowitz’s hiring at Microsoft in the spring of 2006 was hailed as a major coup for the company’s online services business. That business has become profitable since Berkowitz arrived but continues to struggle to make up ground against Google. Berkowitz will exit his post in August, but Microsoft said he would remain affiliated with the company.

Yahoo Road Map?

The changes come as Microsoft prepares to deal with the possible integration of Yahoo, assuming it can get shareholders to agree to its current US$31 per share offer — worth a total of $44.6 billion — or can convince the Yahoo board to agree to an offer with an even larger price tag.

Though any such integration would likely be well in the future and come only after regulatory scrutiny of such a merger, many of the changes do impact the online services areas where the Yahoo buy would fit.

For instance, Microsoft promoted Satya Nadella to senior vice president of search, portals and advertising, a move that could position him to oversee the technical side of an expanded online unit where Yahoo would most logically fit.

Also promoted to senior vice president was Bill Veghte, who will oversee the online services and Windows business group, with responsibility for marketing the company’s Windows Live online services, and S. Somasegar, who will oversee the company’s developer programs that work with internal and third-party software builders.

Microsoft may be laying the groundwork for using a vastly expanded online unit to improve and expand its delivery of productivity applications and other software over the Web, said Yankee Group Research Fellow Laura DiDio.

While Windows Live has had some success, Google has demonstrated with its Apps family of Web-based tools that users will adopt online software, DiDio told the E-Commerce Times. Microsoft may be looking to better align the software development and Web businesses in a way that enables innovation to get ahead of Google.

“Google has shown that targeting end users is a way to gain traction and with Yahoo Microsoft can target a whole new, younger audience,” she added. “If nothing else, Microsoft is creating fresh strategic leadership.”

More to Come

Also promoted to senior vice president positions were three executives who will team to help keep the Office suite the top information worker productivity software platform. Chris Capossela was named senior vice president of the information worker product management group; Kurt DelBene was bumped to senior vice president of the Office business platform group; and Antoine Leblond is now senior vice president of the Office productivity applications group.

Seven others were appointed to the less-senior position of corporate vice president.

The changes also come as the company is preparing for the departure of its cofounder and the longtime face of the company. Chairman Bill Gates will step back from daily operations at the software company later this year, with Ray Ozzie stepping up to become chief software architect. There has been speculation as well that CEO Steve Ballmer, who has held that role since 2000, is close to the end of his run at the company, though Microsoft may want to avoid additional disruption at such a critical time.

Some of the changes come even as Vista has performed well in recent quarters, helping drive strong earnings that may be one of the reasons why Microsoft feels emboldened enough to attempt the Yahoo takeover, David Mitchell, a senior vice president for IT research at Ovum, told the E-Commerce Times.

“The recent surge in sales of Vista and Office show that Microsoft has done a better job of building products that appeal to end users rather than the people who make IT buying decisions,” Mitchell said. Microsoft may be seeking to spread some of the talent that has helped make that possible into areas of the business where it needs more of a boost.

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