Microsoft restructures to five divisions

Microsoft has reorganised into five new divisions focused on customer groups instead of products, a move that had been rumoured for several months and that, according to several analysts, might be motivated by the US Government's antitrust case against the company.

If Microsoft is going to succeed "we need to reinvent ourselves to be able to get done all we think we're capable of for our customers over the next 10 (to) 15 years," Microsoft president Steve Ballmer said in a conference call. Three key aspects of the reinvention are: renewing the corporate vision, making the business units parallel customer segments and staying focused on customers, he said.

Microsoft's vision has been "a computer on every desk, in every home," Ballmer said. While that remains a legitimate goal, Microsoft is broadening its vision to incorporate the Internet and all types of devices spawned by networking technology, Ballmer said.

Under the reorganisation, new business divisions will have their own development and marketing teams responsible for a particular customer segment.

The new divisions are:

-- Business and enterprise, targeted toward software for the information technology customers-- Consumer Windows, focusing on Windows development-- Business productivity, targeting the "knowledge worker," that is, people who use computers and electronic devices for work-- Developer group-- Consumer and commerce, focusing on electronic commerceA new home and retail products division, separate from the business divisions, will focus on games, input devices and Microsoft's reference software.

In addition, the company announced a new business leadership team that will be a subset of the executive staff and will replace the executive committee formed in December 1996 as the most senior-level decision-making group. The team will meet with Bill Gates, chairman and CEO, once a month to "ensure the company is on track with its vision, planning and processes, and that cross-company issues are elevated and resolved," the company said in a statement.

In a conference call, Gates and Ballmer said the reorganisation had nothing to do with the proposal the company submitted to the government last week to settle its antitrust lawsuit.

"There's certainly no breakup of the company into smaller companies that I would find acceptable and we're certainly not near anywhere thinking of that," said Ballmer.

They also declined to talk about the settlement talks, which are scheduled to continue today, and about reports that the company is considering licensing Windows source code or going to an open source model. It would be "inappropriate to get into the specifics of whatever talks might be going on," said Gates. "We've always wanted to settle."

However, several analysts said that the antitrust lawsuit must have had at least an indirect influence on the reorganisation.

"The feedback or message Microsoft has gotten out of the DoJ ... is there is a lot of concern over customer satisfaction," said Chris Le Tocq, director of software consulting at Gartner Group in California. "It is indirectly related to the settlement talks. They're taking the message to heart that business can no longer be done as usual."

"I think Microsoft admitted point-blank that they need to focus more on customers," said Jim Balderston at Zona Research in California. "I think the company also recognises that it's got to put a better face out towards the world. ... One of the ways Microsoft can get itself out of the regulatory spotlight, which won't happen overnight, is to really do a bang-up job in keeping customers happy."

Tim Bajarin, president of Creative Strategies said the reorganisation can be seen as a "preemptive" strike as the company prepares to talk settlement with the government.

"They can use this to show good faith on their part," said Bajarin, in the sense that "at least from a structural standpoint they're willing to make changes." Regardless, the move is a "long time coming when you realise Microsoft has been criticised for not listening to customers," Bajarin added.

Another analyst agreed that the reorganisation will address one of the key causes of the lawsuit -- customer dissatisfaction -- but disagreed that Microsoft officials were motivated by the case. "Up til now Steve (Ballmer) is the guy who got all the complaints," said Rob Enderle of Giga Information Group. "So this is specifically designed so he doesn't have to do any of that again."

Enderle is also optimistic that the company is serious about serving customers better. "Ballmer has made it clear that people will be measured on performance," Enderle said. "He is being very direct in his expectations."

However, the other analysts were less convinced the company would succeed in the new strategy. "They've got to execute now," said Balderston of Zona. "If this is just announcement-ware then they're going to find themselves in similar positions in the future that they're in now."

"This is the old guard, product-focused guys," said Le Tocq at Gartner. "The question is, can we teach the old guard new tricks here and have them be customer sat(isfaction) focused?"

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Elinor Mills

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