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Summary:

Microsoft is noted for big reorgs when it’s behind in a key market or markets. Well, it looks like that time is near again, according to yet another report.

Steve Ballmer

No one’s quite sure what it is but more people are convinced that something big is happening at the highest levels of Microsoft. On Monday, AllThingsD reported that a “significant restructuring” of the software giant is in the works, citing unnamed sources close to the situation.

The report references CEO Steve Ballmer’s annual shareholder letter, which re-characterized Microsoft as a “devices and services company.” That is quite a shift from a company built on shipping shrink-wrapped boxes of diskettes or bundling the operating system on PCs and servers made by hardware partners IBM, HP, Dell et al. Update: Microsoft had no comment on this report.

This report comes a week after noted Microsoft watcher Nomura Securities analyst Rick Sherlund posited “big changes” to come, driven by a set of shareholders increasingly annoyed at Microsoft’s stagnant stock price. Sherlund put forth some pretty interesting options including the offloading of Bing search to Facebookor Yahoo in exchange for traffic acquisition costs or an outright sale of the Xbox franchise — a big “device” success — to another player, perhaps Samsung.

AllThingsD sources expect bigger roles to come for key Microsoft execs including Satya Nadella, president of the key Server and Tools unit — who will speak at GigaOM’s Structure later this month; Tony Bates, president of the Skype communications division; and Don Mattrick, president of Interactive Entertainment division. These are all respected executives but pressure is also building for Microsoft to bring in new blood — perhaps even at the tippy top. There have been repeated calls for Microsoft to dump Ballmer, over the years, for example.

In what could be related news, Microsoft CIO Tony Scott quietly left the company last week, news first reported by Geekwire and subsequently confirmed by Microsoft.

Microsoft is known for big, massive changes — like in the mid-1990s when it missed the internet for example. Still, these latest rumblings come at a critical time for Microsoft, which is at TechEd this week flogging Windows Azure as a key enterprise alternative to Amazon Web Services. And in a few weeks at its Build Conference, it will continue to tout Azure as well as the upcoming Windows 8.1 as a key OS for mobile devices where Microsoft is trying to make up for lost time

MSFT Chart

MSFT data by YCharts

This story was updated at 9 a.m. PDT with Microsoft’s non-comment.

  1. Remember this moment folks as this will be seen as the watershed point Microsoft begins its corporate decline. In both devices and services it is doing nothing but playing catch up to Amazon, Android and Apple!

    With the customer dissatisfaction on Win 8 and a moronic apps ecosystem and its mobile phone strategy tanking almost from the get go, their time has come and went. Even the new XBox is generating sneers from its core audience. Quite frankly I cant see anyway for them to extricate themselves from this long brewing dilemma.

    And it’s a damn shame.

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    1. They did it to themselves, though, because their corporate mentality was to simply raid other peoples’s idea and place their logo on it. And that was from day one. That they made it this far, unscathed, is simply a matter of pricing. If Apple had been more affordable with its original offerings into the computing industry, we might not have even heard of Microsoft.

      My bet is that in 10-20 years, unless Microsoft can somehow pull a rabbit out of its hat, either Chrome OS or Linux will take over the top spot for PC’s. It will all come down to whether the Gaming industry will start writing their games to support either Chrome OS or Linux. Once that shift takes place, Microsoft will be dead in the water.

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  2. It will be a mistake to get rid of Bing, the world is moving towards big data, where there is not a distinction between structured and unstructured data. Althoug Bing cannot compete against Google on the web search front, it should be a key piece of technology for them going forward.

    I do think they need to do big restructuring, the IT world is changing fast, and with many solutions almost as good as Microsoft at a fraction of the cost, they will have to do something. But to just get rid of units because they might make money in the short run is shortsighted (pun intended, hehehe).

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  3. The biggest change shareholders need and the obvious is the “Ballmer” stepping down or even leaving Microsoft who knows that will certainly shake things up and possibly cause the stock to soar.

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