Microsoft shuffles the deck — again

What do you do if you’ve basically missed or been late to all the major trends in technology over the last 10 years; if your latest high-profile product has been a dud in the marketplace; and your stock, despite a recent run, is still trading below the heights it reached 14 years ago?

Well, if you’re Microsoft, you shuffle the deck!

In an expected move this week, the software giant announced a company-wide reorganization intended to streamline the sprawling company. Under the new structure, Microsoft’s operating segments will be reduced from five to four and support functions such as marketing and finance will be taken out of those segments and moved to separate, centralized departments that will oversee those functions for the whole company.

In a memo sent to company employees, CEO Steve Ballmer touted the reorganization as a way of promoting the idea of the company has one whole team, rather than a collection of disparate groups.

“We are rallying behind a single strategy as one company — not a collection of divisional strategies,” Ballmer said in the memo. “Although we will deliver multiple devices and services to execute and monetize the strategy, the single core strategy will drive us to set shared goals for everything we do. We will see our product line holistically, not as a set of islands.”

As part of the reorg, Microsoft will put its three consumer-targeted operating systems — Windows, Windows Phone and Xbox — under one engineering group; previously, responsibility for those different operating systems were spread across two different divisions. The company is also combining its Office applications with Skype and Bing into an applications and services group. Its new Devices group will include all of Microsoft’s various hardware efforts, including the Xbox game consoles, the Surface tablets and its mice and keyboards, and its game development studios. And a new Cloud segment will include Microsoft’s cloud services, including Windows Azure and the underpinnings of Xbox Live and Office 365.

But for all the shuffling, the lines remain somewhat blurry and confusing. The new operating systems group won’t include Windows Server or Windows Embedded. Where Microsoft’s games effort has long been encapsulated within one division, responsibility for it is now spread across two and arguably three divisions. And it’s not clear that moving Bing under a general “applications and services” group that includes a bunch of disparate products will help it compete any better against Google.

And there are other reasons to be skeptical that the shuffling will be a boon to the company. For one thing, one cost of the reorganization was the loss of Don Mattrick, who was widely lauded for turning around the Xbox from a money-losing business into a growing and profitable one for Microsoft as head of the now disbanded Entertainment and Devices group. Mattrick left the company earlier this month to join Zynga, reportedly because he was unhappy with what his new role would be after the reshuffling.

Meanwhile, the reorganization puts more power into the hands of Ballmer, who has been widely criticized for Microsoft’s track record under his leadership. Under Ballmer, the company has struggled to compete with Google in search, failed to compete effectively with Apple in digital music and was slow to recognize the threats posed to its businesses from the iPad and the new wave of smartphones that began with the iPhone.

Whats’s more, it’s important to note that this is only the latest reorganization at the company. Its last major shuffling of the decks happened in 2005.

Photo of Steve Ballmer talking to company employees about the reorganization, courtesy of Microsoft.

Troy Wolverton Troy Wolverton (280 Posts)

Troy writes the Tech Files column as the Personal Technology Columnist at the San Jose Mercury News. He also covers the digital media, mobile and video game industries and writes occasionally about Apple, chips, social networking and other aspects of technology. Previously, Troy covered Apple and the consumer electronics industry. Prior to joining the Mercury News, Troy reported on technology, business and financial issues for TheStreet.com and CNET News.com.