Microsoft Splits Platform in Two

In an unexpected shakeup, earlier today Microsoft split up its Platform and Services division into two groups and announced the departure of divisional president Kevin Johnson. Whoa, Microsoft loses two of three divisional presidents—the other being Jeff Raikes—in one year.

Worse, these were the two execs responsible for cash cows Office and Windows. Holy Smokes! My favorite reaction to Kevin's departure comes from Microsoft's version of the Unknown Comic. Mini-Microsoft blogged, a few hours after one of Microsoft's Town Hall meetings:

"I'm really surprised. There was Mr. Johnson up on stage this morning during the Town Hall causing me to roll my eyes with his fake enthusiasm and now he's leaving Dodge. On the horse he rode in on 16 years back. I know he did a lot to pick up the pieces after the Vista-debacle and is probably due a good amount of praise for letting Win7 align itself to be on the winning trajectory, but I just never bonded with Mr. Johnson's leadership. And some of the projects he's interested in and driving just leave me cold (e.g., the upcoming MSN UI revamp. It puts the F in WTF)."

Kevin's departure doesn't surprise me. He had to go. He was chief architect of the Yahoo merger debacle. I said early on in the failed acquisition process that buying Yahoo was a bad idea. Actually, it was worse than a bad idea. The failed acquisition drove Yahoo into Google's extended arms. Microsoft's search/online advertising position is now weaker, while Google's is quite a bit stronger.

Someone had to fall on his sword for Yahoo. It wasn't going to be Microsoft CEO Steve Ballmer. That left Kevin holding the saber, which I presume he used on himself. The departure isn't unfriendly—not with a press release with big quote from SteveB. In a memo sent to employees late this afternoon, Steve carefully couched Kevin's departure. He took 12 paragraphs and five bullet points of other news or future plans to get to the shocker. From the memo:

"Effective immediately, Steven Sinofsky [senior vice president, Windows and Windows Live], Jon DeVaan [senior vice president, Windows Core Operating System division], and Bill Veghte [senior vice president of the Online Services & Windows Business group] will report directly to me to lead Windows/Windows Live. In the Online Services Business, we will create a new senior leadership position and conduct a search that will span internal and external candidates. In the meantime, Satya Nadella [senior vice president, Search, Portal & Advertising group] will continue to lead Microsoft's search, ad platform, and MSN engineering efforts, and Brian McAndrews will continue to lead the Advertiser and Publisher Solutions Group."

The titles I inserted in brackets were those from before today's organizational changes. I suspect some of the titles will change with responsibilities. Bill, Satya and Steven were on my June list of technical successors to Microsoft Chairman Bill Gates. Coincidence? Methinks not.

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The asunder organizations are a bit of a mess. Where Microsoft had three major divisions before, technically there are now four. Two divisions, Business and Entertainment and Devices, are run by two separate presidents. Windows/Windows Live is run by three senior vice presidents. The fourth division is run by no one; Microsoft is looking for candidates. There could be one heck of a power struggle to fill the empty position and force another president for the other. How do geeks stab each other in the back, anyway? With dinner knives?

On one side is Windows/Windows Live and on the other Online Services. I guess Microsoft has decided that Live really does belong to Windows. But how the heck do you organizationally, logistically or technologically remove Windows Live from Online Services?

Practically, the groups were loosely tied anyway, as Online Services futilely seeks search market share increases and more advertising customers. Online Services was an online dead weight hanging around the Windows group. I'll be fascinated to see if the change affects Microsoft's P/L. I'm sure Microsoft's CFO will have something to say about that during tomorrow's annual financial analysts meeting. Since Windows Client and Online Services already separately reported results, I expect little P/L change, if any.

But, boy oh boy, organizationally, the divisional breakup is a refreshing change. Steve Ballmer created the three major divisions and president positions in a November 2005 reorganization. Sales and marketing guys assumed the major positions over a company with a loooooong history of technical history. Can you say, corporate cultural conflict?

Suddenly, the geeks are back, and they're ready to kick some sales and marketing ass. Stephen Elop, who replaced Jeff Raikes, has got technical experience. Microsoft needs Stephen to bring in some of the technical smarts he applied at Macromedia. The leaders now responsible for Windows/Windows Live and Online Services all have deep technical backgrounds.

All this makes me wonder about two things: accountability and influence. On the accountability front are changes coming from SteveB and COO Kevin Turner. Most everybody associated with Windows Vista is gone from Microsoft or moved elsewhere. Very few executives associated with Vista still work in the Windows group. Used to be that a new Windows version meant big promotions. But with Vista, heads rolled as the accountability guillotine lopped them off. Jim Allchin, who once was co-president of the Platform and Services division, was the first chopped up. Kevin Johnson couldn't stay at Microsoft after Yahoo. There is more accountability now.

As for influence, I really wonder about Ray Ozzie, Microsoft's chief software architect. Maybe Ray has got some weight after all, unless he's a forthcoming casualty with the Online Services group. Doubtful, methinks. Rather, Ray is probably one of the advocates for elevating technical leaders to great positions of responsibility. He's got influence.

Then there is Bob Muglia, senior veep of the Server and Tools division, which is kicking ass. Bob is like Microsoft's poster geek for technical leadership. He's a tangible example that SteveB—the man obsessed by proving things with numbers—simply can't ignore.

If the company were a Terminator movie, the title of this reorganization would be something like, "Microsoft 3: Rise of the Geeks."

[Please send your tips or rumors to watchtips at live.com].