Microsoft Unveils Biggest Reshuffle in Years; Myerson Exits

Dina Bass and Ian King (Bloomberg) -- Microsoft Corp. Chief Executive Officer Satya Nadella unveiled the company’s biggest reorganization in three years, combining the divisions that focus on devices and software for businesses while moving the Windows operating system unit into the cloud operations.

It’s a sweeping set of changes that includes the departure of Windows chief and Microsoft veteran Terry Myerson and the appointment of Scott Guthrie to oversee the combined Windows and cloud business. Nadella is also putting Office chief Rajesh Jha in charge of the newly created Experiences & Devices team. This group will focus on how people interact with various computing devices, using multiple senses, Microsoft said in a memo.

Nadella is reshaping Microsoft to fit a world where the PC is no longer the center of computing. The changes reflect the shrinking role of Windows, the operating system that runs most of the world’s PCs, as computing shifts toward areas like cloud, mobile, productivity and artificial intelligence software. The shuffle moves work on Windows to the same team handling Microsoft’s Azure cloud software. The Windows devices team combines with Office software, with the goal of building laptops and tablets that appeal to users of Microsoft’s applications, including its Word and Excel programs and newer tools like email and Skype.

Related:Microsoft's Sales Get Azure Boost; Tax Charge Leads to Net Loss

“A unified platform-driven approach to product development and delivery should be beneficial for Microsoft," said Mark Moerdler, an analyst at Sanford C. Bernstein, in a report. He added that the changes are also likely to reduce duplication of engineering efforts and should save the company money.

PC sales have been on the decline for years. After peaking in 2011 at 364 million devices shipped, the market has contracted every year since then. Microsoft’s own effort to revitalize hardware, with its well-reviewed Surface devices, hasn’t been able to turn back that tide. Still, under Nadella, who took over in 2014, the company has stayed relevant and boosted sales by focusing on cloud services and subscription versions of its popular work tools. Revenue is forecast to climb 11 percent this fiscal year to $107.3 billion, after rising 5 percent in 2017.

The cloud unit under Guthrie is also gaining some of the company’s artificial intelligence work most closely tied to corporate customers. That division is also taking responsibility for some of Microsoft’s virtual reality and augmented reality development and products. Redmond, Washington-based Microsoft has sought to sell those technologies to cloud customers as new ways to oversee workers, manage equipment and offer training in corporate environments.

Myerson leaves after 21 years, and almost three years in what some have called the hardest job at Microsoft -- trying to build a device business after the company exited the phone handset business, while charting the future of Windows in a world that is moving away from the client-computing model that it led. Prior to those roles, Myerson ran Windows Phone and the Exchange email server.