Mi­crosoft set for mas­sive over­haul

Fall­ing stock prices prompt plan to catch up with ri­vals

Weekend Argus (Saturday Edition) - - BUSINESS -

SAN FRAN­CISCO: Mi­crosoft has de­cided its en­tire busi­ness needs a new op­er­at­ing sys­tem.

CEO Steve Ballmer is re­struc­tur­ing the com­pany to cope with a quick­en­ing pace of tech­no­log­i­cal change that has left the world’s largest soft­ware maker a step be­hind its two big­gest ri­vals, Ap­ple and Google.

In an ef­fort to catch up, Mi­crosoft is dis­man­tling a man­age­ment struc­ture that sep­a­rated the com­pany into some­times dis­jointed di­vi­sions and hatch­ing a more co­he­sive prod­uct line-up. The new set-up re­volves around soft­ware, de­vices and ser­vices con­nect­ing those de­vices to ap­pli­ca­tions stored in re­mote data cen­tres – or “cloud com­put­ing”.

The move comes amid a luke­warm re­sponse to the lat­est ver­sion of Mi­crosoft’s flag- ship Win­dows op­er­at­ing sys­tem and a steady de­cline in de­mand for per­sonal com­put­ers as peo­ple in­creas­ingly rely on more con­ve­nient smart­phones and tablets.

If things pan out the way Ballmer en­vi­sions, the shakeup an­nounced on Thurs­day will foster more rapid in­no­va­tion and sharpen the com­pany’s fo­cus on coun­ter­ing the threat posed by mo­bile de­vices run­ning on soft­ware made by Ap­ple and Google while lap­top and desk­top com­put­ers pow­ered by Win­dows lose their lustre. He is hop­ing a more close­lyknit or­gan­i­sa­tion mak­ing the soft­ware and ser­vices that run smart­phones, tablets, the Xbox video game con­sole and, yes, PCs, will re-es­tab­lish Mi­crosoft’s rep­u­ta­tion as “a com­pany that helps peo­ple get stuff done”.

“We are ready to take Mi­crosoft in bold new di­rec­tions,” Ballmer told an­a­lysts and re­porters.

Ballmer, 57, can’t af­ford to lose his way now. If he does, Mi­crosoft could be even fur­ther eclipsed by its ri­vals. That, in turn, could dis­il­lu­sion in­vestors al­ready ex­as­per­ated with the lack­lus­tre per­for­mance of Mi­crosoft’s stock since Ballmer suc­ceeded Bill Gates, as chief ex­ec­u­tive 13 years ago.

Dur­ing Ballmer’s reign, Mi­crosoft stock has slipped by nearly 40 per­cent even as the com­pany’s an­nual rev­enue has roughly quadru­pled from $20 bil­lion (R200bn) to nearly $80 bil­lion. Ap­ple’s stock price is nearly 17 times higher. Google’s stock has risen ten­fold. Both Ap­ple and Google now boast higher to­tal mar­ket val­ues than Mi­crosoft.

Mi­crosoft’s stock gained 99 cents on Thurs­day to close at $35.69. The shares have surged 24 per­cent in the past three months, partly be­cause the com­pany’s rev­enue is hold­ing up bet­ter than many an­a­lysts ex­pected. Some re­cent buy­ers of Mi­crosoft’s stock had been bet­ting the com­pany would do some­thing even more dra- matic, such as spin­ning off a di­vi­sion or shed­ding its un­prof­itable in­ter­net search engine, Bing, said BGC Fi­nan­cial an­a­lyst Colin Gil­lis.

Nei­ther of those ap­pears likely now.

Gil­lis views the changes as Ballmer’s tacit ac­knowl­edge­ment that Mi­crosoft had be­come bogged down in bu­reau­cracy and sec­ond-guess­ing – and an ad­mis­sion that there was too much in­ter­nal strife as var­i­ous fac­tions formed to pro­tect their turf.

“We have to make the right de­ci­sions more quickly,” Ballmer said.

Ballmer ap­pears to have the right idea, al­though it would have looked even smarter had he done it shortly af­ter it be­came clear that Ap­ple’s 2010 re­lease of the iPad was re­shap­ing the tech mar­ket, said Gart­ner Inc an­a­lyst David Cear­ley.

“They are re­ally re­or­gan­is­ing for the mar­ket re­al­ity that has been in place for the last three years,” Cear­ley said.

“It would have been nice if it was done ear­lier, but it’s not too lit­tle too late yet. The real key is ex­e­cu­tion. All th­ese changes make sense and I can see a path for­ward, but that path for­ward is a re­ally rocky one.”

Most of Mi­crosoft’s key ex­ec­u­tives will re­main in po­si­tions of power at the Red­mond, Wash­ing­ton, com­pany.

Ballmer said no lay­offs are planned, al­though an­a­lysts be­lieve the over­haul will open the door for cost-cut­ting op­por­tu­ni­ties as Mi­crosoft pulls to­gether its dis­parate parts.

Terry My­er­son, who had been over­see­ing Win­dows Phone, will lead Mi­crosoft’s op­er­at­ing sys­tems and en­gi­neer­ing group, namely Win­dows. Qi Lu, who had been over­see­ing Bing, will head ap­pli­ca­tions and ser­vices.

Mi­crosoft named vet­eran ex­ec­u­tive Julie Lar­son-Green head of its de­vices and stu­dios en­gi­neer­ing group, to be in charge of hard­ware de­vel­op­ment, games, mu­sic and en­ter­tain­ment.

Some of what Mi­crosoft is do­ing mir­rors changes that Ap­ple and Google al­ready have ex­e­cuted. – Sapa-AP

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