Microsoft set for massive overhaul

Falling stock prices prompt plan to catch up with rivals

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