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Belluzzo out at Microsoft in reorganization

update President and Chief Operating Officer Rick Belluzzo will be leaving the software giant as part of a shuffle that involves dividing the company into seven divisions.

update Microsoft President and Chief Operating Officer Rick Belluzzo will be leaving Microsoft as part of a reorganization, the company said Wednesday.

Belluzzo, 48, came to Microsoft from SGI in September 1999 as a group vice president. Before that, he was a rising star at Hewlett-Packard and was pegged to be the company's next CEO.

Microsoft did not name a replacement for the executive, who managed many of the company's consumer products and services at various times, including MSN, the Xbox game console and Microsoft's interactive TV projects. Belluzzo will step down from his current position May 1 and leave the company in September.

His tenure was marked by the lackluster performance of many of Microsoft's consumer projects, such as the plan to convince customers to pay for software on a subscription basis. In recent months, however, MSN and other consumer projects were moved out from under his control.

"His consumer strategy of shifting people to fee-based services and making money off MSN hasn't worked so far," said Matt Rosoff, an analyst at consulting firm Directions on Microsoft. "I very much suspect this is an ouster."

To date, Microsoft's most successful consumer product has been the Xbox, but most of the credit for that goes to executive J. Allard. Belluzzo was also running MSN during the 2000 holiday season, when aggressive rebates for MSN Internet access with new PCs hurt the division's profitability. Microsoft later did away with the rebates.


Gartner analyst David Smith says Belluzzo may be taking the blame for the lackluster performance of many of Microsoft's consumer projects, Xbox notwithstanding.

see commentary

At HP, Belluzzo was largely credited with building up the company's profitable printer business.

"Whatever consumer strategy he put forth wasn't working," Rosoff said. "Certainly the retreat of the rollout of .Net My Services was a huge setback."

About a year ago, Microsoft unveiled a series of Web services called HailStorm that would be the first deliverable of the .Net software-as-a-service strategy. Microsoft later renamed HailStorm .Net My Services. But since then Microsoft has delayed the ambitious consumer services strategy in order to craft a new business model. CEO Steve Ballmer and vice president Jim Allchin have been openly critical of the plan.

That and the other recent problems sealed Belluzzo's fate at Microsoft, Rosoff said. "They moved MSN out from under Belluzzo and .Net My Services," he said. "They moved the wireless group out from under Belluzzo. This is sort of the culmination of a pattern we've been seeing for about the last six months."

Rosoff said it's unlikely that anyone will replace Belluzzo. Microsoft presidents have come and gone before without having much of an impact, he noted.

"The president title is kind of the kiss of death at Microsoft," he said. "I don't think there is room for a No. 3 at Microsoft."

see special report: A Class of Their Own When Belluzzo finally departs the software maker's Redmond, Wash., campus, he'll be joining a long list of top Microsoft executives who have left the company in recent years to become entrepreneurs or to chase more personal dreams. Former chief financial officer Greg Maffei, for instance, is now chief executive of fiber-optic network company 360networks, while Nathan Myhrvold, founder of Microsoft Research and former chief technical officer, is investing in start-ups and practicing French cooking skills.

History of Microsoft presidents
1977-1982 Bill Gates
1982-1983 former Tektronix executive James Towne
1983-1990 former Tandy executive Jon Shirley
1990-1992 former Boeing executive Michael Hallman
1992-1996 Three Microsoft executives, including Steve Ballmer, Mike Maples, and Frank Gaudette form an office of the president.
1996-1998 An executive committee of nine Microsoft executives, including Ballmer, replace the office of the president.
1998 Ballmer named president.
2000 Ballmer named CEO and president.
2001 Rick Belluzzo named president.
2002 Belluzzo steps down; no successor named.
Instead of a new president, two other executives--Jim Allchin and Jeff Raikes--will likely emerge as major powers within the company, Rosoff said. Allchin, group vice president of the platforms group, runs the server division and is one of the company's chief technologists. Raikes, group vice president of productivity and business services, has emerged as one of the forces in sales.

Under the new organization, Microsoft will be divided into the following product groups: Windows Client, Knowledge Worker, Server & Tools, Business Solutions, CE/Mobility, MSN, and Home & Entertainment. Each of these groups will have independent operational and financial responsibility, the company said.

"Rick has worked closely with me analyzing the company's structure to determine how we could improve our internal processes and maximize opportunities for growth," Ballmer said in a statement. "We realized we needed to give our core leaders deeper control and accountability in the way they run their businesses, while at the same time ensuring strong communication and collaboration across the business units.

"This is the right decision for Rick, but the company will certainly miss his leadership and experience," Ballmer added.

In evaluating the president's position, Microsoft found a great deal of overlap between Ballmer's and Belluzzo's roles and responsibilities, said sources close to the company. For that reason, no replacement for Belluzzo is planned.

Ballmer apparently notified top executives of Belluzzo's imminent departure by e-mail on Wednesday.

News.com's Joe Wilcox contributed to this report.