As previously reported, the reorganization is one of President Steve Ballmer's first major plans and aims to reorganize the software giant to focus more closely on customers instead of around specific products.
Ballmer dismissed any connection between today's announcement and the ongoing court battle between the company and the Justice Department, and talk about splitting up the company.
"There's certainly no breakup of the company into smaller companies that I would find very acceptable, and we're certainly not thinking about that as a possibility," said Ballmer.
CEO Bill Gates also insisted there was "no relation whatsoever," to the antitrust case. "What we do has a lot to do with competition in the industry," he said.
The new structure more closely maps to Microsoft's core customers: the information technology manager, the knowledge worker, the developer, and the consumer, Ballmer said.
The five new divisions will enable Microsoft to expand on its original vision: a computer on every desk and in every home, the company said.
The business and enterprise division will focus on software technology for the IT customer. Jim Allchin, senior vice president, and Vice President Brian Valentine will lead this group, with Deborah Willingham serving as vice president of marketing for this division.
The Consumer Windows division will focus on evolving the Windows platform for the consumer, or the "renewal of the PC," Ballmer said. Allchin, senior vice president, will also oversee this group along with David Cole, vice president.
The business productivity group, led by Bob Muglia, senior vice president, will focus on meeting the needs of the knowledge worker, and those who work with PCs and Palm devices to do business. Rich Tong will serve as vice president of marketing.
The developer group will focus on the developer customer. Tod Nielson will head marketing for the group. Paul Maritz, group vice president, will head the division.
Finally, the consumer and commerce group will be led by Brad Chase, vice president, and Jon DeVaan, vice president. This group will focus on bringing together consumers and businesses online, covering the company's interests in portals, Internet ventures, and e-commerce products.
Microsoft did not provide any additional details concerning Brad Silverberg, a high-ranking executive who has been on an extended leave.
All the executives have worked for Microsoft for at least nine years, and two--Allchin and Maritz--are on the company's eight-member executive committee. All except DeVaan testified at its antitrust trial.
"This is the biggest reorganization I've ever seen them do," said Enderle. "They've built products created in some developers' mind, as opposed to meeting actual customer needs. This is an attempt to fix that."
Microsoft's reorganization comes after a sweeping eight-month review of operations by Ballmer, the right-hand man to Gates. The aim is to get the software powerhouse back on track after the landmark antitrust trial of the past five months. Settlement talks are scheduled for tomorrow.
"It may be time to inject new energy, some additional people," said Bill Whitlow, a portfolio manager with Safeco Asset Management, which owns more than 670,000 shares of Microsoft. "It's hard not to have lost some momentum with all the attention on the trial."
Microsoft currently is organized into three groups based around technology: computer operating systems; applications; and other activities, including its online business. The reorganization is intended to make customers the driving force behind products rather than technology.
Chase, 38, is vice president of developer relations and Windows Marketing. DeVaan, 38, is vice president of desktop applications. Allchin, 47, is senior vice president for personal and business systems. Muglia, 39, is senior vice president of the applications and tools division. Maritz, 44, is group vice president of platforms and applications.
Under the new structure, the consumer group will include the Windows 98 operating system and the large-business group will include the Windows 2000 system, formerly known as Windows NT, Enderle said. Some products, such as Office business software, may overlap groups, he said.
Lawyers for Microsoft and the Justice Department, and 19 states suing the company, are scheduled to meet tomorrow to discuss a settlement proposal by Microsoft. The company stands accused of using illegal tactics to protect its Windows monopoly.
The trial is in recess until April.
Bloomberg contributed to this story.