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Internet prompts MS reorg

In an attempt to jump ahead in the interactive computing market, Microsoft is expected to announce a company-wide reorganization today.

Microsoft today announced a company-wide reorganization in an attempt to get ahead in the Internet market while continuing to protect its Windows home base.

The company is restructuring the heart of its organization--the Platforms Group responsible for operating systems--to concentrate on developing products and technologies for both Windows and the Internet. "We hope to expand with Windows in the future," said Paul Maritz, group vice president of the Platforms Group, "but we believe that the communication revolution is a reality, and the Net is the framework in which that is unfolding. Our customers want us to make sure that we bring the best of Windows and the Net together."

The Platforms Group will now be divided into three divisions: the Desktop and Business Systems Division, the Internet Platform and Tools Division, and the Consumer Platforms Division. Brad Silverberg is senior vice president of the new Internet Platform and Tools Division, which has been given the charter of creating client software, run-time libraries, development tools, and server products for Internet applications and content.

The Desktop and Business Systems Division will be responsible for Windows 95 and Windows NT. The Consumer Platforms division will develop solutions for "non-PC" consumer devices.

Some Microsoft officials had earlier said that an Internet-specific division would be redundant because the whole company is focused on the Internet. But officials today spoke of future Internet plans, including the possibility of developing software for an Internet terminal. Such Internet boxes have been touted by Oracle, Sun, and IBM as potential alternatives to PCs, the boxes that made Microsoft what it is today.

"We're trying to consolidate a number of areas in terms of set-top boxes. We expect them to roll out as an important capability, but don't expect volumes until 1998," said Craig Mundie, senior vice president of the new Consumer Platforms Division. "We also have continuing programs that are being consolidated in the handheld area which we haven't released information on yet," he added.

But other officials hastened to repeat the company line that such Internet terminals are not really a threat to the PC and Windows. "We don't think it's likely that Internet appliances are going to displace the PC anytime soon," said Maritz. "Revenues are and will continue to be in the Windows division."

The company also created a new group called the Interactive Media Division. The new division will focus on the Internet market as well as the fledgling market for digital video discs, a new variety of multimedia vehicle akin to CD-ROMs that will be able to deliver interactive full-motion video when they begin hitting the market late this year.

The new division will also be home to engineering and marketing teams for the company's games and children's applications as well as its information businesses, such as the Strategic Partnerships group that recently negotiated a deal with the NBC network to distribute news and other information over Microsoft's online service and the Internet.

Last week, Microsoft combined its Consumer Productivity Group, which markets Microsoft Works and Publisher, with the Desktop Applications Division to focus on the home and small business market.

The company said the reorganization will not entail layoffs.

While Microsoft officials emphasized the importance of Windows as a platform for the Internet, analysts and industry watchers said that today's reorganization is a reaction to a phenomenon that has left Microsoft in a weak position compared to younger companies such as Netscape Communications.

Keynote speaker Eric Schmidt, chief technology officer at Sun Microsystems, kicked off the Internet Expo in San Jose, California, by comparing the budding rivalry between Netscape and Microsoft with the bloodthirsty Cola Wars of the '80s.

"We'll have two battles in 1996: Netscape and its friends vs. Microsoft and its power," said Schmidt. "[Microsoft] doesn't need any friends," he said. "It can afford to give everything away for the next 20 years."