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Microsoft shakes up exec ranks as Windows 10 looms

The world's biggest software maker is creating a new group charged with making its Windows software work across all devices. Microsoft is also jettisoning some top executives, including former Nokia chief Stephen Elop.

Days gone by: Stephen Elop (right) with then-Microsoft CEO Steve Ballmer, when both were hopeful Microsoft's $7.2 billion purchase of Nokia's handset business could make Windows Phones popular. Sarah Tew/CNET

With its Windows 10 software era about to begin, Microsoft is making some big changes to its executive lineup.

The world's largest software company is creating a new Windows and Devices Group, whose mission will be to "drive Windows as a service" across all of Microsoft's devices, from PCs to smartphones to its fitness-focused Band.

The company is jettisoning several top executives, including Stephen Elop, the former CEO of Nokia who now heads Microsoft's devices group. Microsoft paid $7.2 billion for Nokia's headset business last year, and now sells its Lumia smartphones.

The management shakeup comes as Microsoft readies the release of Windows 10 late next month.

Microsoft remains the world's largest software maker, with its Windows operating system software running on more than 90 percent of the world's computers, according to NetMarketShare. But PCs sales have steadily declined and the company had a late start on mobile devices and is struggling to keep its software relevant as developers focus on Apple's iOS mobile operating system, Google's Android OS and the Web at large. Windows software for mobile devices holds just a 2.7 percent share of the market, well behind Android and iOS.

Microsoft sees Windows 10 as a single platform that will run all apps across all devices. Developers can write to a single code base, allowing them to create so-called universal apps that will work on phones, tablets, PCs, the Xbox One game console, TVs, ATMs and even Microsoft's new HoloLens virtual-reality headset.

Windows 10 is also an attempt to atone for the missteps of the little-loved Windows 8, which was released in 2012.

The impetus behind the changes, Microsoft CEO Satya Nadella said in an email to employees Wednesday, is "to better align our capabilities and, ultimately, deliver better products and services our customers love at a more rapid pace."

Meet Terry Myerson the new head of Microsoft's Windows and Devices Group. Microsoft

Terry Myerson, now head of Operating Systems Group responsible for Windows 10, will head the new Windows and Devices Group (WDG), which will focus more on Windows personal computing. The new team will combine the company's Operating Systems Group and the Devices & Services Group currently run by Elop. The new group is charged with expand Windows beyond PCs and mobile devices.

"WDG will drive Windows as a service across devices of all types and build all of our Microsoft devices including Surface, HoloLens, Lumia, Surface Hub, Band and Xbox," Nadella said in his memo." This enables us to create new categories while generating enthusiasm and demand for Windows broadly."

Executive VP Scott Guthrie will continue to lead the Cloud and Enterprise team to concentrate on the intelligent cloud platform, especially for corporate customers.

"The C+E team will also focus on building high-value infrastructure and business services that are unique to enterprise customers, such as data and analytics products, security and management offerings, and business processes," Nadella said. "Today, we are also moving the development teams who build our Dynamics products to C+E, which will enable us to accelerate our ERP (enterprise resource planning) and CRM (customer relationship management) work even further and mainstream them as part of our core engineering and innovation efforts."

Executive VP Qi Lu will continue to lead the Applications and Services Group to focus on productivity services across all devices for users both at home and at work. The only change as part of the latest shakeup is that the effort to develop services for the educational market will now be part of Lu's group.

The changes failed to impress investors, with Microsoft's shares little changed today at trading at $45.65 at 2:21 p.m. New York Time.

"Microsoft's reorg shows that it is determined to be a part of the mobile mind shift and that its mobile efforts will benefit from closer engineering alignment with Windows," Frank Gillett, an analyst with Forrester Research, said in an emailed statement. "But having combined engineering won't make the task of growing Windows Phone or enterprise applications any easier. Both face established and entrenched competitors who will make it very hard for Microsoft to grow in these areas."

Elop had once been considered a top candidate for the role of Microsoft CEO, after returning to the company when Microsoft took over Nokia's smartphone business.

In his memo, Nadella explained why Elop is leaving Microsoft.

When Stephen Elop returned to Microsoft, he oriented MDG to create the best Microsoft experience through its devices, inclusive of hardware, software and services. He has been a strong advocate of the need to drive focus and accountability around the delivery of these experiences and has helped drive tighter alignment toward the ambition of more personal computing. With the structural change described above, Stephen and I have agreed that now is the right time for him to retire from Microsoft. I regret the loss of leadership that this represents, and look forward to seeing where his next destination will be.

Besides Elop, Microsoft executives Kirill Tatarinov, Eric Rudder and Mark Penn are also leaving the company.

Tatarinov drove Microsoft's Dynamics business into a $2 billion operation offering ERP and CRP services for enterprise customers. But now Microsoft is incorporating this business into its mainstream engineering, sales and marketing efforts.

After working at Microsoft for more than 25 years in several key areas, Rudder "has decided to try something new," Nadella said without getting into any specifics for his departure. And Penn, who handled advertising and marketing strategy at Microsoft, will leave the company in September to start his own private equity firm, among other things, according to Nadella.

Former Nokia executive Jo Harlow is also leaving Microsoft as the head of phones, according to The Verge. Harlow reported to Elop both at Nokia and Microsoft, so her departure follows that of her boss.

"I'm counting on our Senior Leadership Team to inspire innovative products and services and lead excellent execution," Nadella said. "Our competition and our customers don't care about our organization structure -- they care about innovation. While we are distinctly aligning our engineering structure and core capabilities, our ambitions are interconnected. Success requires all of us -- and particularly the Senior Leadership Team -- to work across boundaries as one Microsoft and in harmony with our partners."

Following the management changes, Microsoft's key leadership team will consist of the following 12 executives:

  • Satya Nadella, Chief Executive Officer
  • Chris Capossela, Executive Vice President and Chief Marketing Officer
  • Kurt DelBene, Executive Vice President, Corporate Strategy and Planning
  • Scott Guthrie, Executive Vice President, Cloud and Enterprise
  • Amy Hood, Executive Vice President and Chief Financial Officer
  • Kathleen Hogan, Executive Vice President, Human Resources
  • Peggy Johnson, Executive Vice President, Business Development
  • Qi Lu, Executive Vice President, Applications and Services Group
  • Terry Myerson, Executive Vice President, Windows and Devices Group
  • Harry Shum, Executive Vice President, Technology and Research
  • Brad Smith, Executive Vice President and General Counsel, Legal and Corporate Affairs
  • Kevin Turner, Chief Operating Officer