MSFT Microsoft Corporation

By Jay Greene 

Microsoft Corp. is diminishing the role of Windows, the storied franchise that put the company atop the personal-computer market in earlier decades, reflecting the massive shift in the way computing power is harnessed.

The software giant reorganized its business Thursday morning around its growing Azure cloud-computing operations and its stalwart Office productivity business.

Executive Vice President Terry Myerson, who ran the Windows business, will leave the company, according to an email from Microsoft Chief Executive Satya Nadella.

The move is designed to focus Microsoft on the biggest areas of growth for the company. In the last quarter, though the company doesn't disclose revenue for those businesses, it said Azure jumped 98% and Office 365 grew 41%. At the same time, its More Personal Computing unit, which includes Windows, gained 2% to $12.17 billion in the latest period.

"Having a deep sense of customers' unmet and unarticulated needs must drive our innovation," Mr. Nadella said in an email sent to employees Thursday morning. "We can't let any organizational boundaries get in the way of innovation for our customers. This is why a growth-mindset culture matters."

Microsoft declined to comment beyond Mr. Nadella's email.

In a post on Microsoft's LinkedIn page, Mr. Myerson, who has run the Windows business since 2013, said the day was an "emotional" one for him but expressed his "ongoing enthusiasm for Microsoft."

For most of its 43 years, Microsoft and Windows were nearly synonymous. Under Mr. Nadella's predecessor, Steve Ballmer, products were sometimes stalled, or even killed, because they didn't help expand Windows' markets.

That Mr. Nadella is willing to shift the company's focus away from Windows illustrates the permanence of the shift from personal computing to mobile devices and the web. It also shows how Mr. Nadella is putting his own imprint on the tech giant.

"He's clearly not handcuffed by history," said Stifel Nicolaus & Co. analyst Brad Reback.

Mr. Nadella is able to make the move because, during his four-year tenure at chief executive, Microsoft has emerged as a leader in cloud computing. Its Azure operations is No. 2 behind Amazon.com in the cloud-infrastructure market. And its Office 365 productivity apps and its Dynamics business-software services are rapidly growing, multibillion-dollar businesses.

"The Microsoft of old could never have made this move," Mr. Reback said. "But the pieces were not in place to make the move."

Mr. Myerson, a 21-year Microsoft veteran, will leave the company and help with the transition "over the coming months," Mr. Nadella wrote.

The company is breaking Windows in pieces. The platform technology, on which Microsoft's partners build their own devices, apps and services, will now fall under Scott Guthrie, who has runs the Azure business. Mr. Guthrie's unit, called Cloud + AI Platform, will also include Microsoft mixed-reality business, including Microsoft's Hololens device, as well as the company's artificial-intelligence business.

Microsoft's devices business, including its Surface lineup of computers, will fall to Rajesh Jha, who has been in charge of Microsoft's Office group. That unit, called Experiences & Devices, will also include Microsoft's efforts to develop new features in Windows.

In his note, Mr. Nadella called the future of Windows "bright," as the company pushed to develop new features that take advantage of new types of devices and emerging technologies such as artificial intelligence. In the most recent quarter, the More Personal Computing unit accounted for 42% of Microsoft's revenue.

"This is the most sweeping reorg that I can recall," said Brad Silverberg, who ran the Windows division when Microsoft launched its seminal Windows 95 operating system.

In the 1990s, Windows was so dominant that a federal judge ruled that it was a monopoly. The U.S. Department of Justice sought to break up Microsoft, accusing the company of abusing its dominance in the PC operating system market to crush rivals. The company ultimately signed a consent decree in 2002, agreeing, in part, to make Windows interoperable with non-Microsoft software.

While Microsoft is still focused on building the platform upon which other tech companies run their technology, that focus is now on Azure, said Mr. Silverberg, a venture capitalist who co-founded Fuel Capital, a San Francisco-based firm. He praised Mr. Nadella's acknowledgment of Windows' reduced importance.

"He recognizes the world for what it is, not what it used to be," Mr. Silverberg said.

Write to Jay Greene at Jay.Greene@wsj.com

(END) Dow Jones Newswires

March 29, 2018 13:33 ET (17:33 GMT)

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