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. Nearly 700 million devices run Windows 10,
the latest version. All told, some version of Windows was on more
than 1.5 billion devices world-wide. 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 13:40 ET (17:40 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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