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Microsoft Announces Windows Unit Shake-Up

Office biz exec Steve Sinofsky moved to Windows group.

(Seattle) Microsoft Corp. announced a shake-up Thursday of the unit that includes its flagship Windows operating system, two days after the company admitted it won't have its new consumer version of Windows ready for the holiday season as planned.

Under the changes, Microsoft said Steven Sinofsky, a high-ranking executive currently in charge of developing many of the company's Office business products, will be tasked with leading a new group that includes the Windows operating system and Windows Live, a key effort to provide more Web-based offerings.

Microsoft said Sinofsky will focus on planning future versions of Windows, while outgoing Windows executive Jim Allchin will work closely with another Microsoft executive, Brian Valentine, to finish the long-delayed Windows Vista.

Microsoft also said Ben Fathi, a Windows executive currently working on storage and file systems, will replace Mike Nash as head of its Security Technology Unit. Nash will take on another, as-yet-unannounced role.

Security issues were among the reasons for the delay in Windows Vista. But Kevin Johnson, co-president of the unit that is being reorganized, said Nash's planned departure is unrelated.

The Redmond-based software maker said the overall restructuring is aimed at helping Microsoft improve its online strategy, make quicker decisions without going through layers of executive approval and respond more nimbly to growing threats from online competitors.

Companies such as Google Inc. and Yahoo Inc. are fast developing Internet-based products for things like sending e-mail or storing photos, and these free services threaten Microsoft's desktop-bound Windows and other products. Microsoft has responded with a beefed-up online effort of its own, dubbed "Windows Live," which is being given even more prominence in this shake-up.

The reorganization also will create a new group to focus on the engineering of new online products, and one tasked with business functions such as marketing and advertising sales for those products.

Other groups will work on the core operating system and the business for servers and software tools.

As previously announced, Allchin, co-president of the Platforms and Services division, will retire next year. Until then, he and Johnson, formerly a Microsoft sales and marketing executive, will continue to lead the division.

The changes follow a directive Microsoft Chairman Bill Gates issued several months ago to rally employees toward offering more ways to do things like store e-mail and manage business tasks over the Internet.

It also comes on the heels of a previous restructuring announced in September and aimed at reducing bureaucracy that, some say, has hindered the company's ability to nimbly compete with companies such as Google. Those changes grouped the company's seven business units into three divisions.

The latest reorganization comes two days after Microsoft said that the consumer version of Windows Vista, its much anticipated new operating system release, would be delayed until early next year, missing the all-important holiday season. Some versions will be released to big businesses in November.

The delay, resulting from Microsoft setbacks in completing functions including security enhancements, is expected to hurt companies that make Windows-based computers, while potentially giving a holiday sales boost to others, especially rival Apple Computer Inc.

Michael Cherry, an analyst with independent research firm Directions on Microsoft, questioned whether a change in executive leadership would solve the types of problems that had led to the Vista delay and other setbacks.

More fundamental, he said, is a cultural problem in which management is afraid to tell top executives that projects can't be completed in time, or with the myriad features that have been promised.

"You have to go back to some basic discipline, and I don't think that the Windows division and Microsoft has shown a lot of discipline," he said. "And part of that is being sure about what you can do, is setting reasonable goals and sort of sticking to them."

Vista will be the first new version of Windows since XP was released in late 2001. Some analysts had originally expected Vista to launch as early as 2003. But the system release was delayed, first by a companywide effort to improve security of all Microsoft products. At another point, Microsoft also decided to attempt to overhaul the operating system so it would be easier to add new features.

Over time, the company has scaled back its goals for Vista, deciding not to ship the product with an advanced system for storing and organizing data, called WinFS. Microsoft does plan improvements to how users can find things like pictures, e-mails and documents, but the more sophisticated WinFS system won't be added until later.

Microsoft shares fell 38 cents to $26.77 in early afternoon trading Thursday on the Nasdaq Stock Market.

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