Microsoft Announces Windows Unit Shake-Up
By ALLISON LINN, AP Business Writer Thu Mar 23, 8:10 PM ET
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 next 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 lead a new group that includes Windows 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 at Microsoft.
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 departure from that job is unrelated.
The Redmond-based software maker said the restructuring is aimed at improving its online strategy, making quicker decisions without going through layers of executive approval, and responding more nimbly to growing threats from online competitors.
Companies such as Google Inc. and Yahoo Inc. (Nasdaq:YHOO - news) are fast developing Internet-based products for such things as 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, Windows Live.
The reorganization also will create a group to focus on the engineering of new online products, and another to handle business functions, such as marketing and advertising sales, for those products.
Other groups will work on the core operating system and on 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.
Analyst Ted Schadler with Forrester Research said Thursday's changes signal that Microsoft intends to give more power to those who market and sell products, decreasing the sway of engineers who develop the software.
That's a smart move, he said, because the company is facing both an increasingly saturated market for Windows and ever-more-sophisticated competitors.
But Schadler said it's too early to say whether the reorganization will help Microsoft compete with such wide-ranging threats as the Firefox Internet browser and Google's increasing array of online consumer products. 
"The jury's definitely still out," he said.
The changes follow a directive Microsoft Chairman Bill Gates issued several months ago to offer more ways to do things like store e-mail and manage business tasks over the Internet.
It also comes after a restructuring announced in September aimed at reducing Microsoft's bureaucracy by grouping its seven business units into three divisions.
On Tuesday, Microsoft said 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. Microsoft blamed the delay on setbacks in completing security enhancements and other functions.
Johnson said the restructuring announced Thursday would have come regardless of the Vista delay, because of the need to be more agile and "start our focus on the future planning for Windows."
Michael Cherry, an analyst with independent research firm Directions on Microsoft, questioned whether changing executive leadership would solve the problems that 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 it 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 to make it 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 Announces Windows Unit Shake-Up
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