Microsoft Corp. announced yesterday it would reorganize its corporate structure in a bid to become more responsive to threats from rivals such as Google Inc. and Yahoo Inc.
Microsoft, based in Redmond, Wash., is redesigning its business to focus more on Internet-based services such as MSN e-mail and other communications software, security updates for businesses and consumers, and Xbox online gaming services.
The company's Windows operating system, which is installed in the vast majority of personal computers, has long been the primary gateway for most users to get access to everything from the Internet to software for managing money and storing digital photographs. But recently, Yahoo, Google and America Online Inc. have released new software that offers alternatives to certain Windows functions and that challenges Microsoft's control over the desktop.
"We see a new era of opportunity to provide greater value to our customers by weaving both software and services into forms that suit their needs," Steven A. Ballmer, chief executive of Microsoft, said in a statement. "These changes are designed to align our business groups in a way that will enhance decision-making and speed of execution."
The company created three new divisions under new leadership, all of which will be overseen by a chief technical officer, Ray Ozzie, who will spearhead Microsoft's software-services strategy. The divisions are products and services, business, and entertainment and devices.
Over the next 18 months, Microsoft plans to introduce a series of new software programs targeted at individual users as well as large corporations, Ballmer said in the release.
The battle for control over online users is accelerating along with the growth in online advertising spending. The major Internet companies are competing head-to-head to offer bigger, better and faster versions of e-mail, specialized search engines, Internet phone services, and mapping images like Google Earth and MSN's Virtual Earth.
"There is rapid innovation," said Larry Cohen, a spokesman for Microsoft. "It is absolutely a market that is dynamic. It is driving companies, including Microsoft, to do better and better work."
Ultimately, the goal of all of these companies is to offer two main things: technology and media content, said Allen Weiner, an analyst with Gartner Inc. Microsoft and AOL are rumored to be in discussions about a partnership that would marry those two elements, but this restructuring seems to signal that Microsoft is emphasizing the technology side of the equation, Weiner said.