Microsoft's top brass at its Irish headquarters in Sandyford are watching with interest as global chief executive Steve Ballmer unveiled his biggest reorganisation since 2002 to speed development of hardware and services at a company plagued by anaemic growth and competition in mobile computing.
Microsoft employs 1,200 staff in Ireland and a further 700 contract workers. The software giant was one of the first major IDA computing clients when setting up in Ireland in 1985.
Last week, the software maker reduced the number of business units to four and said Windows chief Julie Larson-Green will oversee all hardware, including the Surface tablet and Xbox console and related games. Windows Phone software head Terry Myerson will add responsibility for the Windows and Xbox operating systems.
There are no Irish executive changes, according to a spokeswoman.
Ballmer is concentrating divisions around hardware and internet services to appeal to customers who increasingly use mobile devices for tasks once done on desktop machines. As demand for Microsoft's flagship Windows software ebbs amid a global PC slump, Ballmer needs to slice away management layers that have hampered product development.
"First and foremost this is an attempt to address the fact that they are behind in tablet and mobile," said Colin Gillis, an analyst at BGC Partners in New York. "They're effectively saying, 'We have some problems we need to address and we need to make radical changes to accomplish it'."
"Microsoft doesn't lack for great ideas, they lack the ability to execute on these ideas," Richard Williams, an analyst at Cross Research, said. "We're hoping this now means there's less red tape to go through if you have an idea."
The shuffle reverses some changes Ballmer made in 2002 when he divided Redmond, Washington-based Microsoft into what was then seven product units, each led by an executive with operational and financial responsibilities. Since then, he's only tinkered with individual businesses.
In 2011, Bob Muglia was pushed out as server chief, and in 2006 Ballmer revamped leadership of the Windows and internet units after development delays for the Vista operating system.
"To advance our strategy and execute more quickly, more efficiently, and with greater excellence we need to transform how we organise, how we plan and how we work," Ballmer wrote in a memo to employees posted on Microsoft's website last week.
Shifts in technology and computing habits since 2002 made another overhaul necessary, according to Matthew Hedberg, an analyst at RBC Capital Markets. The new structure will help Microsoft support new products such as the Xbox One console, Yammer social-business tools and Skype video-conferencing platform, he said.
"They rolled out the products first, refreshed their entire product portfolio, and now they're tweaking the whole organisation structure," Hedberg said in an interview.
"Changing times call for different measures."
The reshuffle also signals which executives may be poised to succeed Ballmer, who has been CEO since 2000.
"If certain people emerge from this, there's a higher likelihood that one of these division heads will succeed Ballmer," said Hedberg.
As demand wanes for PCs, Ballmer is turning away from Microsoft's original focus on "putting a PC on every desk in every home," he wrote in the memo. Market research firms IDC and Gartner said last week that PC shipments declined 11 per cent in the second quarter, for a record fifth straight quarter of declines.
Microsoft is also trying to challenge Amazon and Google in cloud services as more customers opt for software that runs over the web instead of on corporate machines.
Cloud efforts that were scattered across several divisions will now be concentrated under two units. Satya Nadella, current head of the server business, will direct cloud and enterprise products. Qi Lu, responsible for Bing and other internet projects, will oversee Office and Skype and run a new applications group.
It will fall to Larson-Green to bolster sales of the Xbox gaming console and Surface, Microsoft's first computer. The Surface tablet sold just 900,000 units in each of the fourth and first quarters, according to IDC, and the new Xbox underwent a rocky unveiling recently as consumers balked at the price and restrictions on used games.
Among the other management changes, Skype president Tony Bates will run a new group for business development and acquisitions and cultivate relationships with developers and computer makers.
Tami Reller, who now leads Windows marketing, will oversee a marketing unit. The finance heads for each division will report to Amy Hood, Microsoft's CFO. Previously the CFOs in each unit reported to the head of their respective businesses.One senior executive, Office division chief Kurt DelBene, is retiring. Xbox head Don Mattrick, previously a contender for the hardware post, left two weeks ago to become CEO of Zynga.
Ballmer said on a conference call last week that no job cuts are planned. Microsoft will report fourth-quarter earnings on Thursday using the old group structure, Hood said on the call.
© Bloomberg (additional reporting by Nick Webb)