Is Microsoft’s Structural Shakeup Right Around the Corner?
Some executives at Microsoft (NASDAQ:MSFT) are concerned about the rumored changes that could be unveiled soon. A restructuring of the company could mean some employees seeing their positions disappear, but most of the worry seems to stem from simple uncertainty.
Microsoft has been under pressure from activist shareholders for some time to restructure. Greenlight Capital (NASDAQ:GLRE) had previously tried getting Microsoft to make changes to its business. More recently, ValueAct Capital, which bought a 1-percent stake in the company, seemed to suggest hopes that Microsoft would shift some of its focus to cloud computing.
Despite the pressure, Microsoft has yet to bend to the shareholders will, at least not openly. People familiar with the matter have said that Microsoft CEO Steve Ballmer has been devising a way to restructure the company and put a focus on being a “devices and services company.” Of course, this doesn’t suggest too much about what will actually happen at the company.
A restructuring could be good for the company, as the current structure of the company can be described as convoluted. A new structure seems likely to create new, clearer divisions in the company, such as consumer and enterprise divisions with a devices and a services unit within each division.
The prospect of new divisions and units seems to be leaving a lot of top executives at the company concerned, as they could find themselves stranded without the unit that they were formerly heading. Several executives have received extra focus, including the president of Microsoft’s Servers and Tools division, Satya Nadella; the president of the Skype communications unit, Tony Bates; and Don Mattrick, the president of the Interactive Entertainment division, which is home to the Xbox.
The executives mentioned above may have a little bit of job security. But there is less certainty for Terry Myerson, who’s in charge of the Windows Phone division, and Qi Lu, president of the Online Services Unit. Unfortunately for all of these executives, there is very little information coming out of Ballmer as of yet. He hasn’t been consulting them much on his plans, but rather discussing things with only a small group and some board members. However, sources for AllThingsD said that Ballmer will likely inform senior executives of his plans before July 1.
Changes to the company would come at no simple time for Microsoft. The decline of the PC industry is a major threat for the company, which relies heavily on PC software like its flagship product, Windows — of which the latest version has struggled with consumer complaints. The mobile market for smartphones and tablets has also proven difficult for Microsoft to push into, thanks to resistance from Apple (NASDAQ:AAPL) products and devices running on Google’s (NASDAQ:AAPL) Android operating system.
Restructuring could also pose dangers for the company if it didn’t go smoothly. Microsoft has the launch of the Xbox One to look forward to later this year. If a new lineup loses any pivotal team members or weakens the business at the wrong moment, it could jeopardize the launch of the device, which is a crucial time for a gaming console.
It may be bad enough that Ballmer is keeping executives on edge about upcoming changes by keeping them in the dark. The announcement of changes could mitigate fears for some or actualize them for others. Either way, more information on restructuring is likely to surface within the next couple weeks if Ballmer does share his plans with senior executives by July 1.
Follow Mark on Twitter (@WallStMarkSheet)