July 23 (Bloomberg) -- Microsoft Corp.'s Kevin Johnson, who oversaw the bid to buy Yahoo! Inc., is leaving, adding to the challenges facing the software maker's Internet unit.

Johnson, who joined Microsoft in 1992, also oversaw the Windows business. The company will split Johnson's group in two, Microsoft said in a statement. He is leaving to run Juniper Networks Inc., the Wall Street Journal reported.

As one of three divisional presidents at Microsoft, Johnson took over the Windows and Online group in 2005, overseeing the unsuccessful Yahoo bid and the release of Windows Vista. A possible successor to Chief Executive Officer Steve Ballmer, Johnson led Microsoft's efforts to gain ground on Google Inc. in the Internet search and advertising market.

``This is surprising -- I thought he was at Microsoft for the long haul,'' said Matt Rosoff, an analyst at Kirkland, Washington-based Directions on Microsoft. ``There were one million questions about the online-services division. This is one million and one.''

Sarah Sorensen, a spokeswoman for Sunnyvale, California- based Juniper, declined to comment.

Johnson oversaw more than 30 acquisitions to in an effort to boost Microsoft's Internet software and services, according to his biography on the company's Web site. Before that, he ran sales and marketing the Redmond, Washington-based company.

New Groups

Microsoft will divide Johnson's unit into one group handling Windows and related Internet services, and one for online services such as Web search and Internet advertising. The company didn't say when Johnson will leave.

The Windows business will be led by senior vice presidents Steven Sinofsky, Jon DeVaan and Bill Veghte, who will each report to Ballmer. The company will conduct a search for a new online-services leader.

Last week, Microsoft cut 1 cent a share from its profit forecast for the year and said it will boost operating expenses by about $500 million, largely because of spending on Internet services.

Microsoft rose 63 cents to $26.43 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have declined 26 percent this year. Juniper added 53 cents to $22.89 and has declined 31 percent.

If he takes over at Juniper, Johnson will join a company with about a 20th of Microsoft's annual revenue. Juniper is the second-largest maker of networking equipment after Cisco Systems Inc.

Chairman and CEO Scott Kriens, 50, has led Juniper since its founding in 1996. The company, which sold shares to the public in 1999, had revenue of $2.84 billion last year.

In January, Juniper's operating chief Stephen Elop resigned to join Microsoft, where he took charge of the unit that sells Office spreadsheet and word-processing software. Juniper hasn't announced a replacement yet for Elop, its first chief operating officer.

To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

Last Updated: July 23, 2008 20:37 EDT