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Microsoft Unveils Its Latest Reorg Spectacular

Steve Ballmer, CEO of Microsoft, during the grand opening of a company store in Troy, Mich., on June 28, 2013

Photograph by Bryan Mitchell/Bloomberg

Steve Ballmer, CEO of Microsoft, during the grand opening of a company store in Troy, Mich., on June 28, 2013

Say this for Microsoft (MSFT) Chief Executive Officer Steve Ballmer: The man knows how to do a reorg, reorg, reorg.

On Thursday, Ballmer unfurled his latest attempt to shape Microsoft into a company that can act as a collective whole rather than warring fiefdoms. Executives who managed individual pieces of hardware and software or service programs now have authority over companywide product lines. Windows Phone chief Terry Myerson becomes head of the group responsible for Windows running on phones, PCs, tablets, servers, and the Xbox. Skype overseer Tony Bates will now manage business development and evangelism for the whole company. Bing wizard Qi Lu now heads up apps and services engineering. In total, about 10 top executives now have much larger spheres of influence, per a letter Ballmer wrote to the Microsoft troops.

One of the big winners is Julie Larson-Green, who took over Windows at the end of last year when Steven Sinofsky got Ballmered out of the company. She’ll be in charge of all of Microsoft’s devices and entertainment stuff, from building phones and tablets to cutting deals with movie studios and cable operators. Former Xbox chief Don Mattrick had looked primed for this role, but he just bailed out to become CEO of Zynga (ZNGA).

Among the reorg departures is Office chief Kurt DelBene, who will retire to spend more time with his money. Craig Mundie has also stepped down from the senior leadership team to take on a “special project” for Ballmer. (I’m thinking holographic time machine meets death ray.) And Rick Rashid, who got to spend about $9 billion a year as Microsoft’s R&D chief, will narrow his focus to the company’s operating system technology.

One big takeaway: The cast of characters who have been running Microsoft recently are still running it. Ballmer seems to have just placed more responsibility on a number of plates, while also asking his managers to work together better than before. Unlike many of Microsoft’s past executives, this group actually seems to like talking to each other, a good sign for Ballmer’s plan.

On the other hand. Cough. Ballmer has now officially kicked off a grand battle to replace him. With no clear No. 2 after this reshuffling, putting most of his top lieutenants at the same level and asking them to work together also provides the clear subtext that someone better make sure he or she rises above the rest. Good times, y’all.

As others have pointed out, these leadership shifts will likely translate into financial reporting changes at Microsoft. The company has been longing to tuck its money-losing online services group, which includes Bing, into the larger corporate pie. Shareholders, after all, don’t need a constant reminder of just how much the company spends on its quest to catch up to Google (GOOG).

The latest reorg will only really work if Ballmer’s team can sell consumers on living in an all-Microsoft world. If you own an Xbox, Windows 8 PC, Surface, and Windows Phone, you’ve most likely been blown away by how well all these products work together. After many years of toil, Microsoft has made sharing pictures, movies, and documents across all of these devices a snap. The problem: Most people don’t know that. Windows Phone doesn’t have nearly enough market share to make this Microsoft experience a widespread reality, and Microsoft has struggled in the tablet realm, as well. Today’s moves should be measured by how far it can spread that product line.

Vance is a technology writer for Bloomberg Businessweek in Palo Alto, Calif. He is the author of Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future (HarperCollins, May 2015). Follow him on Twitter @valleyhack.

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