Nadella Conducts Biggest Microsoft Revamp Since Taking Over

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Microsoft’s Stephen Elop, Mark Penn to Leave Company

Microsoft Corp. Chief Executive Officer Satya Nadella made his biggest overhaul since taking over, naming the team that will focus on critical areas such as cloud computing and parting ways with one-time CEO contender Stephen Elop.

Senior executives Kirill Tatarinov and Eric Rudder also will leave the software maker, the Redmond, Washington-based company said in a statement Wednesday.

The revamped leadership team reflects a focus on three key areas: personal computing, cloud platforms and productivity and business processes. Since becoming CEO early last year, Nadella has been remaking a company that had been known for internal battles. Wednesday’s move is decisive step to execute a strategy focused on cloud and mobile software, including products that work with rival’s offerings.

“This change will enable us to deliver better products and services that our customers love at a more rapid pace,” Nadella said in the statement.

Executive Vice President Terry Myerson will lead a newly formed Windows and Devices Group, while Executive Vice President Scott Guthrie will continue to lead the Cloud and Enterprise group. Qi Lu will remain in charge of the applications and services group, which includes Office apps and Bing search.

Elop’s Realm

The company’s Nokia handset business, run by Elop, has been a problem area; Microsoft cautioned in April that it might have to take a writedown in the operation. Elop, executive vice president of Microsoft’s devices group, had been the CEO of Nokia Oyj and engineered the $7.33 billion sale last year of the handset unit to Microsoft. The acquisition returned him to a company where he earlier had been a senior executive.

Profit last quarter exceeded analysts’ estimates as Microsoft boosted cloud software sales. In the phone-hardware unit, the former Nokia business, the cost of goods sold exceeded revenue, weighing on results even before marketing and development expenditures were taken into account.

“Nadella looked in the mirror and realized hard decisions needed to happen,” said Daniel Ives, an analyst at FBR Capital Markets & Co. “These changes needed to happen sooner rather than later as Nadella and Redmond head into a crucial, make-or-break fiscal 2016.”

Rudder, executive vice president for advanced strategy, is a 27-year veteran of the company who once ran Microsoft Research. His role has been reduced of late. Tatarinov, executive vice president for business solutions, was the only senior executive whose products -- accounting and customer software -- hadn’t been integrated in previous reorganizations.

Penn Resigns

Also, Chief Insights Officer Mark Penn will resign in September to form a private-equity fund, Nadella said in a memo to employees. The fund, Stagwell Group LLC, will invest in areas including advertising, research and digital marketing services and includes Ballmer as a core investor.

Microsoft said his departure is unrelated to the management restructuring. Penn had previously overseen marketing and strategy.

The overhaul will leave Microsoft’s senior leadership team with 12 executives, including Nadella.

The company’s shares rose less than 1 percent to close at $45.97, leaving the stock down 1 percent this year.

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