Microsoft is undertaking its third corporate reshuffling in as many years, announcing the departure of four senior executives and combining the development teams that build the company’s hardware and software.
Stephen Elop, the former Nokia chief executive who led Microsoft’s hardware unit, will leave the company after a transition period. So will Eric Rudder, a former leader of the server and tools and research units, Mark Penn, chief insight officer and a former director of strategy at the company, and Kirill Tatarinov, leader of the Microsoft Business Solutions group.
The moves are the largest reshaping of the executive ranks in Satya Nadella’s 16 months as chief executive. An earlier, smaller shuffle occurred in March last year.
In an email to employees early Wednesday, Nadella said the moves fit within his aim of making Microsoft a more nimble company. Nadella has spent much of his time leading the company preaching better alignment of teams and goals at a business with a reputation for corporate infighting.
Daniel Ives, an analyst with FBR Capital Markets, said the moves are an indictment of the company’s mobile device strategy following the $7.5 billion deal to buy Nokia’s handset business.
“Elop getting the exit speaks to Microsoft’s view that Nokia and the overall mobile strategy (were) clearly not heading down the right path,” Ives said in an email. He said he expects Microsoft to take a charge in the next year to account for the reduced value of the assets acquired in the Nokia deal.
In contrast to former Chief Executive Steve Ballmer, “Nadella does not wear rose colored glasses,” Ives said.
Elop, who headed Microsoft’s business unit before leading Nokia, engineered with Ballmer the sale of Nokia’s struggling phone hardware business to Microsoft in late 2013.
In July, Nadella announced a restructuring that reduced by about half the workforce acquired in that deal. The 18,000 layoffs also included cuts to a range of other Microsoft business units.
The reorganization announced Wednesday, which builds on a 2013 restructuring under Ballmer, will consolidate Microsoft’s engineering efforts into three teams.
The former Microsoft Devices and Services group, builder of hardware from the Xbox game console to Lumia smartphones and Surface tablets, will be combined with the Operating Systems Group led by Terry Myerson, and restyled as the Windows and Devices group.
Microsoft Business Solutions, the maker of software designed to help companies track sales and manage other elements of their business, will be looped into Scott Guthrie’s Cloud and Enterprise unit.
And the company’s education-focused initiatives will now reside in Qi Lu’s Applications and Services group.
The changes remove an outlier left over after a reorganization Ballmer spearheaded in 2013. That restructuring eliminated most of the distinct product groups that ran essentially as their own business, centralizing functions like marketing and sales, and grouping engineering teams into fewer units.
But Microsoft Business Solutions, under Tatarinov, remained a distinct business unit, and even a physically separate one in Bellevue’s Eastgate area, away from the company’s downtown Bellevue cluster and main Redmond campus.
Penn, a former adviser to Bill and Hillary Clinton who also led the Burson-Marsteller public relations giant, will lead a new investment group that will invest in media, research and marketing companies. Stagwell Group, introduced to the world by press releaseWednesday, has raised $250 million in funds to invest, including a contribution from Ballmer.
“I’ve worked closely with Stephen, Eric, Kirill and Mark and have incredible respect for each of them and wish them well,” Nadella said in the note to employees..