Update: Microsoft Details Reorganization

Microsoft announced its long-awaited reorganization today, reorienting the company around five basically autonomous divisions that will focus on individual customer segments. Billed as a move to "reinvent Microsoft," company executives portrayed the reorganization as evolutionary rather than revolutionary.

However, by creating semi-autonomous divisions with functions such as sales and marketing duplicated in each, this may be the biggest reorganization in recent years.

President Steve Ballmer and chairman Bill Gates denied that the reorganization has anything to do with settlement discussions, which are set to begin tomorrow with the 19 states involved in its federal antitrust suit. "This is a very competitive business, but [the reorganization] has nothing to do with any lawsuit," Gates said. "It's a natural evolution for us and one that makes us more nimble."

The five divisions, each of which will have its own sales force and marketing staff, consist of:

* The business and enterprise division, headed by senior VP Jim Allchin. This group will focus on IT customers, and will include Windows 2000 development. Deborah Willingham, formerly head of the enterprise customer unit, will be VP of marketing for the division.

* The consumer Windows division, headed by Allchin and VP David Cole. This group will focus on consumers and Windows 98.

* The business productivity group, headed by senior VP Bob Muglia. This group will focus on knowledge workers and will include the Office applications suite.

* The developer group, headed by group VP Paul Maritz. Tod Nielsen will become VP of marketing for this group, which will produce developers' tools.

* The consumer and commerce group, headed by VP Brad Chase and VP Jon DeVaan. This group will have purview over Microsoft's online and E-commerce efforts, including Microsoft Network.

Ballmer said the reorganization is aimed at helping Microsoft to focus on individual customers' needs; to generate a renewal of excitement around the PC, both inside Microsoft and with consumers; and to provide the parallel functions and autonomy within the new divisions that Ballmer, Gates, and the executive committee view as intrinsic to serving customers better.

As part of the new focus, Microsoft has set up a 14-member "business leadership team," which replaces the eight-member executive committee. The team will include Allchin, Orlando Ayala, Ballmer, Chase, DeVaan, Gates, chief operating officer Bob Herbold, VP of original equipment manufacturer licensing Joachim Kempin, CFO and senior VP of finance Greg Maffei, Maritz, VP of public relations Mich Mathews, Muglia, senior VP of law and corporate affairs Bill Neukom, and group VP of sales and support Jeff Raikes.

Notably absent from the new leadership team's lineup is chief technology officer Nathan Myhrvold, who had been rumored to be on his way out of the company in recent media reports. Gates downplayed the switch, and Myhrvold has denied that he is leaving. "I have a group of people who I rely on for technology direction, and Nathan is by far the most important on that list," Gates said.