Does the Microsoft reorg point to future breakup of company?

Microsoft Corporation on Friday announced an executive shakeup that sheds new light on a number of recent developments within the company, including the surprise release last week of Windows Millennium Beta 2 and the renaming of Windows CE. Microsoft president Steve Ballmer announced that the software giant was promoting a group of executives to new positions, including Jim Allchin, Bob Muglia, and Brian Valentine. What's amazing about these promotions, of course, is that most these people are the executives that have spearheaded the company's long, slow drive to Windows 2000, a product with legendary delays and cost overruns. Most troubling, however, is the effect these promotions will have on the Consumer Windows team, which has been struggling to create a new upgrade to Windows 98 that offers something compelling for the users that aren't targeted by Windows 2000. As reported earlier in WinInfo, Windows Millennium has been the subject of much debate within Microsoft. And then there is the obvious nature of the reorganization, which splits the company into groups that most analysts have identified as the ones the government would seek in a potential breakup of the company.

Jim Allchin was promoted to vice president of the Platforms Group, where he will assume overall responsibility for the Windows family of operating systems and, of all things, streaming media. Bob Muglia was promoted to vice president of the Business Productivity Group, where he will manage the development of Microsoft Office, BackOffice, and software for non-PC devices such as palm-sized PCs, eBooks, and the like. Brian Valentine, meanwhile, has assumed control of the new Windows Division, which consolidates the previously separate Consumer Windows Division and Enterprise Division, effectively placing Windows 2000 and Windows Millennium under the same chain of command. Valentine has been promoted to the senior vice president level as well.

There are a host of other changes and promotions, but one might wonder how this will affect Windows Millennium. Events of the past few weeks are suddenly explained by the reorg, including the surprise release of Windows Millennium Beta 2 last week. Just days previous, the Consumer Windows team was giving private demonstrations of Millennium to the press at Fall Comdex, but the company never gave any indication that it was nearing Beta 2. In fact, the closest timetable I heard at the time was, "by the end of the year." The sudden release of Beta 2 suggests that the Consumer Windows team was anticipating the changeover and it wanted to offer up proof that it was on the road to shipping Millennium lest the product be cancelled. One might conclude that the somewhat lackluster Millennium--which offers few improvements over Windows 98 other than some bug fixes and newer versions of bundled applications--might be rushed out the door to avoid an embarrassing cancellation. Millennium was originally expected to in late 2000, but I wouldn't be surprised to see it come together more quickly than that and be packaged as a limited release upgrade that is available only with new computers and not at retail. One thing's for sure: Microsoft isn't going to get away with charging $90 for this upgrade.

And then there's Windows CE, which lost its moniker to become "Windows Powered," an obvious attempt to push the generic Windows name brand. With all of the Windows products now under a single group within Microsoft, the company has realigned itself along product boundaries, not its customers even though it was only March of this year when the company reorganized itself into customer-centric groups. This is a total reversal of that strategy.

So one must question the timing of this reorg, though Microsoft has made many such changes in the past few years. The company recently met with the mediator in its antitrust case and the DOJ just yesterday hired an outside financial advisor, Greehill & Co., to help it plot "structural relief" for the post-trial Microsoft. Legal experts say that this means the DOJ is seeking to break up Microsoft, since Greenhill & Co. is an expert at divestiture. The goal is to fix the problem--Microsoft's abuse of its Windows and Office monopolies--while not destroying the computer and financial industries built around the company. But Microsoft has strenuously denied that it is amenable to a breakup. Why then would it choose to provide an easy solution to that goal by reorganizing into the very business units that any breakup would be likely to follow

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