Microsoft Corp. MSFT +1.61% unveiled a broad reorganization Thursday, aiming to break down barriers between its internal units and potential partners outside the company.
The long-expected set of moves announced by Chief Executive Steve Ballmer strips away a structure based around divisions overseeing particular products, such as Microsoft Windows, the Xbox videogame console or the Office bundle of workplace software. In its place, Microsoft is imposing a horizontal scheme with managers that oversee different kinds of functions -- like engineering, marketing and finance -- that would be applied to multiple product lines.
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Mr. Ballmer said the move is designed to make sure that the company runs "holistically, not as a set of islands."
The company's product-focused units have been known for sometimes acting at cross-purposes, competing for resources and not sharing technologies or moving as quickly as possible. Mr. Ballmer, in a memo to employees, acknowledged that such problems can no longer be tolerated as Microsoft scrambles to catch up in technology trends such as mobile devices and so-called "cloud" offerings.
"We must have a clear strategic direction but also empower employees closest to the customer to make decisions in service of the larger mission," Mr. Ballmer said in his memo.
Highlights: Ballmer's Reorganization Memo
Ballmer's Full Memo to Employees
This isn't the first time Microsoft has reshuffled the corporate organization. But the latest set of moves is particularly sweeping, reaching virtually every part of the company.
"This is a big undertaking," Mr. Ballmer said. "It touches nearly every piece of what we do and how we work."
The Redmond, Wash., company said its product engineering will be split into five parts, including one combining Windows for computers and smartphones, which had been in separate product divisions; a group for hardware engineering for computers, and for the Xbox; and an engineering group for Microsoft's back-end technologies for corporations and software developers.
Microsoft also announced new roles for several executives. Tony Bates, who had been in charge of Microsoft's Skype digital-calling service, has been appointed to head business development and "evangelism."
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Julie Larson-Green, the head of Windows engineering since last fall, now will lead the group overseeing devices like the Surface tablet computer and Xbox. Terry Myerson, who had previously overseen Microsoft's Windows Phone efforts, will now also oversee all engineering for operating systems for personal computers, mobile devices, videogame consoles and back-end systems.
Qi Lu was named head of the company's engineering for applications and services. Satya Nadella, another prominent Microsoft executive, will lead development of back-end technologies for data centers -- including their construction and operation -- and related technologies such as databases, the company said.
Microsoft said Kurt DelBene, who had been in charge of Microsoft Office, would retire.
Analysts said the moves could help improve internal collaboration at the company. "The first thing I expect is a more collaborative and unified Microsoft," said Patrick Moorhead, who heads the market research firm Moor Insights & Strategy. "What this translates to is a much more unified experience between the phone, tablet, PC, and Xbox."
Broad outlines of the reorganization had been previously reported by news organizations that include AllThingsD. The online publication, like The Wall Street Journal, is owned by News Corp NWSA -0.52% .