NEW YORK —
Terry Myerson will lead Microsoft's operating systems and engineering group, namely Windows. Qi Lu will head applications and services.
Ballmer stressed the company's focus on "one Microsoft" in his memo. He said Microsoft will move forward operating as a cohesive company rather than a "collection of divisional strategies."
"Although we will deliver multiple devices and services to execute and monetize the strategy, the single core strategy will drive us to set shared goals for everything we do. We will see our product line holistically, not as a set of islands," Ballmer wrote.
The shake-up is being driven by competitive pressures as two of Microsoft's once much-smaller rivals, Apple and Google, have emerged as the technology trendsetters. In a world that increasingly revolves around mobile devices and Internet services, Microsoft has been scrambling to adapt to the upheaval. The company wants to ensure its relevance in the future while protecting the personal computer franchise that has always generated most of its revenue.
The changing of the guard has already been noted by Wall Street. Both Apple and Google boast market values higher than Microsoft, despite a surge in Microsoft's stock price during the past three months. The new pecking order would have seemed inconceivable when Google first went public nearly nine years ago. Apple's stock price is nearly 28 times higher than it was then while Google's is 10 times higher. Microsoft's stock price is up by just 30 percent since then, largely because the company has fewer outstanding shares than it did nine years ago.
Microsoft's lackluster stock performance has amplified speculation that the company might consider replacing Steve Ballmer, who took over when co-founder Bill Gates stepped down as CEO 13 years ago.
The reorganization could be Ballmer's attempt at placating shareholders with a dramatic overhaul that appears to borrow elements of Apple's and Google's set-ups. The winnowing of Microsoft's disparate divisions and Ballmer's rallying cry for "One Microsoft" suggests the company is trying to make its products work together more seamlessly, much like Apple has been doing since the late Steve Jobs returned as that company's CEO in the late 1990s.