Cloud Computing, Smartphones and Tablets Drive Microsoft to Reshuffle Upper Management

Microsoft has bowed to pressure from its board of directors and investors and will reshuffle its upper management in an attempt to better compete with Apple and Google (News - Alert). The move, which would promote managers with engineering skills and experience executing product plans, would enable the company to better compete in the areas of smartphones, tablets and cloud computing.

Four top executives have left Microsoft since May, as criticism has grown that the company is not keeping up with competitors. A Microsoft (News - Alert) spokesman declined to comment on the management changes.

“You see the engineering team ascending because Steve is realizing that there is a need to execute on a vision and in order to do that you have to actually understand how software is built,” said Wes Miller, an analyst at the Kirkland, Wash.-based research firm Directions on Microsoft. “It’s a whole other thing to be able to say, ‘I’ve been at Microsoft, I understand software, and what you are saying will or will not work.’”

CEO Steve Ballmer (News - Alert) ousted veteran server division president Bob Muglia last month, and it is believed his replacement will know how to combine server software with Web-based services in a bid to expand the company's footprint in the cloud computing arena.

Tony Ursillo, an analyst at Loomis Sayles & Co., said investors are concerned that Microsoft is falling too far behind in the areas of mobile phones and tablet computing. With those devices rapidly supplanting personal-computer purchases, revenues from the Windows operating system are expected to drop.

Ballmer has been under pressure to defend his leadership after the failure of the company's mobile phone Kin last year, as well as the loss of market share for smartphone software and the general need for more innovation in the mobile computing arena. After Ray Ozzie, chief software architect, announced plans to step down in October, Ballmer decided not to replace him, saying Microsoft already had "strong technical leaders in each business group."

“You can play pin the blame on the donkey, but the reality is Steve has to accept some of the blame,” said Miller. “He also has to put the right people in the right places.”

Nokia (News - Alert) is about to undertake a major management shakeup as well to better compete with Apple. Like Microsoft, Nokia has been unable to effectively counter the threat of the iPhone. It is also rumored that Nokia will make a bid to partner with Microsoft and the Windows Phone (News - Alert) division to more effectively compete with the iPhone and Android.