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TheStreet Open House

Ballmer's Biggest Bet at Microsoft

NEW YORK ( TheStreet) -- I think of Steve Ballmer as the John Adams of Microsoft (MSFT - Get Report). Bill Gates was George Washington, the historical figure, while Ballmer is the annoying guy behind the scenes, doing the diplomatic heavy lifting.

Ever since Gates left active management for full-time philanthropy, Ballmer has remained in his shadow, an object of fun for some, an object of ridicule for others.

Yesterday, Ballmer tried to change his storyline with a sweeping reorganization of the company which he told employees will transform it completely.

Dubbed "One Microsoft," the reorganization makes Microsoft a "devices and services" company. Here are the highlights:

  • A single operating systems group, covering everything from devices to the cloud, under Terry Myerson, who is still in his mid-40s and came to the company when his start-up Interse was acquired in 1997.
  • A devices and studios group under Julie Larson-Green , once called Ballmer's heir apparent. She gets hardware, everything from the Windows Surface tablet and the Xbox gaming system, which was previously under Don Mattrick, who left earlier in the week for Zynga.
  • A single marketing group under Tami Reller, who joined the company in 2001 when it acquired Great Plains Software. Previously head of Windows marketing, she now runs all marketing.
  • An advanced strategy and research group under Eric Rudder, previously in charge of developer outreach in servers and tools, who once advised Gates on technical planning.

Satya Nadella, who joined from Sun Microsystems in 1992, gets the cloud engineering job. Former Skype CEO Tony Bates will handle developer relations, and former Yahoo executive Qi Lu gets the business tools gig, which includes Microsoft Office.

What's most startling is that most of these people are not Microsoft lifers. Most came to the company through acquisitions, after building their own teams and corporate cultures.

I think that was intentional. Ballmer basically blew up his organization, blew up his corporate culture, and is trying to build a new one. All the top jobs are now line jobs, not staff, and the new leaders can be evaluated based on the performance of units they will build, not on what they've done within the old Microsoft structure.

This is more than a simple shuffling of deck chairs. By tossing the old structure of Windows, Office, entertainment and cloud, by putting people who didn't grow up in his own corporate culture in charge of most parts of the company, Ballmer is trying to jump-start a transition from the inside-out, rather than the top-down.

Investors must have liked what they heard. The stock was up 3% on the day, double the gain of the market as a whole. Microsoft has gained over 33% in value over the course of 2013, despite the ongoing collapse of the PC business and its failure to make gains in devices like phones and tablets.

But it's a little like the old joke about the magician swallowing gasoline, lighting a match and dropping it down his own throat. It's a great trick but you can only do it once.

If this doesn't work, Steve Ballmer's name will go down in history as a synonym for failure.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Dana Blankenhorn has been a business journalist since 1978, and a tech reporter since 1982. His specialty has been getting to the future ahead of the crowd, then leaving before success arrived. That meant covering the Internet in 1985, e-commerce in 1994, the Internet of Things in 2005, open source in 2005 and, since 2010, renewable energy. He has written for every medium from newspapers and magazines to Web sites, from books to blogs. He still seeks tomorrow from his Craftsman home in Atlanta.

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