*Extra* Ex-SGI Chief Belluzzo to Run Microsoft's Internet Businesses

Belluzzo will fill the long-dormant position of running the software giant's Net businesses, including MSN and WebTV.
Author:
Publish date:

Richard Belluzzo is jumping out of the frying pan and into the fire.

Belluzzo, who

resigned Monday as chief executive of troubled high-end computer maker

Silicon Graphics

(SGI)

, will assume the long-dormant position of running

Microsoft's

(MSFT) - Get Report

numerous Internet businesses, according to four sources familiar with Belluzzo's plans, including two who have discussed them with Belluzzo directly.

Microsoft's consumer and commerce group, currently headed by vice presidents Brad Chase and Jon DeVaan, includes Internet service

MSN

, Internet-TV hybrid

WebTV

, the company's interactive television efforts and marketing activities for the Windows CE operating system for handheld devices.

The group has been a center of attention at Microsoft for several years because of its chronic failure to match

America Online's

(AOL)

dominance of Internet access and services. More recently, Microsoft's Internet operations have been under scrutiny over speculation that Microsoft will create a separate

tracking stock tied to the group's performance.

Belluzzo is an unlikely choice for the job. A 22-year veteran of computer and printer manufacturer

Hewlett-Packard

(HWP)

, he was considered a top candidate eventually to head H-P before he surprised Silicon Valley at the beginning of 1998 by taking a stab at turning around SGI.

Belluzzo is considered a capable operating executive but is certain to meet criticism because Microsoft observers have been expecting the software giant instead to choose a seasoned media or Internet executive, much as AOL turned to Bob Pittman when it needed outside blood.

Microsoft hasn't yet announced Belluzzo's arrival, and a company spokeswoman declined to comment Monday night on any personnel moves. Belluzzo didn't return a phone call Monday evening, and SGI executives declined to discuss where the former executive would be working, though the company said it is a non-CEO job with a company that doesn't compete with SGI. One source says Microsoft had planned to announce Belluzzo's appointment at the beginning of September. Another source says the delay simply is because some of the relevant Microsoft officials are on vacation.

But Belluzzo's ties to Microsoft run deep. He dealt extensively with the company when he ran all of H-P's highly successful printer operations. In that role, he also worked under retired H-P executive Richard Hackborn, a Microsoft board member since 1994. Hackborn -- who, like Belluzzo, lives in Boise, Idaho -- recently spearheaded the search for H-P's new CEO, former

Lucent

(LU)

executive Carly Fiorina. Hackborn is slated to become non-executive chairman of H-P's board of directors when current chairman Lewis Platt retires at the end of the year.

At SGI, Belluzzo is leaving behind a troubled fallen giant. He recently succeeded in restoring the company to profitability, but then disappointed Wall Street with the announcement that SGI would undergo its third restructuring in three years. That move, announced Aug. 10 at a meeting for analysts in New York, includes the jettisoning of SGI's Cray supercomputer division and laying off 1,500 workers. Convinced the reshuffling means SGI will flounder further, investors hammered SGI's stock from more than 16 before the announcement to 12 7/16 Monday.

According to a source close to Belluzzo, the former CEO informed the board of directors of his offer from Microsoft before the New York meeting, but he didn't resign until after taking stock of Wall Street's reaction.

Meanwhile, at Microsoft, Belluzzo will join a business that also has had its share of knocks. The last senior executive to run the entire operation, albeit under a slightly different organization, was Pete Higgins, who took a leave of absence last November. The Microsoft spokeswoman says Higgins remains on his leave and has not indicated when or if he plans to return.

But Microsoft's Internet operations also lately have been showing signs of life. MSN plans to offer highly discounted access to the Internet, a move viewed as a major threat to AOL. The combined MSN sites (including such consumer-focused attractions as

MoneyCentral

and

CarPoint

) also are ranked third in overall users, behind only the combined sites of AOL and

Yahoo!

(YHOO)

.