Microsoft Losing Operating Chief

Updated from 6:20 p.m. EST

Microsoft

(MSFT) - Get Report

said Wednesday that its president and operating chief, Rick Belluzzo, will leave his post in May after little more than a year on the job.

The world's largest software maker said in a press release issued after the market closed that Belluzzo's departure is part of a restructuring in which the leaders of each of the company's core businesses, including MSN and business solutions, will have greater accountability.

Microsoft said CEO Steve Ballmer and the company's "senior leadership team" will oversee shared priorities across those industries to ensure integrated products. Belluzzo will stick around through the summer to help with the transition.

"Given where Steve and I knew we needed to take the business, I decided it was the right time to pursue my goal of leading my own company," Belluzzo said in the press release.

Belluzzo, 48, joined Microsoft in September 1999 as a group vice president. In February 2001, he was promoted to president from his former post as head of the company's consumer business, where he presided over the development of MSN and the Xbox video gaming console. Belluzzo also has overseen Microsoft's software-as-service .Net initiative. He was previously chief executive of

Silicon Graphics

(SGI)

and spent 23 years at Hewlett-Packard.

The executive's departure comes in the middle of an action-packed week in the software sector. Tech stocks in general and software issues in particular have plunged in recent sessions amid rising Middle East unrest and a slew of software earnings warnings. Microsoft shares slid 97 cents Wednesday to $56.33 before adding 17 cents in postclose trading.

Microsoft did not say where Belluzzo would go next or whether it would seek a replacement for him. A company spokesperson was not immediately available for comment.

The move took Wall Street by surprise, although opinions differed over whether he was meant to be heir-apparent to Ballmer.

"A lot of people viewed Rick as being CEO material," said Mattson, an analyst at RBC Capital Markets. She said she believes Belluzzo was probably either presented with a more compelling opportunity or felt the opportunity to move up was limited.

Mattson, who has a sector perform rating on Microsoft, said his departure is just one more question to add to the list for the company as its April 18 earnings call approaches. Although the company has not joined a slew of others in preannouncing disappoint results, Mattson predicted in a research note Monday that Microsoft's earnings will come in a little light.

"We just found a lot of weakness in the underlying business in the March quarter," she said. Her firm hasn't done any underwriting for Microsoft.

Brendan Barnicle, an analyst at Pacific Crest Securities, suggested Belluzzo was overshadowed by his high-profile bosses. "I think at the end of the day, he was a hardware guy at a software company," said Barnicle, who has a buy rating on Microsoft.

"You've got such charismatic leaders with (Chairman and Chief Software Architect Bill) Gates and Ballmer," Barnicle added. "It's hard to get out of their shadow." His firm hasn't done any banking business with Microsoft but Barnicle owns Microsoft shares.

Analysts said they doubted the news would have much impact on the company or its stock. Barnicle said he believes Microsoft was up after hours from

Dell's

(DELL) - Get Report

news that it would beat revenue forecasts.

Melissa Eisenstat, an analyst at CIBC World Markets, viewed the news in a positive light. "I think that Steve Ballmer is such a dynamic leader that having more of the operation closer to him is better," Eisenstat said. She has a buy rating on Microsoft and her firm hasn't done business with the company.