Microsoft Makes Major Reorg, Allchin To Retire

However Allchin, a respected veteran who came aboard to drive the Windows business from Banyan Systems, will retire next year after the Vista client ships, Microsoft confirmed.

Sources say Allchin's decision to leave helped drive the reorg.

The reconsituted platforms group will now comprise not only the Windows client and server, tools but MSN as well with David Cole reporting into Allchin and Johnson, according to a memo sent by Microsoft CEO Steve Ballmer to employees and reporters.

The Microsoft Business Division, boasting both the Office juggernaut and the business ERP applications, will be led by Jeff Raikes as president. Doug Burgum will report to Raikes.

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The Entertainment and Devices Division will be headed by Robbie Bach and will encompass hardware and entertainment, plus mobile and embedded devices.

A spokesman said the company retains its existing P&L units, but various pieces of them now fall among these three groups.

In addition, Ray Ozzie who came aboard as a CTO when Microsoft completed its Groove acquisition earlier this year, will continue to report to Microsoft Chairman Bill Gates, and will "drive software services across all divisions both form a strategy and execution standpoint, " an inside source said.

The news culminates weeks of rumors about Allchin's tenure. Sources at the company said Allchin was ready to leave Microsoft last year amid major delays to Longhorn, WinFS, and other key products. An insider said the race was on among internal candidates to succeed him with names like Sanjay Parthasarathy and Eric Rudder surfacing in speculation.

However one source earlier this week said Johnson was the man. Johnson has both sales and technology experience, having joined Microsoft years ago from IBM Consulting.

Microsoft is moving executives around, trying to come up with a slate of people grounded in sales and marketing as well as technology, who could be successors to Gates and Ballmer, sources said. Bill Veghte, for example, was moved off of technology into sales last year.

News of Allchin's departure comes a week after Microsoft's big Professional Developers Conference, where the company trotted out its Vista game plan.

"Microsoft needed Jim for that event," said another source close to Microsoft.

This story was updated Tuesday evening with additional detail about the organizational changes.