Microsoft’s Reboot: Rashid, DelBene, Mundie Reassigned or Retiring

[Updated 3:20 pm with detail]
The world of Microsoft watchers knew it was coming: a major reorganization of the company around CEO Steve Ballmer’s vision of a more unified “devices and services” business.

Today, we got the details from Ballmer himself, through his all-staff memo and a New York Times interview.

It’s a dramatic makeover. For one thing—and if there was any remaining doubt—this shift of Microsoft to a more centralized product and strategy organization emphasizes once again the triumph of Apple’s vision for the future of digital products.

It’s also a rebuke to the analysts, shareholders, and others who thought Microsoft’s laggardly stock performance, money-losing initiatives, and divided organization meant the company should be broken up into separate pieces.

As retired Microsoft manager and engineer Hal Berenson said, “The only way Microsoft’s reorg could be more dramatic is if they’d gone the opposite way and broken up the company.”

That means some people are out of their current jobs, of course. Here are the three big names broken out specifically in Ballmer’s note, and some detail about what got them here. There are some surprises, but in most cases, these moves make sense for reasons of age, career, or just plain reality.

Rick Rashid, formerly Microsoft’s chief research officer, is losing control of the R&D lab he’s run since joining the company in 1991. This is a big deal for Rashid, who marveled at his own long tenure in our interview marking Microsoft Research’s 20th anniversary.

“No one comes to me and worries about what the pipeline’s going to be in a few years. They look at what we’ve already got and they like that, and they just figure, ‘Well, I guess he knows what he’s doing, he’s been doing it for a long time,’” Rashid said at the time.

Now, Rashid will take on a new job, Ballmer wrote, “driving core OS innovation in our operating systems group.”

The change reflects the major theme in Microsoft’s reorganization, which is more collaborative development of its products and services. While Ballmer gave Rashid high marks for creating “the most amazing computer science research institution in the world,” the CEO also hinted that R&D was too far removed from the company’s product development process.

“We will improve the approach we use to get MSR involved in product development, building on and enhancing our significant strengths there,” Ballmer wrote.

Overall, Microsoft Research will still be organized under top executive Eric Rudder. Research will now be led by former Rashid deputy Peter Lee, with former international research lead Jeannette Wing becoming corporate vice president in the unit.

The succession was telegraphed by Ballmer’s all-staff memo, which said that Rashid “has a great team to assume the mantle.” Microsoft is also emphasizing that the change is Rashid’s choice, not part of any move to shunt him aside. “With Peter and Jeannette in place, I find myself in the enviable position of having my `dream leadership’ team ready, willing and able to replace me,” Rashid wrote in an e-mail to the Microsoft Research team.

Kurt DelBene, previously president of the company’s Office division, is “retiring” from Microsoft. He’s only 52, so this is more about an up-or-out decision.

Office, which is still the dominant work software suite for most businesses of any scale, is a big revenue generator for Microsoft. It’s also been undergoing a major transition to become “Office 365,” the final stroke in the long-term move from the old boxed software days to software-as-a-service, sold in subscriptions to consumers and business customers alike.

DelBene managed the release of the cloud-based Office 365, but his former domain is now being stuffed into the company’s new “applications and services group.” That group will be led by Qi Lu, previously the head of Microsoft’s not-terribly-successful search and online services business.

It’ll be interesting to see if DelBene surfaces in another tech executive role, starts working as an investor, or does something else entirely. It’s also worth noting that his wife is freshman Democratic Congresswoman Suzan DelBene, a former Microsoftie who spends a lot of time representing the company’s district in Washington, DC.

Craig Mundie, who was already on his way to retirement next year, looks to be speeding that up a little. Mundie was famously part of the two-man team that split up most of Bill Gates’s duties when the Microsoft co-founder retired from the executive ranks, the other portion being taken by Ray Ozzie.

Ozzie is now running a secretive startup in the Boston area, and Mundie handed off the reins of top tech strategist to Rudder late last year.

As of today, Ballmer wrote, Mundie is off the company’s senior leadership team “to devote 100% of his time to a special project for me through the end of this calendar year. Beginning in 2014, Craig will continue as a consultant through his previously agreed upon departure date at the end of calendar 2014.”

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