MSN splits in two

Microsoft said Wednesday that its MSN business will split into two units, an effort to streamline the long-struggling Web property.

MSN will divide into one unit focusing on information and another focusing on communications.

The information unit will oversee the MSN Web portal, the company's search technology initiative, and its other media and e-commerce-related services. The unit will be headed by Yusuf Mehdi, who until now ran all of MSN with Senior Vice President David Cole. Mehdi will also spearhead Microsoft's attempts to create an online music store and its investment in ramping up its Web search technology.

The communications division will consist of popular MSN products such as the Web-based e-mail service Hotmail, instant messaging, the Passport log-in service and other subscription-driven offerings. The unit will be headed by Blake Irving, currently corporate vice president at MSN.

Cole will now oversee both units as well as corporate functions such as global sales, business development and finance.

The division of labor comes as MSN, launched in the mid-'90s, continues to take its lumps in an ever-changing market. MSN has watched its dial-up subscriber base erode over the past few quarters and has tried to reposition itself as a premium software package for broadband users.

MSN said it was realigning to improve its customer focus, accelerate innovation and clarify its overall strategic direction.

However, some analysts said the changes reflected concerns over MSN's struggling dial-up subscription business, which continued its decline last quarter.

"I think this comes down to consolidating leadership over MSN's subscription services, which have not performed well over the past year," said Rob Helm, an analyst at Directions on Microsoft, an independent market research company.