July 23, 2003 12:56 PM PDT

Microsoft to detail financial revamp

Microsoft confirmed that it plans to announce on Thursday a reorganization of its executive ranks in an attempt to improve financial management across its business units.

CEO Steve Ballmer will delegate much of the software giant's day-to-day financial operations to seven executives who will serve as chief financial officers and oversee individual units of the company's business. The story was first reported by The Wall Street Journal on Wednesday.

Under the plan, the CFOs will head divisions centered on Microsoft's primary product lines--Windows, server software, mobile software, office software, video games, business software and MSN. Microsoft announced in an earnings call last year that it would increasingly scrutinize financial performance of its business units, and look for greater accountability on the part of individual segment leaders. The appointment of the seven CFOs is an extension of that strategy, a Microsoft representative said.

Among the people slotted to jump into the newly created financial management positions are a list of hires from outside Microsoft, including executives from companies such as Walt Disney, Hewlett-Packard, McKinsey and Exxon Mobil, the Journal reported. Those executives will continue to report to Ballmer who, along with Microsoft CFO John Connors, will help oversee the software maker's central finances.

The move could be a response to critics and investors who have complained that the mammoth company has not always met expectations, particularly in relation to finances and its nearly $50 billion in cash reserves. Microsoft officials characterized the effort as an attempt to "scale-up individual business leadership," based on the growth and diversification of the company.

Microsoft has made several other financial management decisions over the last month, announcing that it would begin handing out company stock directly to employees, rather than follow its previous practice of awarding stock options. It has also been rumored that Microsoft plans to pay out a one-time dividend to investors, as a way to decrease its voluminous cash holdings.

A company representative hinted that the software maker may divulge even more finance-related news on Thursday.

At least one industry analyst saw a potential financial-management reorganization plan as a positive thing, saying it should give the company's various business units the ability to operate more independently. Illuminata analyst Gordon Haff said the shift could give some of Microsoft's lagging business units, such as its Xbox video-game console division, the potential to improve results.

"Microsoft has long enjoyed a decentralized structure in terms of product development, allowing the product groups to be more competitive and nimble," Haff said. "Farming out financial responsibility could benefit the units in a similar way, recognizing that some very different businesses, from server software to video games, need to be run differently."

Haff said the recent spate of management announcements from Microsoft are part of a natural introspection related to the slowdown of the larger IT economy. Haff does not expect Ballmer to scale back his role at the company, but rather to redirect his energy on performing more centralized management tasks.

 

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