Microsoft exec shuffle: Herbold out, Belluzzo in

As part of the move, Belluzzo, 47 years old, is expected take on most of the responsibilities of Microsoft's chief operating officer, Robert Herbold, 58, who is expected to announce his retirement, said people familiar with the matter. Herbold will continue to work part time at Microsoft (msft).

The high-level moves in Microsoft's executive suite reflect the company's evolving business strategy -- to one more focused on consumer services -- as well as Chief Executive Steve Ballmer's continued confidence in the abilities of Belluzzo, a software novice and personal friend of Ballmer's who joined the Redmond, Wash., company only 18 months ago. Since then, Belluzzo, a former Hewlett-Packard Co. executive and the former CEO of Silicon Graphics Inc., has impressed Ballmer and others with his big-picture management style, company executives have said.

In his new post, Belluzzo is expected to take on some of Ballmer's current operating tasks, leaving Ballmer more time to focus on strategy, one person familiar with the matter said. Ballmer, 44, remained president after Microsoft elevated him to the CEO post in January 2000, giving him a title previously held by Chairman Bill Gates. Gates, 45, also added the title of chief software architect.

Belluzzo has increasingly been seen as a prime candidate to assist Ballmer with the complex task of running Microsoft, a company that now has more than 40,000 employees world-wide and is taxing Ballmer's abilities to manage it, people familiar with Microsoft said. The consumer-focused product groups that now report to Belluzzo -- including the MSN Internet access service, the Xbox video-game console and wireless devices -- are expected to stay put, at least for now. In addition, Belluzzo is expected to begin overseeing Microsoft's huge sales force, led by Orlando Ayala. Currently, Ayala reports to Ballmer.

The executive changes come as Microsoft grapples with perhaps its biggest business shift ever: the move from principally offering desktop-computer software to selling Internet-based software and services as well. Further reorganizations to reflect that shift are likely in the offing, but none are expected soon, one person familiar with the matter said. "They've got levels to work out," one person close to the company said.

Some discussions that led up to Belluzzo's promotion touched on the thorny issue of how Microsoft can best reconcile its new "Microsoft.NET" Web strategy with its old, dominant Windows franchise, people familiar with the matter said. Microsoft.NET, which aims to infuse all of the company's future products, will try to harness traditional computing power, mobile devices like cellphones and common Internet communication standards to develop new types of Internet software and services. Some key groups working on .NET, including Group Vice President Bob Muglia's .NET Services division, now report to Belluzzo.

Stuck with Windows?
Some critics, though, have charged that Microsoft's products won't be truly Web-based and will remain tied to its workhorse Windows operating system. Moving some .NET-focused groups into the Windows group, which has been discussed, might reinforce that perception, people familiar with the matter said. Staff reorganizations at Microsoft happen frequently.

In an interview earlier this month, Windows chief Jim Allchin called Windows and .NET "very, very complementary." Asked why Muglia's group wasn't working for him, Allchin said: "Organizational boundaries don't mean very much at Microsoft. I meet with Bob constantly ... and frankly, if we decide that organizationally things should be changed, we have been known to change the organization." He declined to comment specifically about whether there were continuing talks about moving Muglia's group.

Belluzzo has had a quick rise to power at Microsoft. In September 1999, he took over a consumer group that had been somewhat adrift for years under a succession of leaders. The situation got so bad at one point that Ballmer actually moved his office to the consumer group's campus, dubbed "Red West." But Belluzzo quickly narrowed the group's focus and cut loose unpromising businesses, such as tax software.

Herbold joined Microsoft in 1994 after a long career at Procter & Gamble Co. and worked on behind-the-scenes businesses such as corporate operations, finance and human resources.