Is Microsoft Following Intel's Lead?

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It's no secret that Microsoft (NASDAQ: MSFT  ) , like Intel (NASDAQ: INTC  ) , is in the midst of a transition -- a much-needed one. The PC market in which both industry leaders made their marks is nothing close to what it was, nor is that likely to change. The IT world of the future is all about mobile and cloud computing, and both Microsoft and Intel are making inroads in these explosive areas. And investors are beginning to take notice, too: Microsoft's share price is up 30% for the year, and Intel 's nearly 20%.

Intel's new CEO, Brian Krzanich, jumped into his new role with both feet. In addition to buying a mobile-related joint venture from STMicroelectronics and Ericsson, Krzanich is leading a much-needed management restructuring allowing Intel to make, "quick, informed decisions." If the rumors are true, Microsoft's CEO Steve Ballmer is going to take a page from Krzanich's book, which should have Microsoft fans cheering.

The rumors
Ballmer's letter to shareholders last year included the usual CEO-speak, as expected. But there was also interesting verbiage littered throughout the note; words like "fundamental shift in our business," "new experiences," and "move to the cloud," to name a few. As it turns out, the Oct. 9 missive may have been Ballmer's way of laying the foundation for what's coming, as Microsoft, like Intel, transforms its business to keep pace with the market.

Microsoft currently has eight business units run by six presidents, not overly bloated for a company of its size; but in the fast-moving worlds of mobile and cloud computing, leaner is most certainly meaner. And Krzanich understands the need for speed in today's IT market, which is why his corporate restructuring effectively removed an entire level of management.

Now, according to those infamous, "people familiar with the matter," Ballmer is considering a restructuring of his own -- streamlining the number of business units and the folks running them, ala Intel. As per the anonymous sources, Ballmer and the Microsoft board are discussing cutting its number of business units in half, and shaking up the executive management structure to better align leadership with the world Microsoft now lives in.

The four divisions being discussed by Microsoft execs include enterprises, apps and services, hardware, and an OS unit. Microsoft's emphasis on mobile devices and operating systems is obvious with the introduction of its Surface Pro and RT tablets, Windows phone OS, and a commitment from Ballmer to continue building devices. As the shareholder letter from last year made clear, cloud computing is also on Microsoft's list of objectives, to the delight of some of its biggest investors.

A more nimble Microsoft is a necessity to keep pace with the leaders in the fast-moving mobile devices, cloud computing, and OS markets, as Krzanich and Intel realized. It'll come as no surprise to Microsoft fans that Ballmer isn't at the top of many "CEO of the Year" lists; years of stagnant share price growth will do that. But if the realignment rumors are true, it appears Ballmer knew what needed to be done nearly a year ago, and he's getting ready to pull the trigger.

It's been a frustrating path for Microsoft investors, who've watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of its own tablet, along with the widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In a new premium report on Microsoft, a Motley Fool analyst explains that, while the opportunity is huge, so are the challenges. The report includes regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.

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  • Report this Comment On June 07, 2013, at 9:21 PM, techy46 wrote:

    Ha, ha Apptel, WinArm, Wintel vs Google socialism.

  • Report this Comment On June 08, 2013, at 6:31 AM, doawithlife wrote:

    A good consultant would have figured this out a long time ago. MS was about the only stock I knew would be profitable earlier this year. I am not a consultant, but if you know tech - you knew MS was about to explode. Funny thing is, the Fool deleted most of the posts where I said that (I think a few slipped through - if you care to go back and look).

    Ahh yes, this site is full of great financial advice. Just do exactly the opposite of what they say. Now that they are for MS, makes me think it might be time to sell(not really, but that seems to be the trend on the Fool)....

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