Apr 5, 2002 4 min read

SEATTLE (AP) – Rick Belluzzo, Microsoft Corp.’s president and chief operating officer, resigned as the software giant announced restructuring plans that will eliminate his job. Wall Street had a subdued reaction to the news Thursday as shares rose 2 cents to $56.35 in late morning trading on the Nasdaq Stock Market.

Belluzzo, who had been in the position a little more than a year, said he was a key decision maker in the restructuring plans, which will let different parts of the company operate more autonomously. In an interview Wednesday with The Associated Press, he said the restructuring was necessary for future growth – even if it means the company will grow without him.

“We needed to really change the orientation of the business to where business owners could not only (control) product development but also how the product goes to market and so on,” he said.

Some analysts have questioned Microsoft’s long-term growth prospects in recent months, and many praised the move announced Wednesday.

Rob Enderle, an analyst with Giga Information Group, said the company is likely also hoping to make its units more fiscally responsible at a time when all technology companies – including Microsoft – are struggling to make profit targets.

“They’re having some difficult budgetary problems,” Enderle said. “Revenue’s off and clearly they’re going to have to do some cost-cutting.”

Belluzzo said he realized in January that the restructuring plans would make his job redundant, and saw that as an opportunity to pursue his long-term goal of being a chief executive at a company.

Enderle said the resignation was a surprise because many assumed Belluzzo was being groomed to replace chief executive Steve Ballmer at some point.

“You don’t normally put someone in that role in order to take him out of there a few days later or a few months later,” Enderle said.

But Belluzzo said he never thought he would replace either Ballmer or Chairman Bill Gates.

“I think Bill and Steve will be around for some time … so I never thought that was my ambition here.”

Rick Sherlund, an analyst with Goldman Sachs, said he doubted the move reflected any displeasure in Belluzzo’s performance. In fact, Belluzzo is largely thought to have been highly regarded by Ballmer and Gates.

But Sherlund said the restructuring really leaves no room for Belluzzo.

“You hate to see him leave, he’s a good guy, but you understand his desire to want to have broader responsibilities rather than to have this decision narrow his responsibilities.”

While Belluzzo seemed to have a good relationship with Gates and Ballmer, Jonathan Geurkink, an analyst with Ragen McKenzie, remembers feeling at some events that relative newcomer Belluzzo was overshadowed by the star power of the company’s leaders.

“In many ways Microsoft is still Bill Gates’ and Steve Ballmer’s company, but I think (Belluzzo) brought a critical outside perspective to the company. … He helped whip ’em into shape,” Geurkink said.

Belluzzo may also have felt there was no clear place for him, said Brendan Barnicle, an analyst with Pacific Crest Securities.

“It seems like, having watched Microsoft, that there was never really a clear role for him in the company, and it was still all about Steve and Bill (Gates),” Barnicle said.

Belluzzo joined Microsoft in September 1999 and held several senior positions before being promoted to president and COO.

in February 2001. He said he plans to stay in his current position until May, and to stay with the company until September to organize the transition.

Before being appointed president, Belluzzo focused much of his attention on the company’s consumer operations, including its Xbox game system, its MSN Messenger instant messaging system and its Ultimate TV service. Belluzzo also was instrumental early on in the company’s .NET initiative for delivering a variety of services over the Internet.

All of these consumer-oriented projects have been the hallmark of Microsoft’s efforts to become more of a consumer-products company, although most of them have yet to make money for the company.

Analysts credited Belluzzo with bringing a fresh perspective and encouraging the company to think about different approaches, such as this restructuring.

“I’ve enjoyed being able to make a difference,” Belluzzo said. “I can’t say for sure whether (the restructuring) would’ve happened with or without me, but I think my experience in this area did help.”

Analysts said the restructuring would make it easier for Microsoft to split into multiple companies – something the company was briefly ordered to do during the government’s antitrust trial, although it was later overturned. Microsoft said the restructuring had nothing to do with its antitrust trial.

Before joining Microsoft, he was briefly chief executive of Silicon Graphics Inc., and previously spent 23 years at Hewlett-Packard Co.

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On the Net:

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