REDMOND, Wash. - March 29, 1999 -Microsoft Corp. President Steve Ballmer and Chairman and CEO Bill Gates today outlined a fundamental realignment of the company designed to meet the needs of its customers well into the next decade. The two executives outlined a shift in its organizational structure to establish business divisions based on the requirements of core customers. The business division leaders will think and act in parallel, each empowered with driving product planning and marketing strategies for their respective customers. The customer-focused parallelism represents a move away from the alignment by products and technologies that had served the company since its inception.

"This new structure is part of the reinvention of Microsoft," said Ballmer. "Software is going to play a far broader role in our lives than we can even imagine today. When we took stock of our ability to meet these future opportunities, it became clear that we were organized to meet today's needs but not those of the next decade. We realized that we needed to renew Microsoft by focusing on three core issues: First, we needed to update and refresh our vision. Second, we needed to get closer to our customers' needs and requirements. Third, we needed to empower customer-focused groups to work more autonomously and in parallel," added Ballmer.

"Our original vision of 'a computer on every desk and in every home' is still extremely relevant," said Gates. "Looking to the future, our vision is much more expansive. We see a world where people can use any computing device to do whatever they want to do anytime, anywhere. The PC will continue to have a central role in this future, but it will be joined by an incredibly rich variety of digital devices accessing the power of the Internet. We want to give people the power, connectivity and ability to choose how they want to use computing in their lives," Gates added.

Alignment for Greater Customer Focus, Execution of Priorities

Ballmer and Gates stressed that refreshing the Microsoft vision and driving an organizational structure focused on customer needs would help the company execute against its key priorities:

Making the Microsoft^® Windows^® 2000 operating system more scalable, reliable and available, and continuing to deliver solutions that simplify management and reduce total cost of ownership for this very important IT platform

Improving information flow for the knowledge worker, including the mobile worker, by providing end-to-end knowledge management solutions

Building an architecture that lets developers target a broad range of devices and simplify development of second-generation Web applications

Bringing online consumers and businesses together by delivering the best online experience for consumers, and by delivering an integrated platform of products and services that will help businesses of all sizes utilize the Internet as the ultimate marketplace

Developing a new generation of consumer-friendly PCs that are simple, stable and so easy to use they will meet the needs of anyone in the family

Ensuring power and connectivity for the explosion of new devices emerging to complement the PC

The new structure more closely maps to Microsoft's core customers: the IT manager, the knowledge worker, the developer and the consumer. Following are the new business groups and their leaders:

Business and enterprise division. Jim Allchin, senior vice president. Vice President Brian Valentine will lead development, which will focus on software technology for the information technology customer. Deborah Willingham will serve as vice president of marketing for this division.

Consumer Windows division. Jim Allchin, senior vice president. David Cole, vice president, will lead this division, which will focus on evolving the Windows platform for the consumer.

Business productivity group. Bob Muglia, senior vice president. This group will focus on meeting the needs of the knowledge worker. Rich Tong will serve as vice president of marketing.

Developer group. Paul Maritz, group vice president. This group will focus on the developer customer. Tod Nielson will head marketing for this group.

Consumer and commerce group. Brad Chase, vice president, and Jon DeVaan, vice president. This group will focus on bringing together consumers and businesses online.

How the Structure Will Work

Leaders of these major business divisions will be empowered with driving product planning and marketing for their respective customers, allowing more focused and streamlined prioritization, goal setting and accountability for each business division. While each business division will manage its own internal functions in parallel, members of the various groups will still partner across the company where appropriate. For instance, the consumer and commerce group and consumer Windows division can be expected to ally on marketing programs. Certain core processes and infrastructure tools to ensure marketing, management and engineering effectiveness will be shared across group lines.

The company has also created the home and retail products division, which will operate outside of the four core business divisions. It will focus on consumer-targeted products such as games, input devices and Microsoft's reference products. It will be headed by Vice President Robbie Bach, reporting to Senior Vice President Orlando Ayala. Vice President Steve Schiro and Vice President Rick Thompson will partner with Bach on this business.

Business Leadership Team Replaces Executive Committee

Ballmer also announced the formation of a new business leadership team, a subset of the executive staff who will meet with Gates and Ballmer for a full day each month to ensure the company is on track with its vision, planning and processes, and that cross-company issues are elevated and resolved. This team will replace the executive committee formed in December 1996 as the most senior-level decision-making team at the company. Members of the team will include Jim Allchin, Orlando Ayala, Steve Ballmer, Brad Chase, Jon DeVaan, Bill Gates, Bob Herbold, Joachim Kempin, Greg Maffei, Paul Maritz, Mich Mathews, Bob Muglia, Bill Neukom and Jeff Raikes.

In a related announcement, Microsoft made the following organizational enhancements and promotions:

Greg Maffei, currently chief financial officer, gains the additional title of senior vice president, finance and administration, and added responsibility for the company's procurement and real estate.

Tod Nielsen, currently general manager, developer relations, becomes vice president, developer marketing.

Mich Mathews, currently general manager of corporate public relations, becomes vice president, public relations.

Nick MacPhee, currently general manager, corporate services, becomes vice president, operations.

Bill Henningsgaard, currently general manager of corporate accounts, becomes vice president, Western region and South Pacific.

Paul Gross, vice president, will be responsible for server software products for the business productivity group.

John Connors, vice president, will run enterprise, education and organization customer sales.

Moshe Lichtman, vice president, will drive business outside the United States for the consumer and commerce group.

Rick Devenuti becomes vice president and chief information officer.