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UPDATE 5-Microsoft shakeup continues, server unit head out
January 10, 2011 / 5:59 PM / 7 years ago

UPDATE 5-Microsoft shakeup continues, server unit head out

* Server unit head Bob Muglia to leave this summer

* No replacement named

* Latest in line of high-level departures (Adds analyst quote)

By Bill Rigby

SEATTLE, Jan 10 (Reuters) - Microsoft Corp (MSFT.O) Chief Executive Steve Ballmer has ousted the head of the company’s server unit, marking the latest in a series of high-level departures as the software company tries to regain its leadership in the technology sector.

Bob Muglia, a 23-year veteran of the company, will stay on until this summer to help his eventual replacement take over the running of Microsoft’s $15 billion a year Server and Tools business. The unit, its third-largest, sells server and database software to companies.

An internal memo from Ballmer indicates Muglia was pushed aside in a disagreement over strategy.

“Bob Muglia and I have been talking about the overall business and what is needed to accelerate our growth,” Ballmer wrote in the memo, which was made public. “In this context, I have decided that now is the time to put new leadership in place for STB (the server and tools business).”

No replacement has been named. Ballmer said he would look for candidates inside and outside the company.

“It sounds like he was asked to leave,” said Sid Parakh, analyst at McAdams Wright Ragen. “It seems like there was disagreement over strategy.”

Muglia, a well-respected Microsoft veteran, could well reappear at another company.

“We expect Muglia to be on the list for many senior level technology positions,” said Wells Fargo analyst Jason Maynard.

Overtaken by Apple Inc (AAPL.O) as the world’s most valuable tech company last year and stung by a stagnant stock price for the last decade, Microsoft has been shaking up its top leadership for several years.

In the last 15 months alone, the company has lost chief software architect Ray Ozzie, office unit head Stephen Elop, entertainment and devices unit head Robbie Bach and Chief Financial Officer Chris Liddell.

Of the leaders of its five business divisions, only online chief Qi Lu retains the role he had two years ago.

Microsoft’s server and tools business, smaller than only its flagship Windows and Office units, has been growing steadily over the past few years, and is leading the company’s push into “cloud computing,” or selling access to storage and computing power online.

However, it has struggled to eat into the lucrative market for “virtualization,” or providing operating systems over the Web, which has been dominated by rival VMware Inc (VMW.N).

Microsoft has long been considered a buyer in the server and database sector, but analysts said it was hard to see an obvious target.

Its main rivals in the business are Oracle Corp ORCL.O and Germany’s SAP (SAPG.DE). Microsoft Chief Financial Officer Peter Klein said last year that the company had looked into buying SAP five years ago, but was not looking to do a deal now. [ID:nN14156620]

In October, there was talk that Microsoft might make an offer for Adobe Systems Inc (ADBE.O), maker of the Flash media player and Acrobat document software. Adobe shares rose 2.9 percent on Monday in a broadly flat Nasdaq.

Microsoft’s shares closed down 1.3 percent at $28.22 on Nasdaq. They are trading about the same level as they did 10 years ago. (Reporting by Bill Rigby; Editing by Gunna Dickson, Richard Chang, Gary Hill)

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