Why Microsoft Corporation's Management Shake-Up Is Spot On

By Markets Fool.com

It will be two years this September that then-CEO Steve Ballmer announced the mammoth deal to acquire Nokia's struggling device unit, which immediately put Microsoft in the deep end of the mobile manufacturing pool. The $9.4 billion acquisition for Nokia was applauded by some, and bemoaned by more than a few Microsoft fans, including a couple of its biggest internal players.

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After Ballmer announced the agreement to acquire virtually all of Nokia's device manufacturing assets, a report cameoutthat named both Microsoft founder Bill Gates and soon-to-be-CEO Satya Nadella as two execs who opposed the deal. Nadella, as per the report, later changed his stance, but the writing was on the wall. Now, fast forward to Nadella's recent management shake-up, and some investors and pundits may have concerns surrounding the changes. Don't.

Thanks for the memories
The biggest of the four names listed on Nadella's email to employees was longtime Microsoft employee / then CEO Of Nokia / then once-again employee Stephen Elop. If that sounds a little convoluted, it's because it is. Elop came back to Microsoft upon the closing of the deal for Nokia a little over a year ago and headed up its new devices unit.

Dynamics CRM head Kirill Tatarinov is gone, and Microsoft's head of advanced research Eric Rudder is "ready to try something new" after more than 25 years. Finally Mark Penn, who had a say in several of Microsoft's marketing, data analytics, and strategic direction initiatives, will use his talents to open a private equity fund this September. But the most telling of the moves is Elop, for a couple reasons.

I'll take it from here
The last major senior management shake-up at Microsoft was a couple of years ago and was initiated by Ballmer. His reorganization involved doing away with several product divisions and folding the remains of the old units into larger, "flatter" groups to allow for improved communications among formerly disparate factions.

Now, fast-forward to Nadella's recent exec changes, particularly the ouster of Elop, whose former unit has been integrated into a new group called Windows and Devices Group (WDG), which includes Xbox, smartphones, and Surface tablets, among others, along with the Windows division. This change stands out because it undoes at least part of Ballmer's reorg from two years past and puts even more of Nadella's stamp on the "new" Microsoft.

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More importantly, Microsoft's recent exec changes better align it with the first pillar of Nadella's "mobile-first, cloud-first" initiative. Nadella's mobile strategy has always been more than simply building Lumia smartphones or selling more Xbox units: though some may still look at quarterly sales and believe Microsoft is dropping the mobile ball. But there's more to it than that.

Mobile-first: more than devices
If there was any doubt about Nadella's vision for mobile, even after (finally) announcing Microsoft's wildly successful Office solution is now compatible with Apple's iOS, those should have been dispelled with the introduction of its Windows for iOS and Google's dominant Android OS. The pending Windows 10 OS is said to provide an even better integration experience for users, regardless of device.

Similar to Google's strategy behind its free Android OS, getting Windows into as many devices as possible -- regardless of manufacturer -- accomplishes several things. One, you can bet Microsoft's Bing will be the default search engine, and as we saw with last quarter's 21% jump in search ad revenues, Bing is quickly becoming more than an afterthought.

Also, the more devices running Windows should help maintain, at worst, the growing number of consumer Microsoft Office 365 users -- a figure that increased a whopping 35% last quarter sequentially. Best case is that integrating Windows into as many devices as possible actually ramps up Office 365 usage and boosts other app sales like Dynamics CRM.

Nadella's new WDG division headed up by Terry Myerson speaks to more than Elop's departure; it better aligns Microsoft with its plans for a more holistic approach to mobile. And that should have investors smiling.

The article Why Microsoft Corporation's Management Shake-Up Is Spot On originally appeared on Fool.com.

Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.