Microsoft (MSFT) has promoted Bob Muglia to president of the company’s servers and tools division, making him one of only four divisional presidents at the company, The Wall Street Journal reported Monday.

Muglia, 49 years old, was actually demoted by Microsoft CEO Steve Ballmer in 2001, the Journal mentioned. At the time, Muglia had been heading a project to build an online service called Hailstorm that was criticized heavily by privacy advocates. Ballmer sent him off to the Windows group in a reduced role.

After that, Muglia expanded his reach gradually over time, finally taking over the servers and tools division, which has more than 10,000 people. The Journal said that analysis credit Muglia with helping Microsoft fight off a number of competitive threats to its business, including the open-source Linux operating system.

Muglia told the Journal in an interview that his promotion won’t change his division’s strategy, but will give the group a higher profile. The Journal said analysts believe that Microsoft wants more attention for that division, in part because it might be less affected by the current recessionary economic conditions.

In an email to Microsoft employees on Monday that the Journal obtained, Mr. Ballmer said, “Bob has built a culture of getting things done and done right. He has championed some of our most important initiatives and helped us successfully face some of our most important competitive challenges.”