Microsoft appoints CFOs at business units

Microsoft has completed a key phase of its reorganization into seven business units announced April last year with the appointment of CFOs for each unit.

Microsoft has completed a key phase of its reorganization into seven business units announced April last year with the appointment of CFOs for each unit.

Microsoft CEO Steve Ballmer and CFO John Connors are expected to inform the financial community of the progress of the reorganization at Microsoft’s financial analyst meeting at the company’s Redmond, Wash., headquarters on Thursday.

The new structure gives leaders in each company segment more operational control over their businesses, but also makes them operationally and financially responsible and makes them more accountable. Microsoft began reporting earnings and revenue for seven company segments in the first quarter of its fiscal year 2003, which ended Sept. 30, 2002. The seven units reported on are Client; Server Platforms; Information Worker; Business Solutions; MSN; CE/Mobility, and Home and Entertainment.

After announcing the organizational overhaul in April 2002, Microsoft set out to find the people qualified to be CFO at each of the seven segments, reporting to the business group’s leader. All have been hired now, some coming from within Microsoft, others from outside, a Microsoft spokeswoman said Wednesday.

Among the new faces is Alain Peracca, who was a controller at HP and is now CFO of Microsoft’s Client division, Microsoft said.

The appointment of CFOs at each business segment has been expected and some of the fresh Microsoft CFOs have already been talking to financial analysts. The financial head of the Home and Entertainment unit, for example, attended the E3 gaming conference in Los Angeles in May, where he met with financial analysts, said Victor Raisys, software analyst at investment bank SoundView Technology Group. Raisys owns Microsoft stock.

Overall, appointing divisional CFOs makes sense in the light of Microsoft’s reorganization, Raisys said. “To the extent that each of these businesses on an individual basis have the ability to be a standalone business, it probably makes sense for them to be run as one and having someone with financial responsibility makes a ton of sense,” he said.

Still, the seven units are not entirely autonomous, Raisys said. “There is still a hierarchy and Steve Ballmer and John Connors certainly have a say in each of these businesses, but within certain limits they have decision making capability.”

Microsoft executives at the financial analyst meeting are also expected to detail progress in each business segment. For Server Platforms, for example, Senior vice president Eric Rudder will boast about sales of Windows Server 2003.

“Eric will drill into sales being good,” said Bob O’Brien, group product manager, in Microsoft’s Windows Server Division. “Windows Server 2003 sales in terms of units are triple that of Windows 2000 Server in the same three months after introduction.”

Other than talk about its products, Microsoft has indicated it may talk in more depth about how to spend its cash pile of about $49 billion. But no surprises are expected, Raisys said. Microsoft has been clear it wants to set aside funds to deal with its legal problems. After that it is looking at stock repurchases and may increase its dividend, he said.