The Metamorphosis of Microsoft Mobile

Just days after announcing a major mobile acquisition, Microsoft (Nasdaq: MSFT) reportedly is poised to shake up the upper management of its mobile division after the group's former director departed to take a position with Vodafone (NYSE: VOD).

Microsoft's mobile business -- which could get a significant boost if the software giant can pull off its attempted acquisition of Yahoo (Nasdaq: YHOO) -- has seen rivals such as Apple (Nasdaq: AAPL) and Research In Motion (Nasdaq: RIMM), the makers of the iPhone and BlackBerry, respectively, gain much more traction and sales than devices loaded with Microsoft's Windows Mobile platform.

Pieter Knook, who headed up the mobile division for five years, capping a 17-year career at the software company, will take over the newly created role of director of Internet services at Vodafone, the UK-based wireless carrier.

New Efforts

Knook will report to Vodafone's chief marketing officer, Frank Rovekamp, and focus on delivering new revenue growth from Internet content and advertising.

Knook's tasks will be to "help transform the customer experience through the mobile Internet, meet growing customer demand for Web services accessed from mobile devices and drive revenues," Rovekamp said.

Microsoft did not immediately name a replacement for Knook, though published reports said it would move Andrew Lees, a corporate vice president from the company's server and tools group, to head up the mobile division. As many as 10 executives could be shuffled in an ensuring reorganization, The Wall Street Journal reported.

Sign of the Times

Microsoft reorganized the mobile division just last fall, announcing in October it would revamp the unit to focus on the distribution of Windows Live Web-based services.

The latest changes are a reflection of larger trends within Microsoft, Enderle Group Principal Analyst Rob Enderle told the E-Commerce Times.

"This is happening at an unprecedented rate across the company," he said, due to "the combination of a now aggressive acquisition strategy , a major retirement impact that has taken a number of key players ... and major organizational changes."

Meanwhile, cofounder Bill Gates plans to step back from day-to-day operations at Microsoft this summer to focus his time and energy on his philanthropic endeavors.

The mobile group should benefit from the acquisition of Danger, which dramatically expanded the company's pool of mobile engineers and experts. The company, which Microsoft bought last week for an undisclosed sum, is the designer and marketer of the T-Mobile Sidekick mobile smartphone device.

"With the acquisition of Danger, they get people who can run a mobile operation, which broadens their pool of people," Enderle added. "The fact that both RIM and Apple have grown into this market without much real competitive pressure from Microsoft, I think, suggests there was a degree of dissatisfaction with the current leadership, so I expect Knook moved ahead of a change that he probably didn't like."

Any restructuring will likely be aimed at making Microsoft more agile, something they'll need to do to hold off Apple, Research In Motion and Google (Nasdaq: GOOG), whose own mobile smartphone is looming, said Enderle.

Shifting Focus?

Microsoft had hoped the extension of Windows from desktops to mobile devices would be a natural progression.

Changes in the mobile unit may also be telling about what Microsoft's larger focus is in the space. Apple has had strong early success with a consumer-focused device, while RIM has gained traction in enterprises.

Microsoft has chosen to focus on developing software for mobile devices and recently estimated sales of its Mobile platform would double in 2008 to 20 million.

It is a bit surprising that Lees would be tasked with overseeing the mobile business, given his background is in business software, JupiterResearch analyst Michael Gartenberg told the E-Commerce Times.

"This is a critical time and Windows Mobile needs a strong hand at the helm," he said.

The Danger buy could hint at a way forward for the mobile group at Microsoft into more of a consumer position, given Danger's role in developing the Sidekick, which some young consumers consider a hip alternative to the buttoned-down BlackBerry, Gartenberg added.

Microsoft could also be laying the foundation for converging its Zune into a smartphone, all-in-one device, much as Apple did by morphing the iPod in the iPhone. Doing so quickly could help it get such a device into the marketplace before the Google Android phone makes its debut as well.