Microsoft Gives Online Unit Its Own Pedestal in Reorg

Microsoft’s Online Services division, which includes the company’s search, MSN and ad services buckets, will stand on its own as part of a new reorg. The group was previously in the Platforms & Services division and reported to Kevin Johnson. Johnson will depart Microsoft after a transition.

Microsoft has not yet named an executive to lead the freestanding Online Services business, but said it will conduct an internal and external search to find one. In the meantime, SVP Satya Nadella will temporarily head up search, MSN and the company’s ad platform engineering efforts. Brian McAndrews, SVP of Advertiser & Publisher Solutions, will continue to lead the company’s display advertising efforts.

Those efforts have been slightly derailed by economic conditions, which have cut into online ad budgets. In its earnings announcement last week, Microsoft said pricing for graphical ads across its network has succumbed to the same weakness in demand that impacted Yahoo’s and ValueClick’s latest quarterly results. Google appears to be largely insulated so far.

Johnson may have taken the fall for Microsoft’s unsuccessful (to date) exertions to acquire Yahoo. The Wall Street Journal reported late yesterday that CEO Ballmer has grown increasingly frustrated with his own senior executive management’s maneuverings throughout the negotiation process, and Kevin Johnson has been fingered as a major shaker in that process. He leaves after 16 years with Microsoft.

WSJ reported Johnson has taken a position with network infrastructure firm Juniper Networks.

The Windows and Windows Live divisions, previously part of Platforms & Services, will now report directly to CEO Steve Ballmer.