Just under a week after Microsoft released financial earnings dragged down by its online services group, the head of its online operations, Kevin Johnson, plans to leave the company, and Microsoft will split up the group he ran.

Microsoft plans to divide its Platforms and Services division, the group Johnson led, into the Windows/Windows Live group and an Online Services group. Both organizations will report directly to CEO Steve Ballmer.

[ Related reading: Microsoft online business flags despite overall revenue rise ]

Senior vice presidents Steven Sinofsky, Jon DeVaan and Bill Veghte will lead the Windows group, reporting directly to Ballmer. Microsoft plans to create a new position to run the Online Services group and will look internally and externally to fill that job, the company said. Satya Nadella will continue to run search, MSN and ad platform engineering efforts, and Brian McAndrews will continue to lead the Advertiser and Publisher Solutions group within the Online Services group.

Johnson has been with Microsoft since 1992. "In some ways, he has had a career trajectory somewhat like Steve Ballmer's own. He was definitely on the short list of people who would be a potential CEO replacement," said Rob Helm, an analyst with Directions on Microsoft.

Yet, he was in a difficult position as head of the online group. “In the end he was responsible for the online strategy, which is by far the weakest part of Microsoft’s business,” Helm said. Johnson hasn’t managed to improve market share or revenue shortfalls through organic growth or acquisition, Helm noted. “And spending on that business has been tremendous enough to weigh on the company’s results. I don’t know if he jumped or was pushed, but there’s no question he had a difficult job and he may not be the last manager to fall on this particular sword.”

Microsoft's online services business reported a US$488 million loss in operating income for its fourth quarter, more than double the $210 million operating loss the division saw last year.

In addition, Johnson was a driving force behind Microsoft’s unsuccessful attempt to acquire all or part of search rival Yahoo.

[ Related reading: Microsoft says it offered $9 billion to Yahoo ]

However, he was also in charge of the Windows operation at Microsoft, one of the company's most profitable products.

His departure is a blow for Microsoft, said Greg Sterling, an analyst with Sterling Market Intelligence. "This is a bit of a surprise," he said. "He was a very strong and central figure in the company." Sterling speculated that Johnson may have been frustrated by his company's failure to close the Yahoo deal.

The Wall Street Journal reported that Johnson planned to take a position with Juniper Networks. Juniper spokeswoman Sarah Sorensen would not confirm the report, saying the company does not comment on "rumors and speculation." Microsoft did not say where Johnson would go.

(Robert McMillan in San Francisco contributed to this story.)

IDG News Service

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