Muglia Resignation Could Harm Microsoft Morale

Bob Muglia, president of Microsoft’s Server and Tools Business, will depart the company this summer. That’s Microsoft’s first big news following CES, and it suggests that 2010’s executive-suite shakeups are continuing unabated into the New Year.

Mulia’s a 23-year veteran of Microsoft, and the Server and Tools Business was a solid financial success under his watch. That makes the news somewhat startling, especially since CEO Steve Ballmer’s email announcing the departure has all the warmth and cheer of Michael Corleone “retiring” Moe Greene:

“The best time to think about change is when you are in a position of strength, and that’s where we are today with STB – leading the server business, successful with our developer tools, and poised to lead the rapidly emerging cloud future,” Ballmer wrote in the 10 January missive to Microsoft’s employees. “Bob Muglia and I have been talking about the overall business and what is needed to accelerate our growth. In this context, I have decided that now is the time to put new leadership in place for STB.”

Step One: Make your Division out-perform! Step Two: Get booted for it!

Beginning a new cycle

Muglia (left) will apparently stay on-board through the summer, while the company conducts “an internal and external search for the new leader.” In addition, Ballmer framed the leadership changeup as “simply recognition that all businesses go through cycles and need new and different talent to manage through those cycles.”

Microsoft has seen a number of executives jump ship in recent months. In October, Ballmer announced that Chief Software Architect Ray Ozzie had decided to resign from his post. “The CSA role was unique and I won’t refill the role after Ray’s departure,” the CEO wrote in an 18 October email to the company.

Ozzie’s departure, too, was framed within the context of Microsoft’s larger business. “With our progress in services and the cloud now full speed ahead in all aspects of our business, Ray and I are announcing today Ray’s intention to step down from his role as chief software architect,” Ballmer wrote in an 18 October email to the company. “Following the natural transition time with his teams, but before he retires from Microsoft, Ray will be focusing his efforts in the broader area of entertainment where Microsoft has many ongoing investments.”

In September 2010, Microsoft Business Division Presidents Stephen Elop resigned his position to take the CEO reins at Nokia. And earlier in the year, a shakeup in Microsoft’s Entertainment and Devices Division saw the simultaneous departures of Robbie Bach, president of that unit, and J Allard, its senior vice president of design and development.

Maybe Ballmer wants a Muglia replacement who can offer a fresh focus on the cloud. Maybe this is all the result of an internal power-struggle, or Ballmer continuing his house-cleaning and division-reordering from last year. Whatever the case, I can’t help but feel there’ll be an inevitable morale problem if Ballmer decides to replace a longstanding employee with someone from outside the company.